|WEEKLY FUTURES REPORT|
|Last||Last Week (02.22.12)|
|Apr Gas (Blended)||326.41||326.30|
Crude oil sold off in concert with the metals on Wednesday but managed to hold technical levels and actually close up on the session. Fed Chairman Bernanke’s testimony suggested to the market that further quantitative easing was not in the Fed’s immediate plans. A positive for the market was the comment from the Chairman that the labor situation is improving. Dollar strength was a negative. The gold implosion was also a negative influence. Chicago area PMI was a positive. Unemployment at8.3% is a three year low. Gas prices at the pump above $4.00 a gallon is a demand destroyer for many Americans. Crude oil traded as high as 109.95 on February 24th before questions emerged as to the ability of crude to maintain these higher levels without a Persian Gulf event. For the latest reporting week, the Energy Department stated that crude stocks were higher by 4 million barrels while gasoline inventories fell by 1.6 million barrels and distillates fell by 2.07 million barrels. The increase in crude stocks indicated a slackening demand. Ideas that Israel may bomb Iran as a preemptive measure to destroy Iran’s nuclear capability tended to support prices. The growing possibility of releasing crude from the Strategic Petroleum Reserve is a looming negative.
Now for the charts…
Crude will eventually find the mid Bollinger Band; it always does.
Gold cratered on Wednesday in the wake of Federal Reserve Chairman Bernanke’s testimony on Capitol Hill. The metal fell by more than $100 an ounce within minutes after the market decided that the Fed Chairman wasn’t entertaining thoughts of additional economic stimulus in the form of a third round of quantitative easing or QE3. With the recent price advance, there were fewer and fewer shorts in the market and the advance was starting to look tired with each failed attempt at 1800 an ounce. Even so, few would have expected that on this single trading day, the last trading day of an extended February, gold would make a new high and a new low for the month all within hours. Trading became disorderly as stops were hit and technical levels breached as the dollar regained strength. Earlier in the session, the dollar did gain against the EC as the ECB increased its lending facility more than market had expected and offered these 3 year loans at 800 institutions. This action removed some of the premium gold had been commanding as a hedge against a Euro zone collapse. The dollar also strengthened against the Yen while the Aussie and Canadian dollar strengthened against the dollar but this was as a byproduct to those currencies gaining against the EC. In addition to the Chairman’s testimony, Chicago area purchasing managers came in stronger than expected as did the latest GDP estimate. Additionally, the Beige Book or minutes to the most recent Federal Open Market Committee meeting were upbeat in tone and tenor. All of this went to suggest that additional stimulus wouldn’t be a pressing issue for the Fed. Metals had enjoyed an impressive run partially due to the idea that additional, aggressive stimulus by the Fed in this negligible interest rate environment would eventually spark inflationary pressures. Gold was lower by 5% and managed to clear out long standing stops fewer than 1700.00 an ounce. Gold ended up losing for the month of February while still being higher by 9.2% for the year.
Now for the charts…
Will gold now build time under 1745 thereby turning the Bollinger Bands lower? That is the most probable unfolding. There should be margin liquidation pressure on Thursday as there buyers between 1750 and 1775 looking for a punch out of 1800.00.
Silver looks almost better than it should after Wednesday’s price action. Monthly key reversals don’t just happen without residual complication, however.
Tight near term supplies provided coffee with support. Dollar strength tempered gains. Fungus problems in Guatemala are a price positive.
Sugar’s rally left the market with an overbought condition, mostly speculative. Outside markets are turning negative. March deliveries are being tendered and there’s talk that a major cash house will take the bulk of the deliveries and resell them into the world market, a price negative. With current weather models traders continue to see a surplus crop.
As for the charts... Coffee continues to trend lower while the sugar speed line to its advance is unsustainable.
Soybeans had rallied as signs of European stability were well taken by exporters. With RSI above 74, prices are in position to see profit taking. Chinese demand is said to remain substantial. Soybeans traded to their highest level since last September. Acreage shift from corn to soybeans in the US is a negative. Deliveries for March beans have been almost non-existent. Dry conditions in South America remain a negative. Global reserves are shrinking the most in 16 years. Soybean inventories should be 20% lower on October 1st than last year at that time. Possible economic contraction in China is a negative.
May corn looks trapped in a range. Ethanol profit margins remain negative so corn diversion doesn’t make economic sense.
Wheat continues to be influenced by bearish fundamentals. Swept up by the prospect of endless cheap money, funds have been on the buy side recently despite the negative back story to this market. India should see record production for the fifth consecutive year. Trend followers are net short a record number of contracts, a positive as these contracts must be bought back eventually.
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.
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