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Weaker dollar might boost the market on Wednesday

WEEKLY FUTURES REPORT

05.18.11

Filed 9:30 pm

Last Last Week

July Crude 100.24 98.77

July Heat 290.83 291.23

July Gas (Blended) 291.70 304.17

The market was poised to punch higher on Wednesday as overnight there had been a weaker dollar and, according to the American Petroleum Institute, there was a surprising draw down in gasoline stocks. The same report also showed a greater than expected increase in crude stocks. The EIA report released at 10:30 NY time Wednesday stated that crude stocks for the latest reporting week declined by 15,000 barrels to 3870.3 million barrels. The trade had been expecting an increase of 1.7 million barrels. Refineries ran at 83.2% of capacity suggesting better demand for product. On the news, July crude was able to vault over the $100.00 a barrel mark. This is the best price traded over the last eight days. Futures are higher by 44% than year ago levels. Imports of crude dropped 4.4% showing better demand. Supplies at the West Texas Intermediate storage hub at Cushing, Oklahoma fell by 1.59 million barrels to 40 million. Also, there were problems with infrastructure as the TransCanada pipeline developed a leak in North Dakota and had to be shut down for 10 days due to now completed repairs. Gas stocks were higher by 119,000 barrels to 205.9 million barrels. Gasoline demand increased by 2.5%. The increase was the first in three weeks. Some traders believe that even though there’s sufficient oil and prices are verging on demand destruction, fear of supply disruptions will continue to be supportive for prices walking forward. Libyan production of 1.3 million barrels per day remains off the market. Wildfires in Alberta, Canada have jeopardized the transport of 55,000 barrels of oil per day. From a macro perspective, the ending of quantitative easing by the Federal Reserve as indicated by their Federal Open Market Committee meeting notes released on Wednesday could

result in a de-facto tightening and higher interest rates pushing the price of crude down to 83 dollars a barrel.

Notice how the week on week gain is all in the crude oil. Both the products are trading at levels below last week at this time.

July is now front month forward. Be sure to get out of or roll out of your June futures.

Support Resistance

July Crude 95.00 102.00

July Heat 277 295.50

July Gas 277.50 297.70

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METALS

Last Last Week

June Gold 1496.90 1500.60

July Silver 35.22 35.085

July Platinum 1771.90 1779.60

Gold held steady due to a weaker dollar and the modest rally in commodities on Wednesday, especially gaining support from the grains and crude oil. The budget impasse in Washington is a supportive feature. As futures options expire in Gold look for prices to vibrate around strike prices (1500.00) an ounce, The budget impasse and possible shutdown of the US government could be a dollar negative and a gold market positive if an agreement can’t be reached. On the other hand, the end of QE2 cold nudge interest rates higher and eventually take gold down to 1364 an ounce. The commodity asset bubble was created by zero cost liquidity injections into financial system by the Fed and now that is coming to an end.

Support Resistance

June Gold 1456 1509

July Silver 32.84 37.50

July Plat 1474 1793

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SOFTS

Last Last Week

July Coffee 270.05 273.15

July Sugar 22.85 20.94

Coffee prices are still well below week ago levels and have not managed to repair themselves after the margin liquidations of 10 days ago. The International Coffee Organization has now placed global production 8% above last year’s totals.

Sugar looks to be in better technical shape and prices are back above levels seen last week. The market is continuing to work off oversold condition. The harvest in Brazil has gotten off to a slow start. Near-term dollar weakness has been supportive.

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Support Resistance

July Coffee 260.00 273.00

July Sugar 2140 23.50

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Last Last Week

July Soybeans 13.794 13.316

July Corn 7.496 6.7225

July Wheat 8.17 7.59

Soybeans were positive going into the day on Wednesday and continued higher. The cash market was characterized as sluggish but weather conditions have really supported prices over the last couple of sessions. The weather pattern over key growing areas of the United States continues to be wet and cold. Soybeans upside is limited however as farmers can switch from corn and wheat to soybeans and increase the

size of the soybean crop. Funds were buyers. Plantings for soybeans remain well behind schedule.

Corn was higher by 7 ¼ cents going into the session Wednesday and continued higher throughout the session. Funds were active buyers. Expiration of June options was also a positive factor. 34,000,000 acres of corn have yet to be planted due to weather delays. North Dakota is really lagging behind.

A supportive feature for wheat was extremely dry weather in France and Russia. Outside market forces are generally positive. Late last week commodity funds were aggressive sellers. Weather conditions in key growing areas of the United States had them covering their short positions, however. Some forecasters are calling for loss of 5% of the French wheat crop due to these dry weather conditions while wet weather is preventing plantings in the key growing areas in the United States. Cash market tone is good.

Support Resistance

July Soybeans 13.32 13.90

July Corn 7.12 7.70

July Wheat 7.55 8.50

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.