Tired equity market and unexpected increase in gasoline supplies move crude oil futures significantly lower

Weekly Futures Report

10.28.09

Filed Wednesday 3:15 pm

ALL CHARTS THIS WEEK ARE Daily Bars    

                                                            Last                               Last Week   

Dec Crude                                         77.46                                81.38  

Dec Heat                                            202.30                            213.50

Dec XRB (Blended Gas)                   198.58                           206.52

Crude oil was significantly lower on Wednesday as the Department of Energy report showed an unexpected increase in gasoline supplies. Gas stocks rose by 1.62 million barrels to 208 million barrels for the latest reporting week. Stockpiles were forecast to be down by 1 million barrels. Crude stocks were up by 778,000 barrels while the trade had been looking for an increase of 2 million barrels. Crude oil by midday was lower by $2.00 a barrel. Another negative for the market was housing figures as sales came in below the low end of expectations. Also lower equity prices were a negative influence on crude oil.  Another negative factor for the oil market was a tired equity market. Also, the rebound in the dollar against major foreign currencies has weighed upon the crude oil market the last several days. The American Petroleum Institute figures released on Tuesday night stood in contrast to the numbers from the Department of Energy. The API stated that crude stockpiles fell by 3.53 million barrels to 339.5 million barrels, by itself a stand alone positive. As long as the dollar maintains a counter trend rally and the stock market shows disinclination to rally, crude oil should be contained in price.

 

                                                              Support                            Resistance

Dec Crude                                             75.00                           81.00        

Dec Heat                                               200.50                        211.80

Dec Gas                                                 195.00                              210.00                                                             

***********************     

METALS

                                                            Last                             Last Week     

Dec Gold                                           1029.20                              1063.60  

Dec Silver                                            16.19                                17.80              

Jan Platinum                                   1308.30                             1375.20

A weaker US equity market, lower prices for crude oil and a rebound in the dollar all worked together to pressure the gold market lower. The market really hadn't made any new highs for eight sessions and new long positions became tired of holding, waiting for the next leg up. Older positions decided to take profits. The combined market action enabled gold to trade to three-week lows. If the downside momentum gains even more speed, more long liquidation of positions will be seen. Many view the current action as a well deserved and needed correction. Net long positions by hedge funds have been cut back by about 2% since the beginning of October. Money flow in gold is negative as it is in silver. Short-term rallies will be met with selling pressure over the next 10 days. Another negative was profit taking in the commodity currencies, the Canadian Dollar being down 120 on the session and the Aussie Dollar down 171 on Wednesday’s trade.    

                                                    Support                                      Resistance

Dec Gold                                   1025.00                                 1051.00                                                         

Dec Silver                                   16.00                                            17.50                      

Jan Plat                                     1290.00                                        1355.00    

                                     *********************************

SOFTS

                                                                Last                          Last Week

Dec Coffee                                           134.70                        141.10

Mar Sugar                                            21.93                         24.04

Sugar fell to a two-week low in London trading to a stronger dollar and profit taking on Wednesday. Commodities as an asset class and fell by as much as 2%. Previously sugar had traded at levels not seen since 1989 primarily due to a world market deficit. Excess rains in Brazil and dry weather in India combined to create this deficit. Money flow for sugar is negative.

This coffee was also lower in sympathy. The Vietnamese harvest has been slowed by rains. Money flow for coffee is negative.

 

                                                Support                                  Resistance

Dec Coffee                              133.00                                     138.00       

Mar Sugar                                  21.50                                      23.50

**********************************************

                                                                  Last                            Last Week  Jan Soybeans                                          9.704                                10.096

Dec Corn                                                 3.690                               3.982  

Dec Wheat                                               4.946                                5.424

Grains were under pressure as farmers increased sales when they saw prices at their best levels since the beginning of the harvest season. Just five sessions ago corn was trading at a four-month high, reflecting the gain of 23% from September 30. Soybeans were at their best levels in two months. But by Wednesday, the stronger dollar but taken its affect virtually all commodities. During the session corn was 10 cents lower and wheat was 7 cents off Tuesday’s close. Another negative influence was profit taking as gold was down seven dollars and the stock market remained defensive. Also, consumer confidence came in weaker than expected on Tuesday, another negative. The current market action is viewed as a correction and not as a start of a new bear market. The market was also lower on the expectation that weather for the first weeks of November will be dry. Money flow for soybeans, wheat and corn is uniformly negative.

 

                                                                Support                          Resistance

Jan Soybeans                                          9.50                                  10.05

Dec Corn                                                3.60                                    3.85

Dec Wheat                                              4.85                                    5.38

 

Chuck Kespert

NY/NY

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.