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Oil had its biggest one day rally in nearly 5 months

 

WEEKLY FUTURES REPORT

10.05.11

 

Filed 8:10 pm

 

Last Last Week (9/28)

 

Nov Crude 79.67 80.20

 

Nov Heat 277.25 281.81

 

Nov Gas (Blended) 257.50 256.50

 

Oil had its biggest one day rally in nearly 5 months after the release of the US Department of Energy report was released. The Department stated that stocks for the latest reporting week fell by 4.68 million barrels to 336.3 million barrels. The trade had been looking for a gain of 1.5 million barrels. Another positive was the ADP private jobs survey which showed that the economy added more jobs than previously expected. Even with the rally, prices are lower than they were last week at this time. As of yesterday’s close, Brent was 21% lower than it was in April. When a market declines 20% from its highs, technicians usually declare a bear market. The reason for the drop in stocks was due to refiners working off their stocks rather than an increase in demand. Supplies of crude on Cushing, Oklahoma, the hub for American benchmark West Texas Intermediate, fell by 831,000 barrels, the lowest level since March 2010. Another positive for the oil market was from testimony from Fed Chairman Bernanke on Tuesday. He stated that the recovery was much slower than anticipated and that the Fed would stand ready to provide stimulus. Some saw that as an indication that a new round of quantitative easing or QE3 was feasible. Any reflation of the economy would be a positive for oil.

 

Gasoline stocks declined by 1.14 million barrels to 213.7 million barrels while the trade had been looking for an increase of 1.5 million barrels.

 

Now for the charts…

 

Crude prices basically bounced at the August 9

th lows. The bottom Bollinger was run. Stochs turned higher. Slope remains negative. Midlines should be tagged before heading lower again.

Support Resistance

Nov Crude 75.00 81.00

Nov Heat 268.00 281.00

Nov Gas 245.00 260.00

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METALS

Last Last Week

Dec Gold 1643.10 1608.80

Dec Silver 30.51 29.88

Jan Platinum 1496.30 1535.00

Gold improved in price over the past five sessions as the Euro Zone sovereign debt crisis still remains badly defined and fluid. Comments from Fed Chairman Bernanke suggested that another Fed quantitative easing may be in the wings. There were strikes in Athens and some rioting. The main thing to keep in mind is that the gold market, at least for now, is highly correlated to equities markets. In fact, correlations between stocks, commodities, foreign exchange and debt instruments are all highly correlated. Gold has lost its appeal as a safe haven as reflected by its recent lock step decline with the equities markets. Silver remains negative in terms of money flow while gold is positive in money flow and has been holding technical support levels.

As for the chart…

Gold didn’t even come close to the August 9

th price rejection. Mid line should be tested. Platinum is the weakest of the three charts. As a stand-alone barometer, platinum is forecasting a US recession.

Support Resistance

Dec Gold 1581 1715

Dec Silver 27.25 32.60

Jan Plat 1412 1543

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SOFTS

Last Last Week

Dec Coffee 227.70 233.50

Mar Sugar 24.80 24.30

Coffee rallied on Tuesday as commodities as an asset class rebounded out of 10 month lows after Fed Chairman Bernanke hinted that QE3 may be under consideration. The downtrend in coffee has been aggressive lately. Expectations for upcoming production remain high. Coffee exports from Honduras are 70% above last year’s levels. Fundamentals remain bearish. Rains in Brazil are increasing yields.

Outside market forces remain bearish for sugar. Lower prices have encouraged demand in the cash market. The market is still facing a world surplus. Short covering is the only buying in this market.

The charts do not indicate that a bottom is in place.

Support Resistance

Dec Coffee 210 240

Mar Sugar 2400 2600

********************** ********************** .

Last Last Week

Nov Soybeans 11.63 12.23

Dec Corn 6.05 6.31

Dec Wheat 6.25 6.39

Prices have worked their way lower over the past week even with the surge on Tuesday after comments from the Fed Chairman. Cash market reports that US soybeans are now price advantaged over South American soybeans resulted in increased cash market activity. Weather in Brazil and Argentina is perfecta and bearish for price. US weather is now ideal for harvest and may increase by 1 bushel per acre from last year which would add 74r million bushels to the harvest.

The chart indicates that a bottom is not in place.

The trend is corm remains defined. A fear of a hard landing in China is a price negative.

Increasing open interest and declining prices suggest that traders are heavily short this market. Tuesday’s price advance was pure short covering.

Support Resistance

Nov Soybeans 11.36 11.90

Dec Corn 5.69 6.20

Dec Wheat 5.81 6.50

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 SUBEQUENTLY 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.