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The market sold off sharply over the past week, some as a result of the elimination of Bin Laden

WEEKLY FUTURES REPORT

04.27.11

Filed 10:00 pm

Last Last Week

June Crude 108.88 113.25

June Heat 314.14 325.65

June Gas (Blended) 331.43 337.45

The market sold off sharply over the past week. Some of the selling pressure was a result of the elimination of Bin Laden. At the same time, the commodities complex itself was under liquidation pressure as the silver was dismantled by a series of ever higher margin requirements by the exchange. In fact, margin requirements in silver have been raised four separate times since last week. This obviously has a chilling effect on speculation. This month’s ADP private jobs forecast also showed a gain of just 179K in new jobs which reflects a slowing in the most recent series. This leads some to the conclusion that there’s economic contraction or stagnation and there will be less offtake of oil. Also, as the US economy remains sluggish, stronger economies such as India, China and Brazil continue to raise rates to cool their economies. Although China keeps raising rates oil consuhasn’t shown any signs of slowing. Russian oil production is near all-time highs while OPEC production is off by about 2% due to the continuing fighting in Libya. As for the IEA numbers, there was a draw down in gasoline inventories by 1.05 million barrels. As for Crude oil, the IEA report showed a build in supplies of 3.42 million barrels and this sent the price lower by 1.6%. The trade had been looking for an increase of 2 million barrels. Prices remain 32% higher than last year at this time. Conversely, gas stocks are at their lowest levels since June of 2009. There has been some evidence of demand destruction with prices surging at the pump to average just under $4.00 a gallon nationwide. Gasoline consumption dropped by 2.2% to 8.94 million barrels. Also, the Institute for Supply Management which tracks gains and losses in the services sector added far fewer jobs than previously forecast, another negative. Money flow in crude oil is negative. Money flow in gasoline is positive.

From the charts below, it’s fairly easy to tell that the gasoline is the strongest of the three components. Part of this has to do with spreading activity. The last chart in this section clearly shows the power behind the short heating oil/long gas spread.

Support Resistance

June Crude 106.00 112.74

June Heat 310.00 323.64

June Gas 325.00 338.65

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METALS

Last Last Week

June Gold 1515.9 1529.00

July Silver 39.32 48.29

July Platinum 1826.00 1832.00

The silver market plummeted in price as the exchange has no increased margin requirements 4 times over the past week. The market has experienced the greatest three day price decline since 1983. A lessening of geopolitical fear with the elimination of Bin Laden was a factor. Silver is lower by 19% since the end of April. Commodities as an asset class had rallied for the past eight months. This was unprecedented. The soft ADP private jobs forecast number was a negative for the market. Even though prices declined yet again on Wednesday, margin rates were hiked yet again due to increased volatility. Silver has to wash out all speculative interest before it can retrench and rally. Until margin rates come back down expect all rallies to be met with selling pressure. Gold fell in lock step with silver market; the selloff was too steep to ignore. Silver margins now stand at $16,000 a contract.

Support Resistance

June Gold 1495.00 1555.80

July Silver 36.50 45.52

July Plat 1775.00 1850.00

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SOFTS

Last Last Week

July Coffee 294.50 296.40

July Sugar 21.35 22.96

Coffee had been able to rally to 14 year highs but came under selling pressure as the commodity space experienced an across the board liquidation. Supplies remain tight in Europe and North America. Coffee stocks in the exchange warehouse remain at historically low levels. Fundamentally, there’s still too much inflexible demand chasing tight supplies. On the other hand, Brazil is expected to have one of its best skip year productions ever and exports from India are running well above year ago levels as well.

As you can see form the chart below, sugar continues to probe the lower Bollinger band and remains firmly locked in a long liquidation mode. It has closed lower six sessions in a row. India’s production is 21% higher than year ago levels.

Support Resistance

July Coffee 285.00 300.00

July Sugar 2000 2300

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Last Last Week

July Soybeans 13.52 13.844

July Corn 7.294 7.592

July Wheat 7.72 8.12

Soybeans were under long liquidation pressure form commodity funds as the commodity markets deleverage form massive long only bets placed during the month of April. Weak demand from China is a major negative influence. Soybeans sometimes align itself with silver and this has been a massively negative influence this week. Some traders are raising South American production, another negative.

Corn traded down to its lowest level since the end of March. The support for this market comes from delayed plantings due to weather concerns. Corn plantings are just 13% complete compared to 15% usually seen at this time of year.

The wheat market is defensive as it continues to seek clarity regarding weather in the US, Canada, Europe and China. An increased chance for rain in Kansas plus deleveraging from commodity funds remains a negative. Slow spring plantings are a positive. Money flow in wheat remains negative. Sell call spreads.

Support Resistance

July Soybeans 13.25 13.90

July Corn 7.075 7.51

July Wheat 7.50 8.12

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.