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Crude oil was able to trade at its highest level in a month
WEEKLY FUTURES REPORT  
Filed at 8:25 pm    
2.15.12    
  Last Last Week (02.08.12)
Apr Crude 102.20 99.10
Apr Heat 317.40 316.07
Apr Gas (Blended) 316.92 310.99

Crude oil was able to trade at its highest level in a month as rumors hit the market that Iran was cutting off oil exports to EU countries. Oddly enough, the EU has been attempting to organize an oil embargo against Iran in protest to its nuclear program but has been unable to get a consensus in place to take such an action. Now the Iranians are basically imposing the sanctions on themselves. Iran summoned the ambassadors of several EU nations to protest the proposed sanctions. On this news crude spiked nearly 2% before settling down just in front of the release of the weekly Department of Energy inventory numbers. Crude was also supported by news that China was preparing to invest in EU sovereign debt to protect their investment already in place. A negative for price that surfaced later in the session was news that the EU and Greece still can’t come to an agreement on an austerity proposal that will allow release of bailout funds. This last piece of news took its toll on US equities as the day progressed. A negative for price action on Tuesday was the Moody’s downgrade of the sovereign debt of Italy, Spain and Portugal. On the other hand, the borrowing costs for Italy continue to trend lower. Front month crude traded as its highest level since January 12th. Another element influencing valuations for oil was expressed in a report by Goldman Sachs which stated that unused crude oil production capacity for OPEC producing nations is down 26% since last March. This is the lowest level since November 2008. Global stockpiles are increasing far more slowly than the five year average.

For the latest reporting week, the Department of Energy stated that crude stocks fell by 171,000 barrels while Distillates were lower by 2.9 million barrels. Gasoline stocks rose by a less than expected 400,000 barrels. Money flow in crude, gasoline and heating oil are all positive.

Now for the charts…

Crude continues to bend the upper Bollinger, showing strength.

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  Support Resistance
Apr Crude 100.50 103.50
Apr Heat 312.70 325.00
Apr Gas 312.50 320.00

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METALS    
  Last Last Week
Apr Gold 1729.90 1731.30
March Silver 33.49 33.704
April Platinum 1636.00 1668.10

Gold was under light selling pressure on Wednesday as the dollar strengthened on concern that Greece is on a course to an eventual default. On this idea, the dollar strengthened and gold sold off. Profit taking in Apple spilled into other market sectors and this was a negative outside influence for gold. Notes from the Federal Reserve Open Market Committee meeting suggested that more rounds of quantitative easing which infuses massive amounts of liquidity into the financial system bolstering financial assets was not likely at this time. Money flow in gold and silver are both negative which also coincides with negative flows for the EC, Swiss Franc, Japanese Yen and British Pound. US retail sales were weaker than expected yesterday while German consumer confidence continues to rise. Higher values for oil and its products are a positive for metals but grains are a negative influence. The Empire State Manufacturing Index showed good tone and many believe that the unemployment picture is positively trending. Higher equity values have been a positive influence. The market has been otherwise range bound.

Now for the charts…

Although money flow is negative, the chart seems to be oscillating higher, coiling, waiting for a return to speculative interest.

  Support Resistance
Apr Gold 1705.00 1745.00
March Silver 32.50 34.10
April Plat 1605.0 1664.00
******************************************  
SOFTS    
  Last Last Week
Mar Coffee 200.40 220.05
Mar Sugar 24.49 24.48

Coffee traded this week at a 14 month low. The only buying in this market is from short covering. Noncommercial traders had been long the recent rally and this helps to explain the severity of the resent selloff. Forecasts of a large Vietnamese crop as well as the prospect for a bumper Brazilian crop will continue to keep a lid on this market.

Sugar has continued to consolidate. Rains in Mexico have prompted short sellers to think twice. Mexican production is 12% lower than year ago levels. Occasionally, a negative macro outlook for Europe due to the debt crisis will express itself as selling pressure in sugar. Otherwise, technical levels seem to dictate trade.

    Support Resistance
Mar Coffee 195.00 210.00
Mar Sugar 24.20 24.80
********************** **********************
    Last Last Week
Mar Soybeans 12.61 12.314
Mar Corn 6.27 6.424
Mar Wheat 6.26 6.606

Money flow in soybeans continues to be positive. China remains on the buy side. The market is also being supported by production uncertainties in South America as a result of poor weather. Shipping problems in Brazil is also a price positive. Actual soybean production in South America could fall well short of last week’s estimates by the USDA. AS long as the dollar doesn’t seriously strengthen on Euro zone fears, the trend should maintain itself.

Wheat is suffering from a considerable oversupply. USDA says that wheat production in Australia and India are increasing and will probably have to be upwardly revised. Traders are also fearful that ending stocks for wheat will be higher than originally thought as well. Commodity funds are on the sell side which will eventually be a positive feature as they buy back short sales. A generally stronger US dollar is a negative as well. Australia just recently raised its wheat production by 4.2%.

Soybeans continue to trend higher while the charts os corn and wheat are diametrically different in tone.

  Support Resistance
Mar Beans 12.37 12.70
Mar Corn 6.00 6.44
Mar Wheat 6.00 6.47

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.