Chinese manufacturing may be stronger than initially expected

12.01.10 Filed Wednesday 6:20 pm

ALL CHARTS THIS WEEK ARE Hourly Bars

Last Last Week 11.24

Jan Crude 86.75 84.24

Jan Heat 240.79 233.06

Jan Gas (Blended) 230.40 222.24

Crude oil and its products surged on Wednesday on a greater than

expected private forecast in growth. There were also signs that Chinese

manufacturing may be stronger than initially thought. Also, there were

some signs from the European Central Bank that they would take

necessary measures to contain the Euro zone’s debt crisis. Chinese

manufacturing grew at its best levels in seven months. Also, Goldman

Sachs raised a price target for crude in the year 2012 to $110 barrel.

According to ADP, US payrolls rose by 93,000 jobs in November. Also,

the Institute for Supply Management stated that manufacturing jobs in

Managers’ Index came in higher than expected and this was also an oil

market positive. Previously, oil was lower by nearly 2% in price as there

was the fear that the Euro zone debt crisis will soon spread to Spain,

Portugal and Italy.

As for the supply/demand picture, crude oil stocks for the latest

reporting week rose by just over 1 million barrels to 359 million barrels,

basically in line with industry forecasts. Traders have recently voiced

the opinion that the market is currently more focused on macro

economic news rather than supply and demand ratios. Nevertheless,

money flow in crude oil remains negative.

Support Resistance

Jan Crude 82.20 88.00

Jan Heat 225.00 250.00

Jan Gas 215.00 235.00

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METALS

Last Last Week

February Gold 1388.80 1373.90

March Silver 28.50 27.64

Jan Platinum 1686.10 16461.50

Gold once again was challenging the $1400 dollar an ounce level on

Wednesday, its best level in almost two weeks as lingering concerns

about the European debt crisis encouraged continuing demand for

metal as an asset class for diversification. The dollar traded back from

its best level in almost two months as the belief circulated that ECB

policy makers may have a stronger desire to contain and curtail the

current debt crisis. After the bank bailout in Ireland, it’s expected that

the ECB governing council will signal a delay in enacting its exit from

emergency liquidity measures. There is the universal expectation that

the ECB will leave its interest rate unchanged at 1%.

Support Resistance

February Gold 1355.0 1400.00

March Silver 27.00 29.00

Jan Plat 1600.0 1800.00

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SOFTS

Last Last Week

March Coffee 2.024 2.0745

March Sugar 28.60 28.06

Commodities, including coffee, climbed the charts on Wednesday on

better than expected employment prospects being generated by the US

economy. The ADP private forecast suggested that over 90 thousand

jobs were added to the economy. By itself, it’s not a burn down the

house number but it was 20 thousand above estimate and may be

suggestive of a trend. Of course with more employed, discretionary

income enjoys a de facto increase and prices generally tend to rise.

Again, this market is no different than many during this time period as

supply and demand characteristics specific to individual markets are

being obscured by big picture issues.

Sugar rebounded from one of its worst declines of the year in the belief

that global supplies will shrink next year. The world sugar deficit may

be as much as 2.8 million metric tons primarily due to adverse weather

in Brazil. Sugar sold off previously as did many other commodity

markets due to unexpected dollar strength during the month of

November. Heavy rainfall in India reduced sugar production. Brazil

sugar mills are planning to turn more sugar cane into sweetener as

dryness has affected crops.

Support Resistance

March Coffee 1.983 2.07

March Sugar 25.50 29.00

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Last Last Week

January Soybeans 12.83 12.55

March Corn 5.662 5.536

March Wheat 7.40 6.852

Wheat prices surged the most in seven weeks as excessive rain was

projected to have reduce grain quality and delay the harvest in

Australia. The last three months in Australia were the wettest on

record. This will result in deterioration in the crop making it possibly fit

only for feed.

Corn had its biggest one day rise in almost six weeks. There is an idea

that China will attempt to increase its imports to dampen inflationary

pressures. The improving economies of China and India are expected to

support grain prices moving forward. Both countries are running

inflation rates well above those seen in the United States.

Support Resistance

January Soybeans 12.20 13.25

March Corn 5.40 5.80

March Wheat 6.90 8.00

Chuck Kespert from NY/NY