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All the economic indicators show that demand is diminishing for oil

WEEKLY FUTURES REPORT

06.01.11

Filed 7:50 pm

Last Last Week

July Crude 99.72 101.19

July Heat 301.40 299.30

July Gas (Blended) 298.30 298.67

Crude oil and its products sold off sharply on Wednesday. The trigger for the selloff was the employment report released by ADP which showed only a gain of 38,000 jobs. The trade had been looking for a gain of about 138,000 jobs. Obviously, this number signaled a possible economic contraction. Fewer workers, fewer paychecks, fewer fill-ups. The ADP number immediately played into stock market valuations as well. Less discretionary spending has a negative impact on price earnings ratios of stocks so consequently equities had a broad-based selloff. Moody’s also downgraded Greek debt from B1 to Caa1; essentially junk. J.P. Morgan also downgraded Q2 GDP from 2.5 to 2%. Another economic negative was a reading of 52 points the Chinese Purchasing Managers Index. Chinese manufacturing has slowed to its lowest level in several months. All of these factors help to press the price of oil lower. Another negative factor was the contraction in the reading for the Institute of Supply Management factory index which decreased to its lowest level since September of 2009. All of these economic figures indicated that demand for oil may diminish as we move forward. The drop in price was the single biggest decline since May 11. Crude oil is still up 38% from a year ago. The American Petroleum Institute reported after the floor close that crude oil stockpiles increased by 3.47 million barrels to 371.6 million barrels. Oil had rallied on Tuesday when news hit the market that there was going to be another prospective aid package to Greece but the economic data of Wednesday reversed that. OPEC increased production for the second month in row in May led by production increases by Saudi Arabia and Nigeria. The Department of Energy figures were delayed by a day in terms of their release due to the holiday on Monday. Traders are

looking for a drop of 1.6 million barrels in crude and the decline of 0.3% in gasoline consumption. One thing that is interesting to note is that crude oil is lower than last week at this time but heating oil is higher and gasoline is basically unchanged despite significant volatility.

Support Resistance

July Crude 98.10 105.00

July Heat 293 309.00

July Gas 290.00 309.00

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METALS

Last Last Week

Aug Gold 1541.90 1526.20

July Silver 36.83 37.81

July Platinum 1820.7 1785.00

Gold rallied sharply on Wednesday to a four-week high ais traders sought diversification if not a refuge from other markets. Stocks declined on a less than expected ADP report. Stocks consequently had their worst decline in weeks on the first trading day of the month. Gold was lower by 1.3% last month. The dollar was generally stronger against most major foreign currencies except for the Swiss franc so we saw a decoupling of dollar influence in the gold trade Wednesday. Gold also was able to rally despite a precipitous fall in the price of crude oil, another positive for the metal. There was also a divergence between gold and silver with silver falling in price due to a general sense of world economic slowdown. The lower-than-expected Chinese purchasing managers Index was a silver negative. There continue to be questions about the ramifications of the end of quantitative easing and the prospect for another round of same if economic numbers continue to be persistently weak. J.P. Morgan’s downgrade of Q2 was another negative for the silver market. Again it’s interesting to note the changes from last week with gold higher and silver lower on a net change basis, an

infrequent anomaly. Money flow in gold remains positive. The trade in silver is more a barometer of risk appetite. Currently there is enough doubt looking forward about economic expansion, consequently silver will have trouble mounting a sustainable rally.

Support Resistance

Aug Gold 1528 1550

July Silver 36.00 38.79

July Plat 1753 1800

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SOFTS

Last Last Week

July Coffee 255.95 264.85

July Sugar 22.46 22.64

Coffee attempted to rally over the past several sessions based on a weaker dollar but selling pressure arrived on Wednesday. News that Colombian growers are projecting a larger crop than last year by possibly as much as 25% pressured prices. Reports of cold weather in key Brazilian growing areas were a price support but temperatures are not near freezing levels. The International Coffee Organization stated that global exports of coffee were up 25% in April. Selling pressure on Wednesday was due to asset liquidation across the board. Weaker than expected employment figures suggest a possible contraction in discretionary spending.

Sugar continued to mark time. Strength in the London market for sugar, which saw prices jump to their best level since March on dry weather concerns for key growing areas in Europe, was a positive. European sugar plantings however may be up nearly 5% from last year due to higher prices. Speculative buying has been a positive factor for price. Still, May was a down month for sugar. Brazil’s weather looks ideal for the harvest. Indian officials look for a more cooperative monsoon season than last year and because of that a significant rise in production.

Support Resistance

July Coffee 250.0 275.0

July Sugar 22.00 24.00

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Last Last Week

July Soybeans 13.862 13.77

July Corn 7.584 7.422

July Wheat 7.592 7.96

Grains were mixed on Wednesday with soybeans and corn closing higher and wheat continuing a selloff that began on Tuesday. A slow start to planting for soybeans was a market positive. Only 51% of the

crop is planted compared to 41% last week and 71% last year. December corn traded to a new contract high last Thursday but better weather for planting produced selling pressure. Traders expect plantings to be nearly 90% complete compared to 92% which is the ten-year average. Yield concerns for Europe were seen as a positive factor for corn. Wheat was by comparison the weakest commodity in the complex. Rains in Europe and Russia lifting export bans accelerated selling pressure. Wet weather was seen as a negative. Planting has been delayed due to weather in key growing areas in the United States. North Dakota is just 55% planted against a normal reading of 90%. Russia has decided to lift the ban on grain exports as of July 1 and this really negatively impacted the wheat market. Russia probably will export 15 to 20 million tons of grain from this year’s crop if that harvest reaches 85 to 90 million tons. Russian wheat trades at a discount to world market prices so consequently it will quickly be absorbed if made available. India is also expecting a record harvest of wheat this year.

Support Resistance

July Soybeans 13.53 14.02

July Corn 7.30 7.72

July Wheat 7.25 8.22

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.