WEEKLY FUTURES REPORT
Filed 4:00 pm
Last Last Week
Aug Crude 95.82 101.42
Aug Heat 302.59 311.25
Aug Gas (Blended) 290.40 297.09
Crude oil took a spill on Wednesday as outside markets focused on a deteriorating situation in Greece regarding restructuring that nation’s debt. Crude oil fell back to levels not seen since last February on the idea that the European debt crisis will only get worse. Traders are also worried of the contagion effect if Greece’s debt is restructured in such a way that it’s a tacit default. Economic finance ministers broke up their meeting on Wednesday without reaching an agreement. They will reconvene on Sunday. Television coverage from Greece and didn’t look all that inspiring as there was rioting in the streets and police looked reluctant to take control of the situation. Ironically enough, the inventory numbers from the Department of Energy actually showed a draw down in crude stocks, a positive price development. But this was short-lived and the trade became directly correlated to the dollar. The stronger the dollar got a weaker the crude oil that as the day unfolded. European finance ministers broke up their meeting without reaching an agreement on a second rescue plan for Greece. This immediately sent the euro lower and took the commodity space with it. The Federal Reserve Bank of New York’s general economic index slipped to its lowest level since November and this was another negative for the market. Even with today’s decline crude oil is 23% higher than year ago levels. The situation in Greece remains fluid with their prime minister saying he will shake up his cabinet and then seek an immediate vote of confidence. Selling intensified however as the day progressed with a huge break in the US stock market. As for the inventory numbers, US crude oil stockpiles were down 3.4 1 million barrels to 365.6 million
barrels. The market was looking for decline of 1.8 million barrels. Even supplies of oil at Cushing, Oklahoma, the terminus for New York Mercantile exchange West Texas intermediate oil, were lower by 1.1 4 million barrels to 37.7 8 million barrels for the latest reporting week. One reason for the decline was the closure of the Keystone pipeline which carries Canadian oil to central United States. Without the influence of outside markets, crude oil would have probably closed higher on the day. Money flow in crude oil remains positive.
Aug Crude 92.50 102.00
Aug Heat 295 317.00
Aug Gas 285.00 304.50
Last Last Week
Aug Gold 1531.00 1537.20
July Silver 35.81 36.65
July Platinum 1776.80 1824.00
Gold closed higher on Wednesday, decoupling from many different markets in the commodity space and also decoupling from dollar strength. There looked to be direct selling of the EC and buying of gold as a currency. The reason for this was the continuing difficulty regarding Greek debt restructuring. The restructuring or re-profiling of Greek debt would negatively impact European banks. They are not eager to walk away from Greek indebtedness and take sizable write-downs on their balance sheets. The situation remains volatile. Even the ECB which is capitalized with $10 billion holds $74 billion dollars in European debt. Gold is obviously being viewed as a currency, not of last resort but possibly of first resort at this juncture. This is should keep a floor in under gold just on the basis of been an alternative investment unless other markets really tank and there is a universal margin call forcing the liquidation of virtually every asset on the board. So, gold should be bought on dips but keep stops in place. It’s not a trade without implications or consequences. The last chart on the page, although slightly misleading because of ratios, is one of long gold short EC. The trend line is fairly solid.
Aug Gold 1515 1554
July Silver 34.65 37.00
July Plat 1700 1808
Last Last Week
July Coffee 262.65 263.85
July Sugar 25.08 24.95
The coffee market traded mostly higher over the past five sessions. Conditions in outside markets will prevent an upside breakout, however. The failure at new recent highs was encouraged by dollar strength. Also, several new forecasts regarding production levels have been upwardly revised a price negative. On a positive note, Vietnamese producers are not eager to sell product and want to wait for even higher prices before putting out hedges. Exports from Central America suggest increased production from that key growing region.
Sugar saw some considerable technical damage on Tuesday with the market almost lower by 3%. Monday was a doji (prices closed where they opened) and there was a lower close on Tuesday, making Monday’s high more important. India is considering increasing exports. The
market is not concerned about tight supplies. Expanding acreage in India is a negative.
July Coffee 260.00 264.50
July Sugar 24.00 26.00
Last Last Week
July Soybeans 13.68 14.014
July Corn 7.256 7.64
July Wheat 7.084 7.48
With China continuing to ratchet rates higher and the dollar gaining strength due to concerns over the debt crisis in the Euro zone, the
soybean complex felt the pressure and prices deteriorated. Chinese soybean production is supposed to contract this year however and demand may be intractable. Funds were sellers to raise cash. Planting is 87% complete. Money flow in soybeans is negative.
Money flow in corn is negative. Heavy rains in the Midwest were seen as a negative. Temperatures were expected to increase, another negative. The market was limit down yesterday and lower overnight again. Support will come in at 7.01.
Money flow in wheat is negative as well. US wheat has increasing competition from Russia, the Ukraine and Australia. Wheat remains more sensitive to dollar strength. Russian and Ukraine exports are expected to ramp up and this is a negative. Russia is also willing to underprice the market to gain market share and currency. Improving crowing conditions for Europe and the soil rich Black Sea will be a negative as well. Support comes in at 6.80.
July Soybeans 13.36 13.85
July Corn 7.00 7.72
July Wheat 6.98 7.48
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.