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July 2007 Archives

July 25, 2007

Will back-month Cattle mooove higher?

Live Cattle: Friday’s USDA Cattle on Feed report on the surface looks bullish, according to Cattle traders, especially for the fall and winter month contracts, however some think that this could turn into a “buy the rumor, sell the fact” trade this morning. First the numbers: on-feed July 1st 99.0% vs. estimates of 99.5%, placed in June 85% vs. estimates of 90.3%, and marketed in June 97% vs. estimates of 96.5%. The real surprise was the placements figure, which should help support the October and December contracts, as there should be less fed cattle available come the fall. However, October Cattle is already trading nearly $6.00 above the nearby August contract, which has some traders believing the market has already priced in the lower placements. Support for October Cattle comes in at 96.20, with resistance found at 97.57. October Live Cattle closed at 96.60, up 0.15.

Pork Bellies: Friday’s monthly USDA’s Cold Storage report may bring bulls stampeding back to the belly pit, as belly stocks came in below even the low end of analysts’ estimates. The USDA estimated belly stocks at 47.7 million pounds, well below the average estimate around 51 million pounds. This could help the August contract move to the upper end of its recent 650 point trading range. Support for August Pork Bellies is seen at 85.50, with resistance found at 92.17. August Pork Bellies closed at 87.25, down 1.05.

Natural Gas: The minor short-covering rally in Natural Gas futures last week has come to an end, as the lead month August contract fell to lows not seen since early January on the weekly nearby chart, as traders react to weather forecasts calling for the above normal temperatures headed to the Midwest this week to be short-lived. In addition, the lack of any signs of tropical disturbances in the Atlantic have traders removing some of the “risk premium” out of the August contract that will expire on Friday. Support comes in at 6.000, with resistance seen at 6.380. In early trade, August Natural Gas is trading at 6.177, down 0.269.

July 30, 2007

Active overnight trading keeps traders awake!

Corn: December Corn futures traded higher in early trade, as traders gear up for a possible decline in the U.S. crop ratings last week. The USDA reported 62% of the U.S. Corn crop was rated good to excellent last Monday, down 2% from the prior week. Less than expected rainfall in parts of the Corn Belt may lead to a lower crop rating in this afternoon’s report. At the close of overnight trade, December Corn was trading at $3.38 ½, up 2 cents a bushel.

S&P 500 futures: More volatility is expected in the S&P 500 futures this morning, as traders reassess last week’s 87-point sell off in the S&P futures. Since the re-opening on Sunday, September e-mini S&P futures have traded in a nearly 15-point range, with over 200,000 contracts already being traded as of 6:30 am Chicago time. With no major economic reports out today, traders will look towards corporate earnings reports and any additional news on the sub-prime loan situation to gauge their trading decisions today. In early trade, September mini-S&P 500 futures are trading at $1461.00, up 3.00.

Treasury futures:
September 10-year Note futures are trading higher in early trade, following the lead of the European Bond market, as credit spreads continue to widen. This is causing a flow of funds into the Government Bond market, as traders and investors look for a “safe haven” to park funds. September 10-year Note futures are trading at 107-200, up 0-075.

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What’s moooving the Cattle market?

Live Cattle futures ended last week posting solid gains, with the October contract reaching highs not seen since March. Traders have become bullish on Live Cattle since the USDA lowered the amount of Cattle placed on feed in its most recent Cattle on Feed report. In addition, hopes that U.S. beef exports will improve, especially to Asia, later this year are helping to support fall and winter month contracts. However, with prices approaching the 100.00 mark, there are some concerns that futures prices may be ahead of themselves, with cash Cattle trading in the $91 to $91.50 area, and potential competition coming from cheaper pork and poultry prices. The most recent Commitment of Traders report shows large speculators net-long 34,437 contracts as of July 24th , and that sets the stage for some profit-taking selling as the month comes to an end.

Looking at the daily chart for October Cattle, we notice Friday’s high of 98.80 was just short of the contract high of 99.45 reached back in March. The 14-day RSI has reached overbought territory, with a reading of 73.58. Before Friday’s upside breakout, October Cattle had been trading in a very narrow 2.00 range for most of the month of July, and the low end of this range at 96.20 looks to be solid support. Contract highs at 99.45 should act as resistance, with 100.00 a potential target, should resistance fail to hold. October Live Cattle closed on Friday at 98.65, up 1.45.

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July 31, 2007

Climbing the beanstalk

Soybeans: A higher open is expected for Soybean futures following a rally in overnight trading after the USDA reported a decline in U.S. Soybean crop conditions last week. Currently, 68% of this year’s Soybean crop is now rated good to excellent – down 3% from last week and on the high side of estimates. Michigan and Minnesota showed some of the largest declines in crop conditions, with Michigan reporting only 30% of its crop rated good to excellent, and Minnesota at 38%. At the close of the overnight session, November Soybeans were trading at $8.51, up 3 ¼ cents a bushel.

Crude Oil: Energy traders jumped back on the bullish Oil bandwagon, with the lead month September contract hitting a new 11-month high this morning. Crude futures got a lift from rising equity markets yesterday, after last week’s 87-point plunge in S&P 500 futures sparked fears that energy demand may wane. However, traders continue to focus on current world Oil supplies and the backwardation in Oil futures prices, showing the premium traders are paying for near-term delivery. In early trade, September Crude Oil is trading at $77.31, up $0.48.

Copper:
Base metal traders bid up Copper prices this morning, following news that workers at three Copper mines in Mexico were planning strikes. This news overshadowed a labor agreement reached at Codelco in Chile to end a 36-day strike. Some technical traders believe the failure of September Copper to move below support at 350.00 is responsible for the recent price rise. LME warehouse stocks fell by 50 metric tons this morning to stand at 101,750 metric tons. In early trade, September Copper is trading at 364.20, up 5.35.


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Crude Oil Soars to Near-Record Highs!

Lead month September Crude Oil surpassed the $78 per barrel mark this afternoon, as traders look for continued strong world demand. In the U.S., expectations for an increase in refinery utilization should result in another drawdown of Crude inventories last week. Current expectations for tomorrow's EIA energy stocks report are for Oil inventories to have fallen by 700,000 barrels last week, as refineries are expected to have operated at 92.4% capacity. RBOB Gasoline and Heating Oil futures also posted sharp gains, despite estimates that product inventories increased by 1.1 million and 1.4 million barrels, respectively. Technical Crude traders are looking at the all-time highs of $78.40 for the nearby contract as a key resistant point, with the potential for $80 barrels if fresh buying emerges above this level. Support is seen at the 20-day moving average of $74.50. September Crude Oil closed at $78.21, up $1.38.

October Sugar rallied sharply this morning, as commodity fund and trade-house buying emerged in electronic trading before the opening of the pit session. Near-record highs for Crude Oil futures were also seen as a supportive factor for Sugar, as high energy prices may spur increased demand for cane-based ethanol. Floor sources report some producer selling around 10.30 in the October contract, but fund buying absorbed the sell orders as prices closed near the highs of the session. Spread trading was active on the screen, with over 23,000 October/March spreads traded. The next resistance point for October Sugar is seen at 10.53, with support found at Monday's lows of 9.91. October Sugar closed at 10.33, up 0.31.


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The market gives and the market takes away!

Today on Wall Street, the Dow lost 146 points to bring the average down to 13,211. The S & P 500 dropped 18 to end the day at 1455 while the Nasdaq gave up 37 to close at 2546. Even though most of the day was spent in positive territory, the bears won the battle today with a down market on bad news from the mortgage sector.

Bonds finished the day higher in value with the 10-year note closing with a yield of 4.74%. With news from the mortgage sector pushing the market down, bonds had an “end of day” rally in the last hour of the day.

In the world of economic news, consumer confidence beat expectations coming in at 112.6. This is the highest it has been in six years. Personal spending came in right at expectations at .1% and personal income came in slightly below expectations at .4%.

In Asia, the Hang Seng was up almost 2% at 23,023 and the Nikkei was down slightly at 17,318.

Economic Data Scheduled for Wednesday, August 1, 2007

(All times are U.S. Central Time)

U.S.
9:00 AM: ISM Index (Consensus 55.5)
9:30 AM: EIA Weekly Energy Stocks (Estimate CL -700k)

Canada
None

U.K.
3:30 PM: PMI Manufacturing Index (Consensus 54.0)

European Union
3:00 AM: PMI Manufacturing Index (Consensus 54.8)

Japan
None

Are Natural Gas Prices Ready to Fire Up?

After falling below the $6 level last week, September Natural Gas futures have started to heat up, sparking a nearly 80-cent rally since lows were made on July 25th. Forecasts calling for above-normal temperatures in the Gas-consuming regions of the Midwest and East Coast through the middle of August have traders looking for increased Gas consumption to start to draw down record high supplies in storage. In addition, the National Hurricane Center is tracking a system near Bermuda that has the potential to become a tropical storm. The most recent Commitment of Traders report shows large non-commercial traders net short 113,384 contracts as of July 24th, and any sign of activity in the Atlantic storm season could spark a violent short-covering rally as these large traders rush to the exits.

Looking at the daily chart for September Natural Gas, we notice prices closing above the 20-day moving average for the first time since mid-June. The 14-day RSI has turned positive, with a reading of 59.58. Despite the recent rally, solid resistance still looms at the July 20th highs of 6.840, as well as the July 11th highs near 6.960. Support is found at 6.000 and again at the lows of 5.855. In early trade, September Natural Gas is trading at 6.673, up 0.174.

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