Oil falls as a stronger dollar sapped bullish strength from other commodities

10.27.10 Filed Wednesday 7:20 pm

ALL CHARTS THIS WEEK ARE Hourly Bars

Last Last Week

December Crude 81.85 82.60

December Heat 225.50 220.97

December Gas (Blended) 207.18 203.27

Oil fell for the first session in four as a stronger dollar sapped bullish

strength from selected commodities. The stronger dollar tempers

demand from speculators for commodities as an asset class. Minus air

transport purchases, US capital goods orders declined, another negative

feature for the complex. The American Petroleum Institute report

stated that crude stocks were higher by 6.4 million barrels leading most

market observers to conclude that demand can be satisfied by available

supply. The dollar drew strength from an increase in US consumer

confidence. With ongoing maintenance at refineries, players are

expecting to see increases in supplies as refinery runs decline.

The Department of Energy stated that crude stocks rose by 5 million

barrels for the latest reporting week. Players had been looking for a

gain of only 1 million barrels. On a more bullish note, gas stocks

declined by 4.39 million barrels against an expected increase of 625,000

barrels. In opposition to the API report on Tuesday night, the

Department of Energy had been expected to report an increase in

gasoline by 625,000 barrels. The API stated that gas stocks had fallen

by 1.8 million barrels. Players also expected a discrepancy in heating oil

numbers.

Past of the positive tone to the market up until today was due to the

ongoing strikes in France. Due to strikes, 11 refineries had been closed

in France and gasoline was hard to come by in Paris. Money flow in

crude oil remains positive.

Support Resistance

December Crude 80.00 83.50

December Heat 2.20 2.32

December Gas 2.01 2.12

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METALS

Last Last Week

December Gold 1325.60 1345.90

Dec Silver 23.59 23.935

Jan Platinum 1680.70 1687.10

Gold came off in price over the last five sessions as the dollar

strengthened. Some better than expected numbers from housing starts

and consumer confidence helped the dollar move higher against most of

its counterparts and this was a negative for the gold market. Another

negative was the backup in yields. The 10 year yield went from 2.4% to

2.72%. The dollar had previously been much weaker as players have

anticipated a new round of quantitative easing by the Federal Reserve

to stimulate the economy, even, in a sense, reflate it. But with better

economic numbers, players are starting to believe that the amount of

quantative easing may be less than originally forecast and this would be

a dollar positive and a gold market negative. Not until there is clarity

on the size and scope of QE2 expect continued choppy trade. A lower

close on Thursday would reverse the intermediate trend of gold.

Support Resistance

December Gold 1319.00 1359.00

Dec Silver 23.00 24.25

Jan Plat 1662.80 1727.00

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SOFTS

Last Last Week

December Coffee 199.35 194.00

March Sugar 28.59 29.12

Sugar fell to a one week low on Wednesday and India said that it may

export sugar for the first time in two years. India was a net importer of

sugar last year. India is now scheduled to produce 25 million metric

tons allowing it to export 2.5 million metric tons. Before the market

started sensing increasing supply, the market had rallied 19% on the

month. Sugar could reverse its indeterminate trend with a lower close

on Thursday.

Support Resistance

December Coffee 196.50 204.70

March Sugar 26.50 30.00

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Last Last Week

January Soybeans 12.42 12.236

December Corn 8.772 5.73

December Wheat 7.026 6.83

Harvest pressures were felt in the grain pits. A stronger dollar was also

a negative for the grains, hampering export ability. Crop yields are

anticipated to be good and cash market business may be just routine.

Corn is up 53% since the end of June. Soybeans had been up 36% while

wheat was higher by 44%. At some point, higher prices certainly have a

negative effect on demand. 83% of the corn crop has been harvested

while 91% of the soybeans are in.

Wheat was higher still on Wednesday. Dry weather is expected to have

hurt Midwest crop yields. Wheat has registered 4 consecutively higher

closes, the best run since August. The wheat crop is rated 47% good to

excellent. Last year 62% of the crop was rated good to excellent. Money

flow in corn is positive. Money flow in soybeans is positive. Money flow

in wheat is positive.

In a side note, before yesterday, cotton had rallied to its highest price in

its history of 140 years.

Support Resistance

January Soybeans 12.13 12.45

Dec Corn 5.546 5.85

Dec Wheat 6.58 7.15

Chuck Kespert from NY/NY