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German economy has contracted for two consecutive months
WEEKLY FUTURES REPORT  
Filed remotely at 2:02 am  
1.11.12    
  Last Last Week (01.04.12)
Feb Crude 100.97 103.28
Feb Heat 307.50 309.84
Feb Gas (Blended) 277.02 277.99

Oil fell in price on Wednesday as the Department of Energy report stated that the supply of crude and its products rose more than expected for the latest reporting week. There was also concern that a contracting German economy may help intensify recessionary pressures in the Euro Zone. For the latest reporting period crude stocks rose by 4.96 million barrels. This was well above median estimates. Oil was also under pressure from a report released by Germany’s Federal Statistics office which stated that the German economy contracted in the fourth quarter. Today’s numbers suggested that Q1 demand may be downwardly revised. Even with all the problems that the Euro Zone has encountered over the past year, crude remains higher by 11% from last year at this time. Part of the explanation behind persistently higher prices is the threat of and the potential retaliation against the Iranian nuclear program.

Crude inventories rose by 334.6 million barrels, the highest level since the beginning of December. Although the inventory reports have been bearish, geo-political concerns have kept crude prices relatively expensive. Gasoline supplies climbed by 3.61 million barrels to 223.8 million barrels. This is the highest level since last March. Traders had been looking for an increase of only 2.25 million. While supplies increased, demand decreased by 4.4% to the lowest level since February 2003.

Meanwhile, the German economy has contracted for two consecutive months which suggests an accompanying reduction in demand. At the same time, the EU continues to hold talks about an embargo of Iranian oil due to its continuing it’s nuclear program. Just recently, an Iranian nuclear scientist was killed in a bomb attack. Iran blamed Western interest for the act.

As for the charts…

Stochastics have turned over. Prices need to close below 100 to open an attack of 95.00. Heating oil is higher but hasn’t made much progress over the past four sessions.

  Support Resistance
Feb Crude 98.50 104.40
Feb Heat 302.50 314.00
Feb Gas 270.00 281.00

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METALS

Last Last Week
Feb Gold 1643.70 1613.40
March Silver 29.92 29.125
April Platinum 1497.50 1422.70

Gold has begun to divorce itself from a tight calibration to dollar trading. Gold seems more aligned with a steady equity market and the continuation of a low interest rate environment. The idea that the market is fairly saturated with bad news coming out of Europe. In other words, the market seems to have priced in the information. Meetings seem to occur on a bi weekly basis in the Zone. A slowdown in the Chinese economy suggests to some that they may lower rates to spur economic activity. With the recent poor performance in Chinese stocks, some think that a quantitative stimulus is right around the corner. Gold coin demand is up along with the buying from Pac Rim countries and India ahead of the Lunar New Year.

Charts suggest a range trade with the top end of the Bollinger band being tagged setting up a return to test levels under 1600 again. Platinum looks the best again.

Support Resistance

Feb Gold

March Silver

April Plat

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SOFTS    
  Last Last Week
Mar Coffee 234.90 226.70
Mar Sugar 23.69 24.42

The market moved higher over the past five sessions but dollar strength has tempered follow through gains. Brazilian coffee exports in December were lower by 18% from year ago. The Sumatran earthquake was also a price positive for coffee.

Sugar continues to consolidate. China is considering supporting local producers by importing sugar. Dry conditions in key growing areas in South America continues to support price on pullbacks.

    Support Resistance
Mar Coffee 215 240
Mar Sugar 22.50 24.50
********************** **********************
    Last Last Week
Mar Soybeans 12.03 12.30
Mar Corn 6.514 6.584
Mar Wheat 6.41 6.50

Prices are having difficulty at recent levels to advance due to a stronger dollar and the idea of a German economic contraction. The Fed’s Beige book wasn’t particularly helpful to translate its ramifications to the grain markets while many traders squared positions ahead of the USDA crop report.

As for the charts…

Soybeans look to exhibit internal weakness

 
Support Resistance

Mar Beans

Mar Corn

Mar Wheat

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 SUBEQUENTLY 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.