Weekly Futures Report
Filed 5:10 pm Wednesday
Last Last Week
Aug Crude 68.55
Aug Heat 178.87
Aug XRB (Blended Gas)
On Wednesday, the Department of Energy stated that crude supplies for
the latest reporting week were lower by 3.87 million barrels. This was
offset by an increase of 3.87 million barrels for gasoline and an increase
of 2 million barrels for distillates. The market was somewhat responsive to
news that durable goods orders were better than expected, a sign of economic
strength. The market was also initially higher as the equity market rallied.
Prices fell as the dollar gained strength against virtually all foreign
currencies on Wednesday as the Swiss central bank apparently intervened,
selling their currency. A stronger dollar is generally a negative for
commodity prices based on export considerations. Again, what's really
operating in this market is the correlation between the currencies and the
oil market. The correlation is roughly 82%. Fundamentals of supply and
demand are not driving prices. It's apparent that supplies are more than
adequate to meet demand. The other feature to this market is momentum
trading. Money flow in crude oil remains positive. Money flow in heating oil
is negative. Money flow in gasoline remains positive.
Last Last Week
Aug Gold 932.5
July Silver 13.86
Oct Platinum 1168.6
Metals were driven by several, disparate forces over the course of
the last week. When the World Bank came out and stated that the current
recession is worse than their original projection and also worse than the
projection by the International Monetary Fund, the metals sold off sharply.
When it seemed likely that the Federal Reserve will leave interest rates
unchanged and indicate in a communiqué that they were not inclined to raise
interest rates anytime soon, the dollar showed weakness and the metals
rallied. At this point, it's difficult to develop a market consensus
regarding recession, deflation, inflation or even central bank policies. The
market was surprised on Wednesday when the Swiss came in and apparently
intervened against their own currency by selling it. This drove the Swiss
almost 300 points lower intraday. As for the Fed, in a relatively optimistic
communiqué, short-term rates remained unchanged. They also went on to say
that they would stay the course regarding rate policy. They also suggested
that the pace of economic contraction is slowing. Additionally, household
spending is showing signs of stabilization and that inflation was likely
to remain subdued for some time. They also didn’t refer to deflationary
pressures. There are those who remain concern about the Fed's monetization
of debt which will probably lead to potential inflationary pressures
eventually. After all, the stimulus of $12.8 trillion is unprecedented and
historically stimulus has always led to eventual inflationary consequences.
Money flow for gold is positive. Money flow for silver is negative.
Over the past week, platinum futures dropped to a three-week low as a
demand for the metal edge against inflation declined.
July Silver 13.50
Last Last Week
Sept Coffee 119.25
Oct Sugar 17.10
Last Last Week
Nov Soybeans 10.08
Sept Corn 3.95
Sept Wheat 5.676
Wheat continued to decline in value over the past five sessions. Signs
that the winter wheat crop in Kansas will be larger than expected was a
negative. Dry weather is enabling farmers to accelerate the harvest that had
been delayed by spring rains. Yields are much better than industry observers
had previously anticipated.
Separately, there was a report that wheat prices in the past had been
inflated by index investors. A US Congressional investigation report
suggested that the Commodity Futures Trading Commission should enforce
position limits to curb speculation. The report went on to suggest that
index traders pushed futures beyond the limits of normal supply and demand.
The report went on to say that speculation by index funds trading in wheat
resulted in increased costs for farmers, merchants, grain processors and
end-users. The CME group disagreed with the congressional findings, however.
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.