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May 2007 Archives

May 30, 2007

Crude Recovers, Stock Fall

Crude Oil – July Crude Oil is up slightly this morning after losing over two dollars in yesterday’s trade. Refineries have been running smoothly of late, leading traders to believe that production will in fact meet demand. The final numbers on consumption over the Memorial Day weekend are not yet in, but demand is expected to have increased. Regardless, Crude is expected to show a build on the weekly inventory report. Easing tensions in Nigeria helped fuel yesterday’s sell-off, but early market chatter suggests that disruptions in the country’s 150,000-barrel a day output are still a possibility. China is trying to slow its economy, which may help keep prices in check today. July Crude remains bearish on the daily chart, unable to make a push above the 20-day moving average. Momentum is a very weak -4.06 and the RSI comes in at an oversold 29 percent, which could lend some technical support to the market. Crude is toward the bottom end of the downtrend channel formed after peaking in early April, which may also support prices in the near term. Support comes in at 62.36 and 59.00, while resistance can be found at 64.76 and 67.10.

S&P – Stocks are coming in on a sour note due to China tripling its investment tax. The government’s aim is to slow down the country’s booming stock market, but US equity traders are worried about how a loss of wealth and a slowing Chinese economy would impact international players. With the strong gains on the month, the bias for today and Thursday looks to be bearish as traders take profits before month’s end. The June S&P is still bullish on the daily chart, but looks like it may be vulnerable. After last Thursday’s sell-off, the market has had two quiet up-days that look like a small bear flag, which could trigger a short-term correction. Momentum remains bullish coming in to trading at +34.10 and the RSI is giving a neutral 48 percent reading. Support can be found at 1507.80 and 1496.20, while resistance comes in at contract highs of 1535.70.

Corn – December Corn is higher in overnight trading, recovering from a decline of 7 ½ cents yesterday. Ideal weather over the holiday weekend sparked the sell-off, and more rains are expected going into the upcoming weekend. Farmers are carrying a huge short position, which indicates that many are beginning to believe that too much Corn was planted. Planting progress and crop health are on schedule, leaving the market vulnerable to sharp selling pressure in the event that ethanol demand falls short of expectations. Technically, December Corn remains in a painfully slow downtrend with $3.50 a critical area. If the market is unable to gain any traction in this area, the market may fizzle, while strong fund buying in the area may get Corn bulls excited again. Momentum comes in at a slightly bullish +3 and the RSI is a neutral 40 percent. Support can be found at 363 ¼ and 354 ½, while resistance comes in at 376 ½ and 382.

May 31, 2007

Analysts’ opinions mixed on tomorrow's non-farm payrolls report

Economists and traders have a relatively wide range of estimates on tomorrow's payroll figures. On the low end are those looking at yesterday's release of the ADP/Macroeconomic estimate of 97,000 new private sector jobs created in May. On the upper end, those looking at improved weather conditions and an upswing in the factory sector are calling for a payrolls figure closer to 150,000 new jobs. There is greater consensus on an unchanged unemployment rate, which currently stands at 4.5%. Average hourly earnings – a measure of wage inflation closely watched by Federal Reserve officials – are expected to show a moderate increase of 0.3% in May. Market participants will also be watching for any revisions in the March and April payroll figures. Set your alarm clocks early, as the Labor Department will be releasing the May figures at 7:30 AM Chicago time.

FCOJ futures closed the month of May sharply lower, as speculative and fund selling tied to forecasts for potential rain in the parched citrus growing region of Florida overwhelmed light trade buying. The most active July contract fell to lows not seen since April 20th, as traders report moderate sell-stops being triggered below the recent lows of 154.50. Traders report active spread trading as long-term speculative accounts begin to roll out of July and into the November contract. The next support area for July OJ is seen at 148.00, with major support found at the April 19th lows of 146.00. Resistance is found at 160.50. July Orange Juice closed at 151.40, down 6.10.