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Oil higher after the release of the FOMC announcement of leaving the short-term rate unchanged

04.28 Filed Wednesday 6:15 pm

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

June Crude 83.22 86.68

June Heat 225.42 222.97

June Gas (Blended) 233.30 229.59

Oil prices turned higher after the release of the Federal Reserve’s Open

Market Committee announcement leaving short-term rates unchanged.

The market basically fell apart on Tuesday after Greek debt was

downgraded to junk. Spanish and Portuguese debt has also been

subsequently downgraded. The fear of a crisis in the Eurozone could

result in a general economic slowdown. An economic contraction would

of course lead to less consumption of oil. As far as the most recent

supply and demand figures, the Energy Information Administration

stated that US crude stockpiles were higher by 1.9 million barrels.

Distillate stocks rose by 2.9 million barrels and gasoline stocks fell by

1.2 million barrels. Market watchers had expected an increase of 1.4

million barrels for crude and increase of 1.2 million barrels for distillate

while they also expected an increase of 500,000 barrels for gasoline. The

drawdown in gasoline was a positive. With the Federal Reserve keeping

interest rates close to zero the market did have a relief rally on

Wednesday but money flow remains negative for both crude oil gasoline

and heating oil.

Support Resistance

June Crude 80.30 85.30

June Heat 218.00 230.00

June Gas 228.40 235.00

***********************

METALS

Last Last Week

June Gold 1171.80 1148.80

July Silver 18.135 18.109

July Platinum 1713.6 1740.30

Gold had a singularly spectacular performance over the last five

sessions as it was held out as an alternative to currency exposure. Gold

priced in EC, British Pound sterling and Swiss franc made new recent

highs. Gold is seen as a hedge against potential sovereign debt default.

This week Greek debt was downgraded to junk. Spain and Portugal also

had debt downgrades and there was a general flight to quality. The EC

is down 8.3% for the year. There’s a possibility that the EC will have to

monetize its debt thereby increasing the money stock and increasing

inflationary pressures. At the same time, economic contraction in the

zone could induce deflationary pressures. Gold was up 24% last year as

the dollar fell 4.2% against major foreign currencies. It wasn't that long

ago that the EC was being looked upon as being able to supplant the

dollar as a reserve currency. This doesn’t seem likely any time soon.

There is also an idea that the dollar may continue to rally against major

foreign currencies if the US economy continues to improve or if the Fed

moves short term rates higher. Money flow for gold remains positive.

Money flow for silver however is negative as it is for copper. As long as

there are concerns about sovereign debt, gold will continue to be bought

on breaks.

Support Resistance

June Gold 1135.00 1187.50

July Silver 17.55 18.50

July Plat 1680.00 1775.00

*********************************

SOFTS

Last Last Week

July Coffee 133.90 131.25

July Sugar 14.86 16.69

Coffee surged to a two-week high as the dollar was weaker against

major foreign currencies. Coffee had been down 3.8% for the year as

the dollar was stronger. Also, production from Brazil was forecast to

increase. Technically coffee may rally to 1.42 over the next 10 sessions

after clearing the $1.34 barrier.

Sugar continued to fall in price as supplies from Brazil continue to rise

and eat into a global production deficit. Output in Brazil's key growing

region increased by 77% compared to last year at this time. Sugar more

than doubled in price last year as there was a drought in India and

excess rains in Brazil. The exact reverse of this is happening this year.

Prices are now at their lowest levels since last June.

Support Resistance

July Coffee 130.00 135.50

July Sugar 14.00 16.00

*****************************************

Last Last Week

July Soybeans 9.934 10.06

July Corn 3.64 3.690

July Wheat 4.88 4.996

July soybeans fell sharply yesterday on the idea that China will try to

curb inflation by attempting to slow economic growth. If they are

successful, this would reduce the demand livestock feed. Yesterday,

Chinese equities fell to a six-month low as the government attempts to

curtail the real estate market there. China is the biggest foreign

consumer of US soybeans and it is believed that the US, Brazil and

Argentina will all have record crops. Another reason for Tuesday’s

decline was due to a USDA report which showed that soybean planting

in key areas was ahead of a five-year average. Early planting means

that soybeans will be harvested in August and that inventories may

reach 190 million bushels up from 138 million bushels last year.

Corn rallied on Wednesday for the first time in four trading sessions

after it had fallen its to lowest level in three weeks. There is speculation

that China may increase corn imports. Also, cold weather in key

growing areas in the Midwest may damage crops. Weather in the early

part of this week may slow down planting as well. Additionally, snow

and cold weather in northeast China will probably delay planting there

as well.

Wheat e continues to be weak in price. 69% of the winter crop is rated

good or excellent. Last year at this time, only 45% of the crop was rated

good to excellent. Traders say that the European debt crisis is giving

some players the idea that demand will not be as great as it could be this

coming year if economic contraction actually occurs in the euro zone.

Money flow in wheat is negative.

Support Resistance

July Soybeans 9.80 10.19

July Corn 3.46 3.80

July Wheat 4.750 5.10

Chuck Kespert

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.

 

 

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