Weekly Futures Report
01.05.11
Filed Wednesday 5:59 pm
ALL CHARTS THIS WEEK ARE Hourly Bars
Last Last Week 12.22
Feb Crude 91.00 91.00
Feb Heat 252.95 252.95
Feb Gas (Blended) 239.74 239.74
Crude oil was able to rally on Wednesday, regaining some of the losses
the oil complex suffered Tuesday. On the second trading day of the
year, the dollar spiked in strength as several institutional accounts
rebalanced their portfolios based on percentages of exposure to certain
markets. This triggered a serious selloff across the board with gold off
by as much as $44 an ounce at one point. Crude was no exception with
oil falling by as much as $2.50 a barrel. As mentioned, the tone was a bit
better on Wednesday as the ADP private employment forecast came in
far better than expected indicating that demand for oil may remain
solid. The Institute for Supply management which measures strength
and weakness in the services industry came in at 57.1, not as robust as
the ADP number (which came in 3 times stronger than forecast) but still
strong enough to support values. All in all, there are signs that the
economy is making modest improvement and this is a positive for oil
ands its products. Year on year, crude is 10% higher. There are
disparities in the market with West Texas Intermediate trading at a
discount to Brent North Sea as supplies in Oklahoma are at their
highest levels since August. Now, after end of year draw down in stocks
along the Gulf Coast of the US due to tax considerations, supplies there
should build back over the next several months. According to the
Department of Energy, crude stocks for the latest week fell by 4.16
million barrels to 335.3 million barrels while gas stocks surged by 3.29
million barrels. Distillate stocks were also higher by 19.1 million
barrels. Last week’s blizzard that hit the Northeast US curtailed
gasoline consumption. Money flow in crude and heating oil is positive
and negative for gasoline.
Support Resistance
Feb Crude 86.30 93.60
Feb Heat 243.00 261.00
Feb Gas 234.00 248.00
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METALS
Last Last Week
February Gold 1376.80 1411.90
March Silver 29.275 30.60
Apr Platinum 1730.30 1760.20
Over the last two trading sessions, gold suffered its biggest price drop in
over two months. The dollar markedly strengthened on ideas that the
US will experience better growth prospects for 2011 than the Euro Zone
and Japan. Also, there was exposure rebalancing by institutions and this
led to a sharp sell off in some of the better performing markets of 2010.
The ADP private employment report indicated better job growth and
suggested that gold as a hedge may not be as mandatory a position as it
had previously been. Risk aversion trades were being reversed with
selling in hard assets and buyers moving into equities to take advantage
of a possible January effect. The manufacturing sector continues to
show signs of expansion. Gold was up by almost 30% last year and the
market was a bit heavy on one said of the transaction. Going forward,
players will be looking to the non farm payroll number on Friday to see
if it reflects the strength seen in the ADP number. If the NFP number
comes in better that 250K for December which would be impressive
considering the weather and holiday considerations, expect more buying
of paper assets and selling of metal. Dollar trading will drive the metals.
Gold and silver will reverse intermediate trends should they close lower
on Thursday.
Support Resistance
February Gold 1347.70 1433.00
March Silver 28.34 31.46
Apr Plat 1698.00 1790.00
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SOFTS
Last Last Week
March Coffee 233.00 239.65
March Sugar 32.20 33.83
Sugar sought to make up for recent losses as traders adopt the view that
the supply/demand ratios will tilt towards demand as Brazilian sugar
output declines. In key growing areas, sugar production in Brazil is
down 30%. The floods in Australia may limit production there by as
many as two years. Australia is the third largest exporter of sugar in
the world. Fundamentals remain positive for sugar with little in the way
of hedge selling visible in the market.
Coffee fell in sympathy with most commodities on rebalancing
portfolios and a stronger dollar.
Support Resistance
March Coffee 215.00 240.00
March Sugar 31.00 34.50
*****************************************
Last Last Week
March Soybeans 13.934 13.77
March Corn 6.192 6.24
March Wheat 8.082 7.992
Soybeans and corn rose as dry weather may hamper Argentinean
production levels. Rains for this key commodity producer have missed
growing areas. Previously, rains forecast for Argentina had driven the
soybeans lower by 2.4%. Soybeans were up 34% last year and are
approaching a tipping point in that the last time prices surged like this,
there was civil unrest in lesser developed nations. Corn was up 53% last
year. Gains like this are normally not sustainable but demand is fairly
inelastic. Money flow for corn, soybeans and wheat remains positive.
Support Resistance
March Soybeans 13.39 14.05
March Corn 5.914 6.32
March Wheat 7.70 8.15
Chuck Kespert from 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.