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Us economy continues to face headwinds

 

WEEKLY FUTURES REPORT

 

 

09.21.11

 

 

Filed 8:45 pm

 

 

 

Last

Last

Week (9/14)

 

 

Nov Crude

84.80

 88.75

 

 

 

Nov Heat

292.10

 295.08

 

 

 

Nov Gas (Blended)

263.16

 270.30

 

 

 

 

Crude oil declined on Wednesday after the Federal Reserve left interest rates unchanged. In its communiqué, the Fed painted a picture of the US economy as continuing to face headwinds. The Fed also conducted a strategic change to its portfolio by announcing that they would be selling $400 billion worth of short-term maturities and buying $400 billion worth of long-term maturities. Operation Twist effectively flattens the yield curve. All in all, traders came away with the impression that the Federal Reserve continues to believe that the economy is weak. Initially, energy prices rallied earlier in the session as the Energy Department reported that crude stocks fell by 7.34 million barrels to 339 million barrels for the latest reporting week. It’s the lowest level since January and the biggest stock drop since December. Stockpiles were forecast to have declined by 1.3 million barrels. In retrospect, the DOE figures only provided an opportunity to sell. Also, possibly reflecting better demand, crude oil production was higher in the US by 13% to 5.75 million barrels a day last week. Imports of crude were lower by 2.2%. Supplies of distillate fuel which includes heating oil declined 874,000 barrels to 157.6 million barrels for the latest reporting week. Gasoline inventories were higher by 3.3 million barrels to 214.1 million barrels. This is the biggest one-week gain since last May.

 

Sentiment about the economy remains negative which is a negative for crude oil and its products.

 

And now for the charts…

 

The crude oil chart has a negative bias due to negative economic sentiment.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Support

Resistance

 

 

 

Nov Crude

83.00

89.00

Nov Heat

290.00

302.00

Nov Gas

2.60

2.73

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

METALS

 

 

 

Last

Last

Week

 

 

Dec Gold

 

 

 

   1824.80

 1782.60

Dec Silver

39.67

                              40.825

 

 

 

Oct Platinum

                     1762.10

1815.10

 

 

 

 

Gold fell in price as the dollar was very well bid after the conclusion of the Federal Open Market Committee meeting. The Fed left rates unchanged but announced that they were going to rearrange their portfolio by selling short term debt maturities and replace them with long dated maturities. Gold was off more than 1% for the day. As the dollar rallied, the flight to quality impulse of the markets was diminished. Also the weakness in grains and copper were a negative for the precious metals markets as well. It’s interesting to note that bonded warehouses are running out of room to store gold. Demand for passive investment in gold and safe storage continues to be strong despite daily vagaries induced by the next headline. Holdings in gold backed ETF’s are equal to more than nine years of US mine production. Storage fees and replacement insurance costs are skyrocketing for gold as they are based on a percentage of the current market price. Gold is trading in an inverse relationship to bank stocks. To monitor a possible top in gold, look at the performance of the banking sector. If the bank share sellers eventually become exhausted and buyers start to take positions this could hurt gold. With that said, what the Federal Reserve did today basically impair the profitability of the banks as the Fed flattened the yield curve with Operation Twist.

 

As for the charts…

 

Bollinger bands are fairly flat. This suggests a trading range. Gold is well off its highs but buyers lurk below for a variety of reasons even though the dollar may remain strong over the next week or two.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platinum continues to be the weakest of the three charts as it is more reflective of industrial activity.


 

 

 

 

 

 

 

 

 

 

 

 

Support

Resistance

 

 

 

Dec Gold

1756

                           1840 

 

 

 

Dec Silver

38.75

41.00

Oct Plat

1755

1803

 

 

 

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

 

SOFTS

 

 

 

Last

Last

Week

 

 

Dec Coffee

251.95

265.70

Oct Sugar

26.83

29.70

 

Sugar tried to retrench and stop the bleeding after being down more than 15% over the past four weeks. The cash market is looking for some buying interest as prices drop. The price of coffee has dropped 9.7% this month following a 20% gain in August. Open interest continues to decline in sugar suggesting more and more long liquidation by speculators. The remaining longs are hoping that a sharp break in the cash market will attract cash buyers.

 

As for the charts…

 

At least coffee is showing some support with two days of price rejections followed by a negative day which fails to make a new low.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Support

Resistance

Dec Coffee

245.00

260.00

 

Oct Sugar

25.50

27.50

 

 

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

 

 

Last

Last

Week

 

 

Nov Soybeans

13.204     

13.826 

13.826

 

 

Dec Corn

6.856

 7.242

 

 

 

Dec Wheat

6.666

 7.044

 

 

 

 

Wheat fell to a two-month low on the idea that world economic contraction will hurt demand side. In its communiqué, the US Federal Reserve said that there were significant downside risks to the economic outlook. Traders came away from the event with the idea that both in the United States and worldwide, economies continue to struggle. Wheat is down over 16% for the month. Continued stress over Euro Zone debt has been a price negative for the grains complex even as Corn futures are still up 9% for the year.

 

As for the soybean chart, although prices are oversold, the stronger dollar and its impact on export viability continues to emphasize the negative aspect of this market.

 

 

 

 

 

 

 

 

 

 

 

 

Corn chart remains negative. See how the upper Bollinger band is arching away from the market which indicates downside momentum in price.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Support

Resistance

Nov Soybeans

12.50

13.55

Dec Corn

6.80

                      7.09

Dec Wheat

                   6.61

                  6.94

 

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

 

 

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.