After an initial spurt to two-week highs, Corn futures lost their luster, as commercial selling and updated weather forecasts put bears in control. December Corn started the day session slightly higher, with forecasts of above-normal temperatures in the Midwest keeping traders concerned that crop conditions would continue to deteriorate. However, some private forecasts are now calling for increased precipitation in the parched regions of South Dakota and Minnesota going into the weekend, putting pressure on Corn futures. In addition, failure to hold above the widely-watched 20-day moving average in December Corn – currently at 3.42 ¾ – sparked some momentum-based selling. Resistance for December Corn is seen at the July 17th highs of $3.48 ½, with support at the recent lows of $3.24 ½. December Corn closed at $3.35 ¾, down 6 ½ cents a bushel.

After posting a record high of $78.77 for a nearby contract, September Crude Oil plunged over $2 at its lowest point of the session, despite a larger-than-expected drawdown of U.S. Crude stocks last week. In its weekly energy stocks report, the EIA reported that U.S. Oil inventories fell by 6.5 million barrels last week, down sharply from average forecasts calling for a decline of 700,000 barrels. Refineries ramped up production significantly, with utilization reported at 93.6% – well above estimates. Gasoline and Distillates both showed increases with gains of 600,000 and 2.8 million barrels, respectively. After the initial rally to a record high, Crude Oil futures were hit with a wave of selling, as traders booked profits with the expectation that refined product inventories should increase given the sharp rise in utilization. September Gasoline made another attempt to test the $2 level, falling as low as $2.0020 before buyers emerged and prices rebounded over 2 cents off the day’s lows. The 20-day moving average at $74.72 looks to be the next support point for September Crude, with today’s highs at $78.77 seen as resistance. September Crude Oil closed at $76.51, down $1.70.

In the past, investors looked to Gold as a safe haven investment, especially in times of financial and economic crisis. Gold is particularly valued for its liquidity and universal acceptance as a store of value. In light of recent dire news concerning the U.S. subprime loan situation and weakness in the U.S. stock market, it would stand to reason, then, that investors would rush back into Gold until the dust settles. However, Gold prices have been falling in recent days, as large speculators are using the liquidity it offers as a means of raising funds to meet obligations for losses in other sectors of the market. In addition, many analysts look for European central banks to continue to sell Gold, with the possibility of hitting the 500-ton ceiling by September. The Central Bank Gold Agreement runs from September to September, and allows sales of no more than 500 tons per year. Traders estimate that just over 100 tons of Gold may still come on the market from central banks by the end of September, and this is acting as a cap on recent price rallies.

Looking at the daily chart for December Gold, we notice prices continuing to trade under both the 20- and 100-day moving averages. The 14-day RSI has turned lower, with a reading of 40.73. Yesterday’s highs at $680.90 look to be near-term resistance for December Gold, with a close above this level setting up a test of $691.50. Support is found at last week’s lows of $665.30. In early trade, December Gold is trading at $674.00, down $5.30.

Energy futures: After September Crude Oil fell just short of hitting an all-time high of $78.40 for the near-term contract yesterday, a modest profit-taking sell-off is taking place in early trade as traders square their positions ahead of this morning’s EIA weekly energy stocks report. Current estimates are for Oil stocks to have fallen by approximately 700,000 barrels last week, with refinery utilization expected to have increased by 0.7%. Gasoline stocks are expected to have risen by 1.1 million barrels, and distillates – including Heating Oil – are expected to have increased by 1.4 million barrels last week. In early trade, September Crude Oil is trading at $77.69, down $0.52.

Stock Index futures: Yesterday’s sell-off in the U.S. stock market spread overseas, with major European stock indexes down between 1 and 2 percent in early trade. Continued concerns over the subprime loan situation have stock index traders in a selling mood. After falling as low as 1442.25 overnight, S&P 500 futures are starting to come back before the day session begins. In early trade, mini-S&P 500 futures are trading at 1454.75, down 7.25.

Japanese Yen: September Japanese Yen futures rose to 3-month highs this morning, as continued risk aversion selling by large speculators is causing an unwinding of the so-called “carry trades” supporting the Yen. The Australian and New Zealand Dollars and the Euro Currency are among leading currencies taking a hit as the Yen rises. In early trade, September Japanese Yen futures are trading at .8488, up 0.0019.

Today was quite the sea saw battle between the bulls and the bears in the US stock market. In the end, the bulls won today’s battle. The Dow closed the day at 13,366 gaining 154 points. The S & P ended the day 10 points on the positive side of the fence while the Nasdaq closed at 2553, up 7 points.

In the news, pending home sales came out with a surprise increase of 5% for the month of June. This could be a leading indicator of new and existing home sales for the report coming out at the end of August. The ISM index came in below expectations at 53.8. The concensus was 55.5.

Bond yields were on the rise today as the 10 year note closed the day with a yield of 4.78%.

In the overseas markets, the Nikkei closed yesterday at 16,870 (down 2.19%) and the Hang Seng closed at 24,455 (down 3.15%).

Economic Data Scheduled for Thursday, August 2, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims (Consensus 310K)
9:00 AM: June Factory Orders (Consensus +1.0%)

Canada
None

U.K.
6:00 AM: BOE Interest Rate Decision (Consensus 5.75%)

European Union
4:00 AM: June PPI Mom (Consensus +0.3%)
4:45 AM: ECB Interest Rate Decision

Japan
None

Stock Index futures: Mini-S&P 500 futures are trading flat this morning after a flurry of buying hit the screen in the last 45 minutes of trading yesterday to send the index up 30 points at its peak and allow for a sharply higher close. European stock index futures are up as well, with gains of between 0.5% and just over 1% seen in afternoon trading in Europe. In early trade, September mini-S&P 500 futures are trading at 1472.00, up 2.00.

Natural Gas: September Natural Gas futures are pushing to the upside in the early going, as traders square positions ahead of this morning’s EIA storage report. Current estimates are for a 76 billion cubic feet (bcf) build in Natural Gas stocks last week. Currently, 2.763 trillion cubic feet (tcf) of Gas is in storage – a record high for this time of year. In early trade, September Natural Gas is trading at 6.395, up 0.043.

British Pound: September British Pound futures are trading slightly higher this morning after the Bank of England (BoE) voted to keep interest rates unchanged at 5.75%. Though widely expected, there is now talk that the BoE will raise rates 25 basis points at its September meeting. In early trade, September British Pound futures are trading at 2.0291, up 0.0024.

Economic reports out today: U.S. economic data is light today, as traders gear up for tomorrow’s Non-farm Payrolls report. Today’s agenda includes:

7:30 AM CDT: Initial Claims for 7/28 (consensus 310k vs. 301k prior)

9:00 AM CDT: June Factory Orders (consensus +1.0% vs. –0.5% prior)

Platinum traders have been on a wild ride of late, with prices hitting a 2-month high on July 20th at $1349.80, followed by a steep price decline the following week. That drop culminated in a more than $40 decline on July 27th, when Nissan Motor Company announced its new technology for catalytic converters that will use half the amount of Platinum, Palladium, and Rhodium currently necessary. This breakthrough could sharply curtail demand for Platinum, especially if other automakers are able to adopt the technology. Meanwhile, workers at Impala Platinum Holdings Ltd. of South Africa have averted a strike, accepting the company’s latest offer for higher wages. Since Impala is the second largest producer of Platinum in the world, the end of the strike threat is also deemed bearish for Platinum. The most recent Commitment of Traders report shows both large and small speculators holding net-long positions in platinum currently totaling over 14,000 ounces. However, the report only covers the period through July 24th, three days before the $40-plus price drop. Traders will be carefully watching tomorrow’s COT report to see how many of these long positions were liquidated in the recent sell-off to gauge the extent of possible further speculative selling should recent support fail.

Looking at the daily chart for October Platinum, we notice how quickly the nearly 3-week rally that started in late June was wiped out once the Nissan news came out. Though the market has recovered somewhat from the recent lows at $1,271, prices still remain below several key moving averages, especially the 100-day MA. The 14-day RSI remains weak, with a reading of 37.62. Bulls would need to see a weekly close above the 100-day moving average currently at $1300.30 to regain control of the market. Bears will be looking for a weekly close below the lows of $1271.00 to keep the momentum in their favor. In early trade, October Platinum is trading at $1296.00, up $5.10.

As the first Friday of the month approaches, traders and economists will be dusting off their crystal balls in anticipation of the release of the July Non-farm payrolls report. Current estimates are for payrolls to have increased by between 130,000 and 140,000 jobs last month after increasing by 132,000 in June. The unemployment rate is expected to have remained steady at 4.5%. Average hourly earnings (a measure of wage inflation) are expected to have increased by 0.3%. Traders will also look for any revisions to the May and June employment numbers to gauge the trend in payrolls. They’ll need to set those alarm clocks early again – the Labor Department releases the July payrolls report at 7:30 AM Chicago time on Friday.

Coffee Futures Perk Up!

New York Coffee futures soared this morning, moving above the key 50- and 100-day moving averages as local and speculative buying triggered buy stops above recent highs. A rally in the London Robusta futures this morning added spillover support to the N.Y. Arabica futures. Government subsidies are allowing Brazilian growers to hold back new-crop Coffee supplies in the hopes of higher prices later in the year, when roasters start to accumulate inventories to meet winter demand. The Brazilian Green Coffee Exporters Council reported preliminary figures for Brazilian Coffee exports for the August 1st period at 59,117 60-kg bags versus 37,110 bags this time last month. 117.95 is seen as the next resistance point for September Coffee, with support found at the 20-day moving average at 112.30. September Coffee closed at 116.20, up 3.10.

The U.S. stock markets continued their late-day rally habits today, with all three benchmarks finishing to the upside. The Dow gained an even 100 points to finish at 13,463, while the S&P added 6 to close at 1472. The NASDAQ finished ahead 22 at 2575.

Initial Claims came in below expectations today at 307,000 versus estimates of 310,000. Factory Orders came in at .6%, well below the 1% expectation. Tomorrow will be a more active day on the economic calendar, with both Unemployment and Non-farm Payrolls set to be released.

Bonds had a relatively flat day, with the yield on the 10-year Note moving up 1 basis point from 4.76 to 4.77. The spread between the 2- and 10-Year Notes remains the same at 18 basis points.

Overseas, the Nikkei finished at 16,984 (up .67%) and the Hang Seng moved down less than .1%, closing at 22,443.

Economic Data Scheduled for Friday, August 3, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July Non-farm payrolls (Consensus +135K)
7:30 AM: July Unemployment rate (Consensus 4.5%)
7:30 AM: July Average hourly earnings (Consensus +0.3%)
9:00AM: July ISM Non-Manufacturing Index (Consensus 59.5)

Canada
None

U.K.
3:30 AM: July Purchasing Managers Services Index (Consensus 57.4)

European Union
3:00 AM: July Purchasing Managers Services Index (Consensus 58.1)
4:00 AM: June Retail Sales MoM (Consensus +0.8%)

Japan
None

Treasury futures: September 10-year Note futures are down slightly in early trade this morning, as traders gear up for the Non-farm payroll figures for July. Estimates are for payrolls to have increased moderately with approximately 135,000 new jobs created. The unemployment rate should continue to remain steady at 4.5%, and average hourly earnings are expected to increase by 0.3%. In early trade, September 10-year Notes are trading at 107-135, down 0-015.

Stock index futures: Can we end the week on a high note? That is the question on stock index traders’ minds this morning after a wild trading week. The focus today will initially be on this morning’s jobs report, as steady job growth and moderate wage inflation are the expected outcome of today’s Labor Department report. However, concerns about the subprime loan situation will continue to garner attention. In early trade this morning, September e-mini S&P 500 futures are trading at 1479.50, down 2.25. Volume is a moderate 54,825 contracts as of 6:27 AM Chicago time.

Gold: December Gold futures look to end the week in positive territory, as moderate U.S. Dollar weakness and a continuing strike threat at three of South Africa’s biggest Gold producers is underpinning prices this morning. However, the China Gold Association announced yesterday that China’s Gold production was up 15% in the first half of 2007, producing 122.5 metric tons. In early trade, December Gold is trading at $677.00, up $0.40.

Economic reports out today:

(All times are U.S. Central Time)

7:30 AM: July Non-farm payrolls (Consensus +135K)
7:30 AM: July Unemployment rate (Consensus 4.5%)
7:30 AM: July Average hourly earnings (Consensus +0.3%)
9:00AM: July ISM Non-Manufacturing Index (Consensus 59.5)

Speculative accounts are starting to warm up to the Coffee market of late, with the September contract surging to highs not seen since late June. Origin selling, which would normally appear on rallies during the harvest season in Brazil, has been light, further aiding the bullish cause. A strong Brazilian Real versus the U.S. Dollar and price subsidies from the Brazilian government are allowing growers to hold back on sales while awaiting higher prices. The next official crop estimate for the 2007-08 Brazilian Coffee crop comes on August 24th, with some early estimates calling for a crop of between 32 and 35 million bags. Roasters will be looking to secure supplies soon to meet winter demand and with Brazil’s domestic Coffee prices relatively high versus exchange prices, some traders look for roasters to use the futures markets and exchange stocks as a source for supplies.

Looking at the daily chart for September Coffee, we notice prices moving above the 100-day moving average during yesterday’s sharp rally. With follow-through buying in early trade this morning, the next resistance point appears to be the June 21st highs of 117.95. The 14-day RSI looks solid with a current reading of 65.65. Support is seen at 112.30, with major support found at the recent lows of 111.00. Currently, September Coffee is trading at 117.10, up 0.90.

U.S. job growth slowed in July, rising by only 92,000 jobs, as the decline in manufacturing and construction jobs offset some of the gains in the service sector. The unemployment rate rose by 0.1% to 4.6%, and average hourly earnings rose by $0.06 cents, or 0.3%, to $17.45. The Labor Department also revised the June and May payroll figures lower by 6,000 and 2,000 jobs, respectively. Just after the figures were released, the September mini-S&P 500 futures are now lower by 5.25, to stand at 1476.50, and September 10-year Notes are trading at 107-180, up 0-030.

Weaker-than-expected U.S. payrolls for July combined with higher exchange stocks to drive Copper futures to 1-month lows this morning. September Copper started the session in the red, as the London Metal Exchange (LME) reported exchange inventories rose by 2,225 metric tons to stand at 105,650 mt – the highest level since July 5th. In addition, Copper stock at the Shanghai Futures Exchange rose by 1,474 mt this week to stand at 91,563 metric tons. Further weakness was seen in the red metal after the U.S. Labor Department reported that Non-farm payrolls for July rose by a lower-than-expected 92,000 jobs and the unemployment rate rose to 4.6%. Speculative liquidation accelerated once the September contract fell below key support at 350.00. Sell-stops were triggered and prices fell to a low of 347.00, very near the 50-day moving average of 347.55, before light buying was found. Copper was not the only member of the base metals complex to sell off today, with Aluminum futures falling over 3% and Zinc dropping nearly 4% on the LME. The 100-day moving average at 343.00 is now the next support point for September Copper, with resistance at the 20-day moving average of $359.30. September Copper closed at 347.90, down 9.40.

Soybean futures ended the week on a high note, as weather forecasts calling for hot, dry weather in the key growing states of Illinois and Iowa have traders concerned about the condition of the crop. August is the most important month for bean development, with ample moisture key for yields. Traders largely shook off a crop estimate from private forecaster Informa calling for U.S. Soybean production of 2.700 billion bushels, up from the most recent USDA estimate of 2.625 billion bushels. A yield estimate of 42.7 bushels an acre is also 1.2 bushels higher than recent USDA estimates. The next USDA crop production and supply/demand report is due on Friday, August 10th at 7:30 AM Chicago time. The 20-day moving average of $8.75 ½ is seen as the next resistance point for November Soybeans, with support found at the recent lows of $8.33 ¼. November Soybeans closed at $8.60 ½, up 6 cents.

Crude Oil: Follow-through selling from Friday’s weak close is keeping Crude Oil futures on the defensive in early trade. In addition, OPEC exports for July climbed by 181,000 barrels a day in July to 30.72 million barrels, according to a Dow Jones Newswire survey. Technical traders will note that September Crude Oil fell below the widely watched 20-day moving average today, which sparked further long liquidation selling. In early trade, September Crude Oil is trading at $74.06, down $1.42

S&P 500 futures: Buying emerged in the S&P 500 futures this morning, taking back some of the sharp losses from Friday after a disappointing U.S. Non-farm payrolls report. Lower Crude Oil prices and a rally in some of the major European stock indexes are helping support S&P futures this morning. In early trade, the September mini-S&P 500 futures are trading at 1453.00, up 10.00.

Soybeans: November Soybeans fell in overnight trading, as rain in Iowa and Illinois over the weekend figures to benefit the Soybean crop during its key pod-setting stage. In addition, traders will be squaring their positions this week ahead of the USDA August crop report due out on Friday. At the end of the overnight session, November Soybeans are trading at $8.46 ¾, down 14 ¼ cents.

No major U.S. economic reports scheduled today.

Range-bound trading may continue in Cotton futures this week, as traders gear up for the August USDA crop report on Friday. The August report is widely anticipated, as it is the first report of the season that uses actual surveyed data, thus providing a better estimate to the size and condition of the crop. U.S. and world Cotton production is expected to decrease this season, as U.S. growers have switched acreage to more profitable crops such as Corn or Soybeans, and poor weather conditions in China have caused analysts to lower estimates of the Cotton crop there. On the export front, the 2007-08 marketing year is off to a solid start, with U.S. Cotton exports running at 8.4% of USDA projections for the year, up by 1.3% from this time last season. Traders will also focus on this afternoon’s USDA weekly crop progress report to see if the Cotton crop ratings fell again last week.

Looking at the daily chart for December Cotton, we notice a rising wedge formation unfolding the past two weeks. Prices remain below the 20-day moving average, currently standing at 6507. The 14-day RSI is reading a rather neutral 55.55 this morning. Though trading should be choppy the next few days, Friday’s report has the potential to be the catalyst for direction in Cotton prices heading into the fall harvest period. In early trade, December Cotton is trading at 6470, down 19.

The energy complex fell sharply this afternoon, with Crude Oil dropping over $3 per barrel to send prices below $72 by the close of the day session and RBOB Gasoline breaking through the $2 floor, as concerns persisted that the U.S. economy will slow due to fallout from the subprime loan situation. The most recent Commitment of Traders report had large speculators heavily long the Crude Oil market as of July 31st, and much of the recent sell-off may be tied to long liquidation by these large traders. Today's declines also took the September Oil contract below the widely watched 20-day moving average near the $75 area, which sparked some short-term momentum selling. Sell-stops were seen being triggered below the recent lows at $73.10 and again at $72.50. The next support point for September Crude Oil is the 50-day moving average currently at $71.38, with resistance found at $73.10. September Crude Oil closed at $72.03, down $3.45.

Soybean futures fell sharply to start the week, as better-than-expected rainfall in the western part of the Midwest had traders in a selling mood. Ample moisture is necessary for the Soybean crop, especially during the key August pod-setting stage. Bean prices were also put on the defensive by private forecasters looking for higher-than-average yields than previous USDA forecasts. All eyes will be on Friday's USDA Crop Production and Supply/Demand report, which will be the first to be based on actual survey estimates. The most recent Commitment of Traders report shows large speculators holding a net-long position of just over 99,000 contracts as of July 31st – down over 11,000 contracts from the previous report – as a flight to liquidity caused funds to close out positions in many commodities, including Soybeans. USDA weekly export inspections came in at 10.489 million bushels for the week ending August 2nd, up from 9.131 million bushels the previous week and near the high end of analysts’ expectations. Minor support is seen at the recent lows of $8.33 1/4, with major support found at the 100-day moving average at $8.29 1/4. Resistance is seen just above the 50-day moving average at $8.67. November Soybeans closed $8.50, down 11 cents a bushel.

Stock Index futures: Equity index traders may get a bit of a reprieve this morning after several days of extreme volatility, as the market gears up for the end of FOMC meeting this afternoon and the announcement on interest rates. The market expects the Fed to keep interest rates steady at 5.25%, but will be keenly interested in its statement after that decision is announced, especially in regards to how the Fed plans to handle the fear surrounding the subprime loan situation. In early trading, September S&P 500 futures are trading at 1467.00, down 0.75

Wheat: Another day, another contract high in December Wheat futures in Chicago, as surging demand due to tight world supplies has traders continuing to bid up prices. Weekly Wheat export inspections came in at 25.127 million bushels for the week ending August 2nd, well above the high end of estimates. Morocco issued a tender for 630,000 metric tons of option origin soft Wheat, which is deemed supportive to U.S. Wheat futures. Paris million Wheat futures hit another new all-time high this morning, trading as high as EUR220 a metric ton in the November contract. The U.S. Winter Wheat harvest is nearly completed, with the USDA reporting 94% harvested so far, up 6% from last week, and 3% above the five-year average. At the end of the overnight session, December Wheat was trading at $688 ½, up 5 cents a bushel.

Lean Hogs: October Lean Hog futures plunged yesterday after reaching contract highs on Friday, as traders liquidated long positions fearing a decline in wholesale pork demand while slaughter rates continue to increase. However, prices may remain volatile in the near-term, as many believe China, the world’s largest pork consumer, will need to increase its imports of pork due to a supply shortage after disease ravaged the country’s pig crop. Wholesale pork prices in China were up 44% through July due to supply shortages. October Lean Hogs closed yesterday at 75.05, down 2.55.

U.S. Economic reports for August 7th 2007

7:30 AM: 2Q Advance Productivity (Consensus +2.0%)
1:15 PM: FOMC Policy Statement
2:00 PM: June Consumer Credit (Consensus $6 Billion)

Earlier this year, all grain traders wanted to talk about was the Corn market, as surging demand for Ethanol and livestock feed led some to question whether we could produce enough to meet demand. Fast-forward to August and that talk has cooled right along with Corn prices, as the Wheat market has quietly moved to the forefront in the minds of grain traders. Just this morning, Chicago December Wheat moved to a new contract high of $6.89 ½ per bushel, with Japan looking to tender for 131,000 tons and Egypt in the market for 55,000 tons as well. This follows a Morocco tender for 630,000 metric tons of optional origin Wheat. It appears that Mother Nature was not kind to Wheat growers this season, with excessive rains hurting the crops in the U.S. and France, while hot, dry conditions have played havoc with Canadian, Australian, and Ukrainian production. This is causing Wheat importers to try to lock in supplies – despite high prices – in fear that high quality Wheat will not be available in the coming months. Traders will keep a close eye on this Friday’s USDA crop production and supply/demand report, especially world ending stock figures.

Looking at the daily chart for December Wheat, we notice the resilience of the rally, as prices remain well above the 20-day moving average. In addition, the most recent Commitment of Traders report shows a battle between large and small speculators, with large specs holding a net-long position of 27,977 contracts and small specs net-short 27,781 contracts as of July 31st. With prices at contract highs, it will be interesting to see if the small specs can continue to hold their short positions in the face of commodity fund buying. The 14-day RSI has reached oversold territory with a reading of 75.21. $7.00 looks to be key resistance for December Wheat, with support found at the recent lows of $6.39. At the end of the day session, December Wheat was trading at $6.88 ½, up 5 cents.

Lean Hog bulls ran for the exits this afternoon, as commodity fund liquidation and sell-stops kept prices on the defensive. After making new contract highs of 77.70 on Friday, October Hogs have fallen by over 500 points – mostly on long liquidation selling – as weak pork cut-out values and the steep premium on October Hogs versus the CME cash index had traders looking to lighten on their long positions. Sell-stops were being triggered below the recent lows of 74.00. Traders continue to await confirmation of pork sales to China, as the world’s leading consumer of pork is faced with rising prices due to tight internal supplies. Support for October Hogs is seen at the 20-day moving average at 72.07, with resistance now seen at $74.00. October Lean Hogs closed at 72.57, down 2.47.

Interest rate futures decline as Fed keeps rates steady!

Once again, the Federal Reserve kept rates steady at 5.25% during this afternoon’s FOMC meeting. The key for most traders, however, was the Fed statement after the interest rate announcement in which the Fed acknowledged that "downside risks to growth have increased somewhat,” but that inflation remains the “predominant” concern. Fed Fund futures are now pricing in only a 25% chance that the Fed will lower rates to 5% at the September 18th meeting, down from 35% before today’s announcement. Longer-term interest rate futures finished virtually flat after an initial price spike after the Fed statement, with the September 10-year Note future hovering just below unchanged near the close of the trading pit session. September Fed funds futures closed at 94.7750, down 0.0400, while September 10-year Note futures closed at 107-185, down 0-030.

Another roller coaster day in the US stock market today, as the S&P ranged from a low of 1455 to a high of 1488, closing with a gain of 8 points to finish at 1476. The Dow added 35 to close at 13,504, while the NASDAQ forged ahead 14 points for a 2561 close.

The big news on the day was the Fed announcement that there will be no change in the current 5.25% interest rate. US stock markets fell sharply on this news, with the Dow immediately making its way down to 13,347 before rebounding all the way up to 13,598 as the high.

Over in the bond pit, the 10-Year Note fell slightly, closing with a 4.77% yield. Bond yields also saw plenty of movement right after the Fed announcement, but wound up mostly flat on the close.

Overseas, both the Hang Seng and the Nikkei were both nearly unchanged in trading last night.

Economic Data Scheduled for Wednesday, August 8, 2007
(All times are U.S. Central Time)

U.S.
9:00 AM: June Wholesale Inventories (Consensus 0.4%)
9:30 AM: Weekly EIA Energy Stocks report

Canada
None

U.K.
None

European Union
1:00 AM: (Germany) June Current Account (Consensus 12 billion)

1:00 AM: (Germany) June Trade Balance (Consensus 17.8 billion)

Japan
None

Energy complex: Energy futures are all trading moderately lower this morning as traders gear up for the weekly EIA energy stocks report due out at 9:30 AM Chicago time. Current estimates are for another solid build in energy products, with Gasoline inventories expected to have increased by between 700,000 and 1 million barrels last week. Distillates – which include Heating Oil – are expected to have increased by 1.5 to 1.8 million barrels. Crude Oil inventories, however, are expected to show a decline of 2 million barrels last week, with refineries operating at 93.7% capacity. In early trade, September Crude Oil is trading at $72.15, down $0.27, September RBOB Gasoline is trading at $1.9387, down $0.0055, and September Hearing Oil is trading at $1.9592, down $0.0049.

Copper: September Copper futures fell sharply in early trade this morning, after LME Copper stocks rose by 8,675 metric tons to stand at 114,275 mt, the largest increase since December of 2005. Most of the increase is thought to have come from China, where domestic prices are below that of the world market. In early trade, September Copper is trading at 342.75, down 7.90.

Ten-year Notes: Treasury futures continue to slide, after the Federal Reserve announced that it expects the U.S. economy to continue to expand, despite the housing market slowdown. In addition, the Treasury will auction $13 billion worth of 10-year Notes this afternoon, with pre-auction hedge selling likely to keep prices on the defensive. In early trade, September 10-year Notes are trading at 107-025, down 0-155.

Economic Data Scheduled for Wednesday, August 8, 2007

(All times are U.S. Central Time)

U.S.
9:00 AM: June Wholesale Inventories (Consensus 0.4%)
9:30 AM: Weekly EIA Energy Stocks report

The recent rally above the 10-cent level for October Raw Sugar futures failed to spur fresh momentum buying, as origin sellers took advantage of the rally to hedge production and send prices tumbling to 3-week lows in early trade today. The N.Y market has received no help from the White Sugar market traded in London, which fell to 21-month lows this morning, as Russia still has not raised its import duty on Sugar. The import duty was expected to increase short-term demand, as buyers covered their needs before it took effect. Large Sugar surpluses in Brazil and India have also pressed Sugar prices lower – India is expected to have 1.3 million tons of White Sugar available for export this month, with exporters looking to be eager sellers on any price increases. Despite weak fundamentals, the most recent Commitment of Traders report shows both large and small speculators holding a net-long position of 105,836 contracts as of July 31st, which leaves room for further liquidation selling should prices continue to tumble.

Looking at the daily chart for October Sugar, we notice prices approaching the 100-day moving average, currently at 9.71. Many technicians consider this key moving average the arbiter as to whether a market is in a bullish or bearish long-term trend, so a close below this level could be the catalyst for further speculative liquidation or even a switching of positions to the short side. The 14-day RSI looks weak, with a reading of 34.72. 9.71 will be key support for October Sugar, with resistance seen at the psychologically important 10-cent level. In early trade, October Sugar is trading at 9.81, down 0.03.

Crude Oil inventories fell by 4.1 million barrels to stand at 340.4 million barrels.

Gasoline inventories fell by 1.7 million barrels to stand at 203.0 million barrels.

Distillate inventories rose by 1 million barrels to stand at 127.5 million barrels.

U.S. refineries ran at 91.3% versus 93.6% last week.

Oil stocks at Cushing, Oklahoma fell by 1.4 million barrels to stand at 19.3 million barrels.

Gasoline imports rose by 172,000 barrels per day to stand at 1.397 million barrels per day.

Treasury Bond futures fell sharply this afternoon, as funds moved out of government debt and into stocks following yesterday’s FOMC announcement. In addition, futures were under pressure after the auction of $13 billion in new 10-year Notes drew a higher-than-expected yield of 4.855%. Indirect bidders – including foreign central banks – bought a 32.1 percent of the total, which was below expectations. Technical traders noted the September Bond contract moved below the 100-day moving average, which spurred some additional long liquidation. 108-07 is seen as the next support point for September Bonds, with resistance now seen at 109-22. September Bonds closed at 108-30, down 1-08.

September Japanese Yen futures tumbled to 2-week lows, as traders unwound risk aversion trades. A rally in global stock markets after the Federal Reserve declaration of moderate growth expectations for the U.S. economy was the catalyst for large speculative traders to re-enter so called “carry trades,” which put pressure on low-yielding currencies such as the Yen. Sell-stops were seen triggered once the September contract moved below the 100-day moving average, adding further selling pressure on the afternoon. 0.8337 is seen as support for the September Yen, with resistance found at 0.8514. September Japanese Yen futures closed at 0.8403, down 0.0073.

Stock index futures rose for the third consecutive session, with S&P 500 futures hitting nearly 2-week highs as traders returned to the equities markets. September S&Ps closed up 21.10 to end the session at 1503.50, while September Dow futures closed up 157 at 13705, and September NASDAQ 100 futures ended the day up 26.00 for an even 2000.00.

Treasury futures tumbled, as flight-to-quality buying ceased and a disappointing 10-year Note auction weighted on prices. September 30-year bonds closed at 108-30, down 1-08, and September 10-year Notes closed at 106-275, down 0-225.

Economic Data Scheduled for Thursday, August 9, 2007
(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Claims for week ending Aug 4th(Consensus 310,000)

Canada
7:30 AM: June New Housing Price Index YoY (Consensus 0.7%)

U.K.
3:30 AM: Total Trade Balance for June (Consensus -3.900 billion)

European Union
3:00 AM: ECB publishes monthly report (Aug)

Japan
6:50 PM: July Domestic Corporate Goods Price Index MoM (Consensus 0.6%)

S&P 500 futures: S&P 500 futures are well in the red in early trade after three consecutive up days, as two large European banks reported losses in the U.S. subprime loan markets, sparking fears that credit concerns will spread to Europe. In early trade, September mini-S&P 500 futures are trading at 1488.75, down 15.25.

Natural Gas: Lead month September Natural Gas is trading moderately higher this morning, as traders gear up for the weekly EIA Gas storage report due out at 9:30 AM Chicago time. According to a Dow Jones Newswire survey, traders and analysts are expecting a build of 53 billion cubic feet (bcf) last week. Last year at this time, there was a withdrawal of 7 bcf. Current gas in storage totals 2.840 trillion cubic feet. In early trade, September Natural Gas is trading at 6.295, up 0.029.

Wheat: December Wheat futures hit another contract high in overnight trading, climbing above key resistance at $7.00 per bushel on concerns that the USDA will lower harvest estimates for European and Australian Wheat – as well as U.S. Winter Wheat production – in tomorrow’s USDA crop production and supply/demand report. Paris milling Wheat also made a new record high today, trading up 3.2% to 227 Euro per ton. At the close of the overnight session, December Wheat was trading at $7.06, up 7 ½ cents per bushel.

Economic Data Scheduled for Thursday, August 9, 2007
(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Claims for week ending Aug 4th (Consensus 310,000)

Canada
7:30 AM: June New Housing Price Index YoY (Consensus 0.7%)

The dog days of summer have been anything but for S&P futures traders, as concerns about the slumping U.S. housing market and fears of continued tightening credit due to the subprime loan situation have made it a volatile summer for the stock indexes. After a nearly 80-point rally in the September mini-S&P500 futures since recent lows were made on August 6th amidst soothing words on the state of the U.S. economy from Federal Reserve officials, subprime loan fears have come back to the forefront of traders’ minds this morning. BNP Paribas SA, France's largest bank, announced it halted withdrawals from three of its investment funds, as it could not provide a fair value to the holding of the funds due to illiquid conditions in segments of the U.S. credit markets. This sparked selling in European markets, which has spilled over into U.S. stock index futures this morning. Other markets have also reversed recent trends, with Treasury futures starting to recover some of this week’s losses and Japanese Yen futures gaining ground, as traders once again move out of “carry trades.” As we move into the last days of the summer vacation season, fewer traders may be leaving their desks in August as volatile trading conditions show no signs of taking a rest!

Looking at a daily chart for the September e-mini S&P 500 futures, we notice that the recent recovery in prices has still failed to move the market above any of the major moving averages on a closing basis, such as the 20-, 50-, and 100-day averages. This should signal that bears are still in control, with this morning’s sharp sell-off adding to the notion that the three-day rally may have been overdone. The 14-day RSI has turned neutral with a reading of 48.58. A close above the 100-day moving average at 1510.30 would help bulls regain control, but should yesterday’s lows at 1480.50 give way, bears would keep their momentum and set up a possible test of the 1460.00 area.

Volatility has emerged in short-term interest rate futures, with word that the European Central Bank (ECB) injected 94.8 billion Euro – or $130 billion – into short-term rate markets after the London interbank offer rate jumped over 50 basis points today. The U.S. Federal Reserve added $24 billion into the repo market to meet the increased demand for cash today. This news spooked interest rate traders, with September Fed Fund futures surging as high as 94.900 after closing yesterday at 94.775. Today's 12.5 basis point range is quite large for near-term Fed Fund futures outside of a surprise announcement on interest rates by the Federal Reserve. Longer-term Treasury futures also gained some buying support from "flight-to-quality” buyers, as well as short-covering by momentum traders after the sharp sell-off in Bond prices this week. September Fed Fund futures closed at 94.875, up 0.100.

Natural Gas futures soared to highs for the month, as a smaller-than-expected storage build coupled with an increased chance for an above-normal hurricane season had traders in a buying mood. This morning, the EIA announced in its weekly Gas storage report that 42 billion cubic feet (bcf) of Gas was put into storage last week, well below the average pre-report estimate of a 53 bcf build. Also supporting prices was today's revised NOAA outlook on this year's hurricane season, which now sees an 85% chance for an above-normal season, up from 75% in its May outlook. Out of the 13 to 16 tropical storms expected to develop, between 7 and 9 may become hurricanes according to NOAA forecasters. Large speculators have been holding a large net-short position in Natural Gas futures, with the most recent Commitment of Traders report showing a net-short position totaling 122,719 contracts as of July 31st. Additional strength may be coming from the unwinding of long Crude Oil/short Natural Gas spreads that were popular with commodity funds this summer. Support for September Natural Gas is now seen at the 20-day moving average of 6.324, with resistance found at the July 31st highs of 6.684. September Natural Gas closed at 6.586, up 0.366. Written by Mike Zarembski, Senior Commodity Analyst

The bears came to the table again today for another feast. The Dow dropped 386 points on the day for almost a 3% loss. The S&P 500 lost 44 and the NASDAQ gave up 56, while the bond markets closed higher and the Ten-year Note ended the day with a yield of 4.78%.

Subprime loans were the hot topic once again in the market. French banking group BNP Paribus suspended three funds that had exposure to US credit markets, saying it was due to the “complete evaporation of liquidity.”

Initial Claims came out today at 316,000, above the expected 310,000.

Over in Asia, the Nikkei is coming off a gain of just under 1%, while the Hang Seng lost about .5% in its last trading session. Written by Mike Tosaw, Director of Education

Economic Data Scheduled for Friday, August 10, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: Import/Export prices for July
7:30 AM: Crop Production and Supply/Demand Report
1:00 PM: Treasury Budget for July (Consensus-$33.0 billion)

Canada
6:00 AM: July Net Change in Employment (Consensus 23.5)
6:00 AM: July Unemployment Rate (Consensus 6.1%)

U.K.
None

European Union
1:45 AM: (France) June Industrial Production MoM (Consensus 0.4%)

Japan
12:00 AM: July Consumer Confidence Households (Consensus 46)

Grain futures: It was a fairly quiet night in the Grain futures markets, as traders saved their strength for this morning’s USDA crop production and supply/demand report. Corn traders are looking for a moderate increase in production from the July report, with average estimates for a 12.909 billion bushel crop versus 12.840 billion in July. Soybeans are expected to also show a slight production rise to 2.653 billion bushels, up 28 million bushels from July’s report. All U.S. Wheat production is expected to decline, with average trade estimates calling for 2.129 billion bushels versus the 2.138 billion bushels in July’s report. At the close of the electronic overnight session, December Corn was trading at $3.45, down 3 1/4, November Soybeans were trading at $8.82, up 4 ½, and December Wheat was trading at $6.88 ½, down 1 ¼.

Cotton: U.S. Cotton production is expected to show a slight improvement in today’s USDA report, with average estimates calling for a 17.70 million-bale crop, up from 17.50 million bales in the July estimate. This is still well below 2006 production of 21.59 million bales, as producers switched acres from Cotton to Corn and Soybeans. In early electronic trade, December Cotton is trading at 6224, down 18.

Stock Index futures: No recovery in U.S. Stock index futures this morning, as major foreign stock indexes continue to slump, with the DAX 30 currently down 1.6%, the FTSE 100 down 3.01% and the Nikkei 225 closing down 2.37%. The European Central Bank added an additional 61.05 billion Euros ($83.6 billion) into the banking system today after yesterday’s 94.8 billion Euro injection. The Central Banks of Canada, Australia, and Japan joined the U.S. Federal Reserve in adding funds to help stem a short-term credit crunch. In early trade this morning, the September e-mini S&P 500 index was trading at 1440.00, down 18.00, while September mini-Dow futures are trading at 13185, down 142.

Mike Zarembski, Senior Commodity Analyst

The August crop report has something for everyone, with the USDA raising U.S. Corn production due to a sharp increase in yield estimates. However, difficult weather conditions forced the all Wheat production estimate down by over 20 million bushels from July’s figure. The following are key highlights from this morning’s report:

Corn: The USDA raised the U.S. Corn production estimate to 13.054 billion bushels, up from 12.840 billion bushels in July and above pre-report estimates. Average Corn yields are expected at 152.8 bushels per acre, up from 150.3 in July. 2007-08 Corn carryout is expected to increase to 1.516 billion bushels, slightly above the 1.502 billion estimate for July.

Soybeans: The 2.625 billion bushel estimate for July remains unchanged for August, though average analyst estimates were calling for a moderate increase to 2.653 billion bushels. Average yields also remained in place at 41.5 bushels per acre. Carryout totals were lowered to 220 million bushels, down 25 million bushels from July and 27 million bushels below analyst estimates.

Wheat: All Wheat production is expected to decline to 2.114 billion bushels, down from 2.138 billion in July and 15 million bushels below pre-report estimates. Increased world demand is expected to increase U.S. exports, with 2007-08 carryout totals expected to drop to 404 million bushels, down form 418 million bushels in July.

Cotton: The USDA lowered U.S. Cotton production estimates to 17.346 million bales, down from 17.50 million bales in July and well below the 17.70 average pre-report estimates. U.S. Cotton carryout is expected to fall to 5.80 million, down from 5.90 million in July.

Early calls by CBOT traders are for Soybeans to open up 3 to 5 cents higher, Wheat to open up 2 to 3 cents higher, and Corn to open 1 to 3 cents lower. In early trade, December Cotton is trading at 6225, down 17.

Mike Zarembski, Senior Commodity Analyst

Think you’ve got what it takes to tangle with 40,000 pounds of full-grown beef cattle?

We’re pleased to announce today that you now have access to the CME meat and livestock futures markets. In addition to live cattle futures, you also can trade futures based on lean hogs, feeder cattle, and pork bellies. This is just the latest example of our ongoing commitment to expanding the breadth of commodity futures available for trading on the optionsXpress platform.

These products trade in the open-outcry pits at the Chicago Mercantile Exchange, from 10:05 AM ET until 2:00 PM ET. The feeder cattle and lean hog contracts are settled in cash and aren’t physically deliverable. Futures on live cattle and pork bellies, though, call for physical delivery.

For many investors seeking portfolio diversification or trading opportunities a bit off the beaten path, CME meat and livestock futures might be worth a closer look.

Take a peek at all the futures products now available for trading at optionsXpress. The list will continue to grow in the weeks ahead.

Dan O’Neil
Executive Vice President, Futures
optionsXpress

Futures involve substantial risk and are not appropriate for all investors. Please read Risk Disclosure Statement for Futures and Options prior to applying for an account.

December Cotton fell to lows not seen since June 27th, as weaker-than-expected USDA export estimates overshadowed a cut in U.S. production. The USDA cut its estimate for the U.S. Cotton crop to 17.35 million 480-pound bales, down from 17.5 million bales in the July report. However, the USDA cut its estimate for U.S. Cotton exports by 300,000 bales, which was seen as a sign of weaker world demand, as well as the rise in world ending stocks to 51.52 million metric tons, up from 50.78 million in July. Today's sell-off sent prices through the 50-day moving average, with triggered sell-stops below this level. 6007 is seen as the next support point for December Cotton, with resistance found at 6235. December Cotton closed at 6124, down 118.

Gold and Silver futures had a wild ride today, with prices initially in the red as continued fund liquidation roiled the commodity markets. However, the fresh influx of funds to the financial system throughout the world by Central Banks and some moderate flight-to-safety buying by speculators caused a sharp rally in the two major precious metals. A weaker U.S. Dollar versus the Euro also was supportive to the metals complex. Today's rally in Gold sent prices back above both the 20- and 50-day moving averages, which triggered fresh momentum buying. Silver futures found some support after hitting 1-month lows $12.605, but prices remained below the widely watched moving averages at the close of the day session. Support for December Gold is now seen at $665.30, with resistance found at $688.10. Support for September Silver is seen at $12.635, with resistance at $13.440. December Gold closed at $681.90, up $9.10, and September Silver closed at $12.870, up $0.165.

Stock Index futures: After Friday’s volatile session, Stock Index futures are higher in early trade this morning, following assurances of liquidity from the Federal Reserve, European Central Bank, and Bank of Japan on Friday. European Stock indexes are higher this morning, lending some support to the U.S. market. On the economic calendar today is the release of Retail Sales figures for July at 7:30 AM Chicago time, with expectations for a rise of 0.2%, with ex-autos expected to show an increase of +0.4%. In early trade, September e-mini S&P 500 futures are trading 1461.75, up 10.75.

Copper: After falling to nearly 2-month lows on Friday, September Copper futures are showing signs of a recovery this morning, as rising demand from China, a decline in exchange stockpiles, and higher equity prices are combining to support prices. According to preliminary customs data from August 10th, Chinese Copper imports are up 49% from a year ago to stand at 1.72 million metric tons. In addition, Copper inventories in Shanghai fell by 1.7% last week, coming in at just below 90,000 mt. The London Metal Exchange reported Copper stocks fell by 200 mt this morning to stand at 114,300 mt. In early trade, September Copper is trading at 341.25, up 5.30.

Corn: Buyers continue to support Corn futures in overnight trading, as disappointing weekend rainfall amounts in parts of Iowa and Illinois have some traders concerned about potential yield losses due to the hot and dry weather. The recent rally comes despite Friday’s USDA estimates for a 13.054 billion bushel Corn crop. However, some traders are skeptical about this total given the iffy growing conditions in some parts of the Corn Belt. At the end of the overnight session, December Corn was trading at $3.54 ¼, up 3 ¾ cents.

Economic Data Scheduled for Monday, August 13, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July Retail Sales
9:00 AM: June Business Inventories

British Pound futures fell to 1-month lows this morning, as large speculators continue to unwind so-called “carry trades” in light of the stumbling world credit markets. The British Pound was one of the favorite currencies for the carry trade model against the Japanese Yen, as the Bank of England’s benchmark rate of 5.75% makes it quite attractive versus the 0.5% rate in Japan. Now that traders are taking a more risk-averse stance to try to free up liquidity, the Pound and other higher-yielding currencies are being sold to buy back the borrowed Yen. In addition, tomorrow’s report on consumer prices for July is expected to show that prices grew at the slowest pace in more than a year. If so, this combined with the recent liquidity crunch may be enough evidence to keep Bank of England officials from raising rates to 6% at their next meeting.

Looking at the daily chart for the September British Pound, we notice prices falling through the 50-day moving average of 2.0130 this morning, which triggered further liquidation selling. However, prices have rebounded a bit, as higher world stock indexes gave some supportive buying to the Pound at lower levels. Momentum as measured by the 14-day RSI remains weak, with a current reading of 35.98. Bears have yet to test major psychological support at the 2.0000 level, which if taken out will set up a test of the 100-day mobbing average at 1.9967. Resistance is found at the 20-day moving average at 2.0366. In early trade, September British Pound futures are trading at 2.0130, down 0.0091.

Natural Gas futures soared to 6-week highs early in the session as storm activity in the Atlantic basin sparked a round of short-covering buying. Two tropical disturbances are being tracked by forecasters at the National Hurricane Center in Miami – one off the coast of Africa about 520 miles west-southwest of the Cape Verde Islands and another over the northwest Caribbean. Though neither storm has been upgraded to Tropical Storm status, traders will be watching developments carefully should these systems organize into stronger storms. In addition, cooling demand for the Midwest and East coast should remain strong as forecasters call for temperatures in the mid 80’s to low 90’s this week. Today’s rally sent prices above the 50-day moving average at $6.977 and through psychological resistance at $7.000, which triggered fresh momentum-based buying. Cash prices have moved higher with Henry Hub next day delivery up 60 cents this morning. However, bulls ran out of gas around midday, as one weather model predicted the depression near the Cape Verde Islands would move north away from the U.S. Gulf Coast, sending traders scrambling to sell out of existing long positions and knocking prices well off the session highs to end the day. The 100-day moving average at $7.526 looks to be the next resistance point for September Natural Gas, with support now seen at $6.684. September Natural Gas closed at $6.794, down 0.026.

After hitting 3-month lows on Friday, Cocoa futures rebounded to start the week, with trade and technical buying noted this morning. A return to some stability in the stock and commodity markets this morning has helped support Cocoa futures, along with higher prices in London. Origin selling has been light of late, especially once prices fell below the $2,000 per ton level. Technical traders will note that the 14-day RSI had fallen into oversold territory on Friday with a reading of 27.91, which may have contributed to some of the fresh buying seen today. Support for December Cocoa is seen at Friday’s lows of $1823, with resistance at $1923. December Cocoa closed at $1886, up $36.

Mike Zarembski, Senior Commodity Analyst

U.S. Stock Index futures closed higher this afternoon, but well off the day’s highs, as traders continue to fear that the economy will show signs of slowing due to continued concerns over credit conditions and a weak U.S. housing market. September S&P 500 futures closed at 1454.60, up 3.60, and September Dow Jones futures closed at 13255, up 18. Treasury futures staged a late rally, with September Bond futures ending the session up 5/32 to settle at 109-15. Traders will be looking towards tomorrow’s PPI figures, with the consensus estimate for a 0.1% rise, and the “core” rate without food and energy prices up 0.2% in July.

Economic Data Scheduled for Tuesday, August 14, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July PPI (Consensus 0.1%, Core 0.2%)
7:30 AM: June Trade Balance (Consensus -$61.0 billion)

Canada
None

U.K.
3:30 AM: July CPI MoM (Consensus -0.2%)

European Union
1:00 AM: (Germany) 2nd qtr GDP (Consensus 0.4%)
4:00AM: 2nd qtr GDP MoM (Consensus 0.5%)

Japan
None

British Pound: September British Pound futures fell below $2.0000 for the first time in nearly 6 weeks, after the U.K’s inflation rate dropped more than analysts had expected. Consumer prices rose by 1.9% in July, down from 2.4% in June and below the 2.2% consensus estimate. This was the first time the rate fell below the Bank of England’s 2% target rate in 16 months and gives cause for the BoE to keep rates steady at 5.75%. In early trade, September British Pound futures are trading at 1.9990, down 0.0135.

Soybeans: Soybean futures traded lower overnight, as yesterday’s USDA crop progress report showed 56% of the U.S. Soybean crop rated good to excellent as of Sunday – unchanged from last week. Traders were looking for a 1 to 2 percent decline in the crop ratings, which caused prices to give back some of Monday’s rally overnight. At the end of the electronic session, November Soybeans were trading at $8.79 ¼, down 2 ½ cents.

Gold: A stronger U.S. Dollar has put Gold futures on the defensive this morning, as lower growth and inflation rates in Europe are taking some of the shine off the precious metals sector. In addition, Gold traders will be looking toward this morning’s release of the July Producer Price Index (PPI) as a gauge to wholesale inflation levels in the U.S. In early trade, December Gold was trading at $679.00, down $1.90.

Economic Data Scheduled for Monday, August 14, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July PPI (Consensus 0.1%, Core 0.2%)
7:30 AM: June Trade Balance (Consensus -$61.0 billion)

After a nearly 2-month rally, Bond futures are taking a breather after last week’s volatile trade. This morning, September Bonds are trading slightly in the red, as traders gear up for the release of the July Producer Price index. The consensus estimate is for a rise of 0.1% in the headline number, with the so-called “core” index – which excludes food and energy costs – rising by 0.2% versus a 0.3% rise in June. Traders’ expectations have been lowered for this morning’s report due to weaker equity markets, as well as a lower-than-expected rise in U.K. consumer prices. Flight-to-quality buying of Bond futures has been limited by the actions of central banks throughout the world, which have been adding liquidity to market to help stem a short-term liquidity crunch. Chart watchers will notice that the 20-day moving average is poised to cross above the 110-day moving average, which if confirmed could spark additional buying by technical traders.

Looking at the chart for the September Bond contract, we notice a potential symmetrical triangle pattern forming. Normally this pattern signals a rest period in the continuation of the current trend – combined with the potential moving average crossover, this should peak the interest of technical traders in the near-term. The 14-day RSI has moved into neutral territory with a current reading of 50.99. 109-27 is seen as near-term resistance for the September Bond, with support found at the recent lows of 108-20. In early trade, September Treasury Bond futures are trading at 109-13, down 0-02.

July Producer Prices increased by 0.6%, led by a strong increase in energy prices. This was higher than the pre-report estimate of 0.2%. However, the “core” index, which excludes energy and food prices, rose by a less-than-expected 0.1%.

The U.S. trade deficit for June narrowed to $58.1 billion, the lowest figure since February, as U.S. exports of industrial supplies helped to offset rising crude Oil imports.

Mike Zarembski, Senior Commodity Analyst

December Wheat futures continued their ascent above the $7 per bushel level, as the French state grains board lowered France's 2007-08 soft Wheat production to 32.5 million metric tons, down 1.5 million tons from the previous estimate. Also supportive to Wheat prices was Egypt's purchase of 415,000 tons of U.S. soft red Wheat and 25,000 tons of Russian Wheat. This came shortly after Egypt bought 115,000 tons of Russian Wheat. World Wheat ending stocks look to be extremely tight, with USDA estimates calling for world Wheat carryout of only 114.7 million metric tons – the lowest total since 1981. Traders look for U.S. Wheat exports to continue strong despite sharply higher prices, as poor world production this year looks to leave the U.S. as one of the few outlets for exportable Wheat. The next resistance point for December Wheat is seen at $7.20, with support found at yesterday’s lows of $6.79 ¼. December Wheat closed at $7.11, up 20 ½ cents.

Crude Oil futures rallied this afternoon to close above the 50-day moving average, as the National Hurricane Center upgraded tropical depression four to Tropical Storm Dean. Currently located approximately 1490 miles east of the Lesser Antilles, Dean is forecast to become a Hurricane later this week. Though its path is still undetermined, traders are starting to cover short positions should the storm look to threaten the energy producing regions of the U.S. Gulf Coast. Position squaring was also seen as traders gear up for tomorrow’s weekly EIA energy stocks report. Analysts are looking for a 2 million barrel decline in Crude stocks last week, as refinery utilization is expected to have increased by 0.5%. Resistance for September Crude is seen at $73.20, with support found at Friday’s lows of $70.10. September Crude Oil closed at $72.38, up $0.76

Bears feasted on bulls again this afternoon, as September S&P500 futures fell by 21.10 to close at 1434.00. European indexes were also in the red, with the September DAX 30 index falling 41.50 to close at 7463.00, and the September FTSE 100 shedding 84 points to close at 6161.50. Bond futures were moderately higher, with the September contract gaining 11/32 to close at 109-26.

Traders will focus on tomorrow’s release of July’s CPI, as analysts look for a moderate rise of 0.1%, with the “core” index expected to increase by 0.2%. In addition, energy traders are expecting a nearly 2 million barrel drop in U.S. Crude stocks last week in the Energy Information Administration’s weekly energy stocks report tomorrow at 9:30 AM Chicago time.

Economic Data Scheduled for Tuesday, August 15, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July CPI (Consensus 0.1%, Core 0.2%)
8:15 AM: July Industrial Production (Consensus 0.3%)
8:15 AM: July Capacity Utilization (Consensus 87.1%)
9:30 AM: EIA Energy Stocks report

Canada
None

U.K.
3:30 AM: Bank of England minutes

European Union
None

Japan
None

Energy Futures: After dropping as low as $70.10 on Friday, September Crude Oil futures are trying to make a comeback and are higher in early trade this morning. Today’s focus will be on the weekly EIA energy stocks report, with traders looking for around a 2 million barrel drop in Crude stocks last week. Gasoline stocks should show a modest 400,000-barrel decline, and Distillates – including Heating Oil – are expected to show a 1 million barrel rise. Refinery utilization is expected to rebound by 0.5%. In addition to this morning’s report, a tropical depression in the Gulf of Mexico is expected to become a tropical storm, and traders are nervous that it may affect refinery operations on the Texas coast. In early trade, September Crude Oil is trading at $72.94, up $0.56.

Two-year Note futures: September Two-year Note futures prices soared to highs not seen since 2005 on the weekly continuous chart, as traders renewed speculation that the Federal Reserve will cut interest rates once or possibly twice by the end of the year. Continued fallout from the subprime loan situation and falling stock indexes have traders looking towards the Government debt markets with expectations that yields will continue to move lower. In early trade, September Two-year Note futures are trading at 102-247, up 0-030.

Platinum: Lead month October Platinum dropped to lows not seen since June for the lead month contract, as a higher U.S. Dollar – particularly versus the Euro – has some traders looking for lower precious metal prices as investment demand starts to decline. Spillover weakness from lower Gold and base metals prices is also contributing to Platinum’s recent sell-off. In early trade, October Platinum is trading at $1268.00, down $9.00.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, August 15, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July CPI (Consensus 0.1%, Core 0.2%)
8:15 AM: July Industrial Production (Consensus 0.3%)
8:15 AM: July Capacity Utilization (Consensus 87.1%)
9:30 AM: EIA Energy Stocks report

Two of the favorite high-yielding currencies for traders putting on so called “carry trades” – the Australian Dollar and the New Zealand Dollar – have been hit hard of late, with the “Aussie” falling to lows not seen since May and the “Kiwi” dropping to levels last seen in April. The sharp declines have resulted from traders becoming more risk averse and looking for liquidity, as the subprime loan situation has spread outside of the U.S. The current 8.25% short-term rate in New Zealand and 6.50% rate in Australia have made these currencies favorites of large speculators and hedge funds as they borrow funds in low-yielding currencies such as the Japanese Yen (0.5% rate) and the Swiss Franc (2.50%) and invest in higher-yielding assets such as the “Aussie” and “Kiwi.” Now that these trades are being offset, the high-yielding currencies are being hit hard. If that weren’t enough, retail sales dropped for the second consecutive month in New Zealand, which has also put pressure on the currency, and business confidence in Australia was also weaker than expected last month, adding to “Aussie” woes.

Looking at the weekly chart for the New Zealand Dollar, we notice how quickly and sharply the market fell one the 20-week moving average was penetrated on a weekly closing basis. Just this week alone, “Kiwi” futures have lost 300 points, as sell stops are hit and liquidation selling continues. The next major support point is coming into view, with the 50-week moving average at 0.7070 being widely watched by technical traders. The 14-period RSI is hovering just above oversold levels with a reading of 30.12. Should the 0.7070 level fail t hold, the next major support point is seen at the March lows of 0.6722. Resistance is now seen at the May lows of 0.7230. In early trade, the September New Zealand Dollar is trading at 0.7134, down 0.0119, and the September Australian Dollar is trading at 0.8220, down 0.0120.
Mike Zarembski, Senior Futures Analyst

Crude Oil inventories fell by 5.2 million barrels last week to stand at 335.2 million barrels.

Gasoline inventories fell by 1.1 million barrels to stand at 201.9 million barrels.

Distillate inventories rose by 200,000 barrels to stand at 127.7 million barrels.

Oil stocks at Cushing, Oklahoma fell by 900,000 barrels to 18.4 million barrels – the lowest levels since December of 2005.

Gasoline imports fell by 184,000 barrels per day to 1.213 million b/d

Refinery utilization ran at 91.8% versus 91.3% last week.

Mike Zarembski Senior Commodity Analyst

Orange Juice futures closed sharply lower this afternoon, after a private analyst came out with a larger-than-expected estimate for the 2007-08 Florida Orange crop. Citrus consultant Elizabeth Steger projected the Florida Orange crop at 198 million 90-pound boxes – well above the expected range of between 160 and 180 million boxes. In contrast, this year's crop came in at nearly 129 million boxes. The most active September contract briefly traded down the 10-cent limit after rumors of the estimate hit the ring in the last 30 minutes of the day session. Contract lows at 118.90 continue to be support for September O.J., while resistance is found at the 50-day moving average currently at 134.70. September Orange Juice closed at 122.00, down 9.70.

Though only recently becoming an official named storm, Tropical Storm Erin is already catching the attention of Cotton traders, as traders fear potential flooding and crop damage as the storm nears the Texas coast. At 10:30 AM Chicago time, Erin was located 250 miles east of Brownsville Texas, moving west-northwest at 12 mph according to the National Hurricane Center. Erin is currently expected to make landfall near the lower or middle Texas coast in the next 48 hours. Any damage to the Cotton crop would be supportive to new-crop Cotton futures, as the USDA is estimating US ending stocks to fall to 5.80 million bales versus 9.7 million bales this past season. However, concerns that U.S. Cotton exports will not meet USDA estimates are keeping any rally attempts in check. Technically, December Cotton remains range-bound between two widely watched moving averages, with support seen at the 100-day moving average at 5928, and resistance found at the 50-day moving average of 6260. December Cotton closed at 6018, down 36.

Mike Zarembski, Senior Commodity Analyst

The S&P 500 went negative for the year today, closing at 1406, while the Dow finished down 167 and the NASDAQ dropped 40 points on the day. In the treasury market, the price of the 10-year Note increased as the yield dropped to 4.71%.

In economic news, both CPI and core CPI came in just as expected (.1% and .2%, respectively). However, there is still fear in the market over the subprime debacle. Traders will be paying attention to the housing starts data coming out tomorrow, which should give at least an indication of how much worse the subprime situation may get.

In the Asian markets, the Hang Seng dropped 2.31% and the Nikkei lost 2.19%.

Economic Data Scheduled for Thursday, August 16, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July Housing Starts (Consensus 1.405 million)
7:30 AM: July Building Permits (Consensus 1.400 million)
7:30 AM: Initial Claims for week ending 8/11 (Consensus 315,000)
11:00 AM: Philadelphia Fed for August (Consensus 8.0)

Canada
7:30 AM: International Securities Transactions for June (Consensus $1.0 billion)

U.K.
3:30 AM: Retail Sales for July MoM (Consensus 0.1%)

European Union
1:00 AM: (Germany) Consumer Price Index for July MoM (Consensus 0.4)
4:00 AM: (E.U) Consumer Price Index for July MoM (Consensus -0.2%)

Japan
None

Japanese Yen: Lead-month September Japanese Yen futures soared to highs last seen in July of 2006, as a sell-off in many of the major stock markets continues to inspire a flight to “safe haven “ securities such as short term government debt and traders continue to liquidate “carry trades.” Traders will also be closely watching today’s U.S. housing starts figures for July, with expectations for a slowdown to an annualized pace of 1.4 million versus 1.467 last month. In early trade, September Japanese Yen futures were hovering at 0.8788, up 0.0199.

S&P 500 futures: No recovery in early trade for U.S. Stock Index futures, as a sell-off in major world stock markets has caused the September mini-S&P 500 contract to fall below the 1400.00 level for the lead month contract for the first time since March. The beneficiary of the flight of funds from the stock indexes appears headed to U.S. Treasuries, with the yield on the two-year note falling to a 22-month low this morning. In the early going, September S&P 500 futures are trading at 1393.75, down 20.75.

Crude Oil: Lead month September Crude Oil gave back all of yesterday’s gains and then some in early trade, as fears of a global economic slowdown tied to falling equity markets caused fresh selling in the Crude market. This comes despite yesterday’s weekly EIA report showing U.S. Crude inventories falling by a larger-than-expected 5.17 million barrels last week. However, traders will be watching the track of Hurricane Dean, which is located about 500 miles east of Barbados early this morning. Though it is still too early to tell if the refinery operations along the U.S. Gulf Coast will be affected by this storm, traders are preparing for increased volatility in the Crude market going into the weekend. In early trade, September Crude Oil stands at $71.46, down $1.87.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, August 16, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July Housing Starts (Consensus 1.405 million)
7:30 AM: July Building Permits (Consensus 1.400 million)
7:30 AM: Initial Claims for week ending 8/11 (Consensus 315,000)
11:00 AM: Philadelphia Fed for August (Consensus 8.0)

What do Cotton, Gold, Crude Oil, Corn, and Cocoa all have in common? Well, in early trade this morning, these five, along with nearly every other U.S. traded commodity future, are trading lower, as fears of an economic slowdown have traders liquidating commodity futures across the board as they attempt to increase liquidity. This morning’s action in the commodity markets is a good lesson for traders on how interrelated the global markets really are, where the fundamentals that may be affecting Cocoa or Wheat can take a backseat to overriding concerns about liquidity and the forced liquidation of positions by speculators in normally uncorrelated markets to cover losses elsewhere. With many major European Stock markets down over 2% so far today and S&P futures trading at lows last seen in March, it will be interesting to see how commodities react once the day session begins. Should the stock indexes make a recovery, will commodities follow? Stay tuned……

Looking at the daily chart for December Gold, we notice that even a market once thought of as a vehicle for “safe haven” buying cannot stage a rally. Prices are lower in early trade, hovering just above recent lows at $668.80, with a stronger U.S. Dollar against the Euro not helping the cause of Gold bulls. Prices have now fallen below the 50-day moving average, which may trigger fresh selling by momentum traders. The $668.80 level will be widely watched, and a close below this level could signal a test of the $650.00 before major support is seen. Resistance is found at the 20-day moving average of $681.80. In the early going, December Gold is trading at $672.00, down $7.70.

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It was hard to find much green on the commodity quote boards today as liquidation selling pummeled nearly every commodity sector. Some of the highlights (or lowlights): December Cotton closed down the 300-point limit, September Lumber was down 9.50, November Soybeans were down 40 cents, December Gold was down $21.40, October Live Cattle was down 2.07, September Crude Oil dropped $2.33, and the list went on an on. The continuing shakeout from the credit crisis has spurred a flight to liquidity, with traders and investors looking to seek refuge in short-term government debt. Fundamentals were largely ignored in many markets, as forced liquidation of positions took center stage with margin calls looming. However, as of 2:46 PM Chicago time, the S&P 500 futures have staged a bit of a rally, and if they can finish unchanged or higher, we may see a different outcome in the commodity markets tomorrow.

Soybean futures were hit hardest in the grain complex sell-off this afternoon, with the most-active November contract falling the 50-cent limit at one point in the session to its lowest levels since mid-May. The entire commodity complex had been under pressure today due to the continued rush for liquidity in the wake of recent financial turmoil. Also weighing on the Soybean products was the improved chances for rainfall in the Midwest, including previously parched sections of the region. U.S. weekly Soybean exports came in at 313,300 metric tons for the week ending August 9th, with 236,000 mt for the 2006-07 marketing year. Soy products were not immune from the sell-off, as December Bean Oil posted triple-digit losses on the back of sharply lower Crude and Malaysian Palm Oil futures, and December Soy Meal broke through near-term resistance at the 20- and 100-day moving averages. The next support point for November Soybeans is seen at the psychologically important $8.00 level, with resistance found at the 100-day moving average of $8.34. November Soybeans closed at $8.14 ½, down 40 cents.

It was a rollercoaster day on Wall Street, as the S&P 500 went as low as 1370 – a drop of 37 points – before finishing up 4 points at 1411. The Dow finished only 15 lower after recovering from being down as much as 340 points on the day. The NASDAQ ended the day down 7. In the treasury market, the 10-year Note dropped its yield 19 basis points on the day to 4.6%.

The big news this morning was more disappointment from the housing market, with housing starts checking in at 1.381 million, lower than the 1.405 million estimated. Building permits also came in below expectations. Initial jobless claims printed at 322,000, higher than the expected 315,000.

Overseas, the Nikkei finished down 2% while the Hang Seng finished down 3.29%.

Economic Data Scheduled for Friday, August 17, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: University of Michigan Sentiment Index (Consensus 88.5)
2:00 PM: Cattle on Feed

Canada
None

U.K.
None

European Union
1:00 AM: (Germany) Producer Price Index for July MoM (Consensus 0.3%)

Japan
12:00 PM: June Leading Economic Index

Energy futures: After yesterday’s sharp sell-off in the energy complex and most other commodity markets, there’s been a bit of a recovery this morning as Crude Oil and energy product futures are trading moderately higher to start the day. Traders are beginning to focus on Hurricane Dean, which moved past the islands of St. Lucia and Martinique this morning as a category 2 hurricane. The current path has Dean moving west and possibly into the Gulf of Mexico, where a large potion of U.S. Oil and Gas production is located. In early trading, September Crude Oil is trading at $71.69, up $0.69 and September RBOB Gasoline is trading at $2.0201, up $0.0021

Nikkei 225 futures: Japan’s leading stock index future couldn’t find support from the late recovery in the U.S index futures markets, as a soaring Yen had traders fearing Japanese exports would be hurt. This caused the index to hit lows not seen in just over a year. In early going at the CME, September Nikkei futures were trading at 15395, down 555.

U.S. Stock Index futures: Yesterday’s dramatic late rally in the major U.S. indexes failed to support prices in early trade this morning, as spillover from a weak finish in Japan and continued fears that the worst of the credit crunch may not be behind us have put sellers back in control so far. Economic releases will be light today, with the
preliminary University of Michigan consumer sentiment survey for August on tap. In early trade, September e-mini S&P 500 futures are at 1412.25, down 12.25, and September mini-Dow futures stand at 12827, down 117.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 17, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: University of Michigan Sentiment Index (Consensus 88.5)
2:00 PM: Cattle on Feed

Not even livestock futures were immune from the liquidation frenzy in the commodity markets yesterday, as lead month October Live Cattle futures fell by over 200 points despite solid demand for beef and firm cash cattle prices. Beef exports are up 20% through June versus last year, with June’s total of 41,000 tons being the highest so far this year. However, fund liquidation took center stage yesterday, with prices gapping below two major moving averages and taking out the recent lows at 94.25 to trigger sell-stops along the way. Today, however, traders will be keener on positioning themselves for this afternoon’s release of the monthly USDA cattle-on-feed report. According to a Dow Jones Newswire survey, analysts are expecting an on-feed number for August of 96.1%, Cattle placed in July at 86.9%, and Cattle marketed in July at 102.6%.

Looking at the daily chart for October Live Cattle, we notice the technical damage caused by yesterday’s speculative liquidation. Prices gapped below both the 50- and 100-day moving averages, setting a weak tone to the market. Once the August 13th lows at 94.25 were taken out, sell-stops were triggered, with few buyers looking to stand in the way of the onslaught. The sell-off has moved the 14-day RSI into oversold territory, currently reading 28.99. The June lows at 92.27 look to be the next major support point, with resistance seen at the 50-day moving average at 95.67. October Live Cattle closed at 93.70, down 2.22.

Mike Zarembski, Senior Commodity Analyst

The Federal Reserve has announced a 50 basis point cut in the discount rate to 5.75%.

This news has sent U.S. Stock Index futures soaring, with e-mini S&P 500 futures up over 20 points as of 7:28 AM.

Precious metals futures rebounded to end a wild week, as the Federal Reserve unexpectedly lowered the discount rate 50 basis points to 5.75%, helping to shore up liquidity issues for short-term borrowing. In the process, the Fed seemed to dismiss its own statement that fighting inflation was its chief concern and focused on the threat to economic growth. This news sparked a sharp rally in U.S. Stock Index futures, and helped spur some fresh buying in the precious metals complex. A stronger Euro against the Greenback was also a supporting factor this morning. Yesterday’s sharp sell-off in Gold failed to take out solid support at the recent lows at $651.00 in the December contract, which may have spurred some short-covering, as well as fresh buying by speculative accounts. The next resistance point for December Gold is seen at the 50-day moving average at $675.00, with support found at $651.00. December Gold closed at $656.90, up $8.60.

Currency futures – with the notable exception of the Japanese Yen – were sharply higher this afternoon, as the massive unwinding of “carry trades” seems to have taken a breather with support coming from the Fed’s discount announcement this morning. Today’s trade is nearly the exact opposite of the recent trend, where safe haven buying supported the Greenback and the Yen was furiously bid as traders bought back short positions from their carry trades. The New Zealand and Australian Dollars – among the hardest hit of the currencies the past few sessions – were two of the biggest gainers in today’s “flight-from-quality” trade. The September Euro closed at 1.3488, up 0.0069 , the September Australian Dollar closed at 0.7917, up 0.0060 , and the September New Zealand Dollar closed at 0.6924, up 0.0144.

Mike Zarembski Senior Commodity Analyst

Energy futures: Prices are sharply lower in the energy complex to start the week, as forecasters are now expecting Hurricane Dean to track south of the main Oil-producing areas of the Gulf of Mexico. The current track is expected to bring Dean through the Yucatan Peninsula and on to central Mexico. October Crude Oil is currently trading at $71.06, down $0.76, and October Natural Gas is trading at $6.668, down $0.455.

Short-term Interest Rate futures: The Federal Reserve’s surprise announcement of a cut in the discount rate on Friday has traders increasing the odds that the Fed Funds rate will be next on the chopping block when the Fed reconvenes on September 18th. Fed Fund futures are now pricing in a 64% chance of the Fed cutting rates to 4.75% at the September 18th meeting, up significantly from almost no chance last week. In early trade, September Fed Fund futures are trading at 95.055, down 0.010.

Gold: December Gold futures have turned positive in early trade this week, as concerns about inflation have sparked moderate buying interest. The statement released after the Fed’s unexpected 50 basis point cut in the discount rate did not mention its concern for fighting inflation, but instead focused on its attempt to control the recent short-term credit crunch. In early trade, December Gold is trading at $668.10, up $1.30.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Monday, August 20, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Leading Indicators for July (Consensus 0.3%)

Copper futures were sharply lower last week, with traders in heavy liquidation mode due to continuing credit concerns and sharply lower world stock indexes. However, there are signs that the Copper sell-off may be through for the near-term. Prices are moderately higher this morning, as a strike at Grupo Mexico SAB’s San Martin mine continues after a Mexican court refused to issue a halt to the work stoppage. In addition, a rebound in other members of the base metals group this morning – mostly on bargain hunting buying – is also supporting Copper prices, despite a moderate rise in LME Copper stocks, which increased by 475 tons this morning to stand at 121,025 mt. Nevertheless, Copper stocks are still down nearly 35% for the year. Should the recent liquidity crunch come to an end and calm return to the financial markets, Copper futures have the potential to recover recent losses, as traders dismiss the panic selling that has gripped the commodity markets and once again focus on the fundamentals.

Looking at the daily chart for December Copper, we notice the sharp rebound in prices from Thursday’s lows at 304.70. Though still weak, the 14-day RSI has rebounded from oversold territory, with a reading of 32.90. After Thursday’s steep sell-off, the next resistance point remains well above current prices, with near-term resistance seen at Thursday’s highs of 332.00. Support comes in at the Thursday lows of 304.70. In early trade, December Copper is trading at 320.80, up 6.05.

Mike Zarembski, Senior Commodity Analyst

The rollercoaster ride continued on Wall Street today, as the S&P 500 finished down less than a point after being as low as 1430 (14 points in negative territory), while the Dow gained 42 points and the NASDAQ added 3. Over in the bond market, the 10-year Note climbed in value with a closing yield of 4.64%, and the 30-year Bond finished at 4.98%, widening the gap in the yield curve.

The markets spent the day still digesting the Federal Reserve’s lowering of the discount rate by 50 basis points last Friday. This week’s trade will reveal how the market is reacting to that move, as well as whether investors believe the Fed will hold its stance on not cutting the Fed Funds rate.

In the Asian markets, the Nikkei is coming off of a 3% gain from its last session, while the Hang Seng ended recent trading with a gain of nearly 6%.

Does anyone remember when we all use to obsess about the price of Crude Oil? With all of the attention being paid to the subprime market of late, it seems that the media has abandoned Oil like an unwanted puppy. 

With Oil giving a tease around the $80 mark a few weeks ago, it has since relinquished the upward momentum, closing at 71.12 today. Is it technical or weather related? 

If it is weather related, then traders must feel that Hurricane Dean will not be a factor to the Oil-producing areas in the Gulf of Mexico, and certainly no reason to drive prices further up at this time.

On the other hand, if recent moves are technical in nature, we may be nearing a long-term double top similar to last summer, when Oil was in this price range. We didn’t reach new highs at that point, but we did come close. 

Should we see the price of near $80 again soon, it will be interesting to see if the double top holds, or if bad news from the Gulf will push it over the top.

Soybeans: Soybean futures rallied in overnight trading, as traders reacted to the USDA crop progress report showing 54% of the U.S. Soybean crop was rated good to excellent, down 2% from last week. In addition, drought conditions in China’s main Soybean growing region may lower output this year and cause a rise in Chinese Soybean buying later this year. At the end of the overnight session, November Soybeans were trading at $8.33, up 5 ¾ cents.

Wheat: Chicago Wheat futures continued to climb in early trade, as U.S. exports soared despite relatively high prices. The USDA reported 45.7 million bushels were inspected for the week ending August 16th, nearly three times the amount at this time last year. At the end of the overnight session, December Wheat was trading at $696 ½, up 5 ½ cents.

Two-year Note futures: Traders are starting to believe that the Federal Reserve will lower interest rates at their next meeting on September 18th, which is sending a bid through the short end of the yield curve—the most affected by a Fed Funds rate cut. This has sparked a climb in September Two-year Note futures in early trade, leaving them hovering just below contract highs of 103-112 set on Thursday of last week. In early trade, September Two-year Notes were trading at 103-082, up 0-040.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, August 21, 2007

(All times in U.S. Central Time)

U.S.
None

After last Thursday’s limit-down move on heavy speculative liquidation, Cotton futures have staged a moderate comeback, with prices nearly 350 points above Thursday’s lows of 5560. Yesterday’s weekly USDA crop progress report showed that the U.S. Cotton crop continued to deteriorate, with 51% of the crop now rated good-to-excellent, down from 53% last week and below the 10-year average of 52%. The recent sell-off in Cotton prices may make U.S. Cotton more attractive to foreign buyers, which could improve U.S. export totals. Though Cotton prices have rallied since the May lows, some traders believe prices may need to rally further in order to “buy” acres for next season’s crop away from Corn and Soybeans. This has led to an increased speculative interest in the December 08 contract, which is priced just over 8 cents above this year’s new-crop December contract. Though the recent sell-off had liquidated a portion of the large net-long speculative open position, any further concerns of the recent credit crunch expanding may cause further long liquidation by commodity and hedge funds, despite improving fundamentals.

Looking at the daily chart, we notice December Cotton approaching the 100-day moving average. A weekly close above this level may be the key to further price appreciation, as many traders look at the 100-day moving average as a barometer of a bull or bear market. The 14-day RSI has moved above oversold territory but is still reading a rather weak 35.05. Major support is seen at the August 16th lows of 5560, with resistance found at the 20-day moving average at 6210. In early electronic trade, December Cotton is trading at 5908, up 40.

Mike Zarembski, Senior Commodity Analyst

Energy futures tumbled as Hurricane Dean chugged toward the Mexican coast as a downgraded Category 2 storm, with the most-active October Crude Oil contract falling to lows not seen since late June. The weakening of Dean along its more southerly track suggests minimal impact on Oil production in the Bay of Campeche. Long liquidating selling was especially evident in Crude Oil futures, with today’s expiration of the September contract adding to the severity of the sell-off. Large speculators are not looking to take delivery of Crude, especially with deferred contracts in a backwardation to the lead month contract. October Crude fell through both the 100-day moving average and the psychologically important $70 per barrel level, sparking a double-whammy of sell-stops below two key support points. Traders will now turn their focus to tomorrow’s EIA energy stocks report, with estimates that Oil stocks fell between 2.5 and 3 million barrels last week. $68.50 is seen as the next support point for October Crude, with resistance found at $71.55. October Crude Oil closed at $69.57, down $1.39.

Strong demand for U.S. Wheat continues, with Egypt announcing a 450,000 ton purchase of U.S. and Russian wheat. 240,000 tons of the tender was said to be for U.S. Soft Red Winter Wheat, which sent December Chicago Wheat futures once again above the $7 per bushel level for the first time since last week’s commodity-wide sell-off took it as low as $6.70 ½. Today’s sales combined with yesterday’s higher-than-expected weekly export inspections continue to demonstrate the strong demand for Wheat, despite near-record prices. The next resistance point for December Wheat is seen at the contract highs of $7.19, with support found at the 20-day moving average, currently at $6.79 ¾. December Wheat closed at $7.04, up 13 cents.

Wall Street ended relatively flat today, without much compelling news to move the US stock markets at day’s end. The Dow closed down 30 points, the S&P 500 gained a point, and the Nasdaq closed up 12 to lead the pack.

In the bond market, the yield of the 10-year Note lost some ground today ,closing at 4.59%, while the 30-year Bond ended the day with a yield of 4.95%.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Senator Christopher Dodd met today to discuss the economy. Afterwards, the Senator spoke to the media, stating that Chairman Bernanke is absolutely prepared to use all tools at his disposal to address the credit crisis.

Overseas, the Nikkei closed ahead 1.07%, while the Hang Seng ended its session with a gain of .62%.

Economic Data Scheduled for Wednesday, August 22, 2007

(All times in U.S. Central Time)

U.S.
9:30 AM: EIA Weekly Energy Stocks Report

Canada
None

European Union
4:00 AM: Industrial New Orders MoM (Consensus 2.0%)

Japan
None

Energy futures: After briefly falling below $69 on Tuesday, analysts will be watching for a rebound in Oil prices after this morning’s weekly EIA energy stocks report. Traders are anticipating between a 2.5 million and 3 million barrel decline in Crude stock last week, with the continued backwardation of Oil futures prices discouraging the storing of Oil. Gasoline stocks are expected to fall by between 600,000 and 800,000 barrels and Distillates – including Heating Oil – are expected to show a build of 800,000 barrels last week. In early trade, October Crude Oil is at $69.84, up $0.27, October RBOB Gasoline is at $1.8312, up $0.0135, and October Heating Oil is at $1.9770, up $0.0070.

Canadian Dollar: Fears that tightening credit concerns worldwide will force the Bank of Canada to change course and lower interest rates at its September 5th meeting have hurt the Canadian Dollar. With rates currently at 4.5%, the market initially was looking for one or perhaps two more rate hikes by the end of 2007, with inflation standing as the Bank’s top priority. However, in light of the recent credit crunch that view has changed, and short-term Canadian interest rate futures are now pricing in rate cuts by the end of the year. However, continued belief that the U.S. Federal Reserve will cut interest rates at its September 18 meeting has put a bid into the “loonie” this morning. In early trade, the September Canadian Dollar is sitting at 0.9456, up 0.0054.

Stock Indexes: Higher Stock Index futures in Europe are spilling over to the U.S. market, as traders believe the Federal Reserve will lower rates to help stem the credit crisis and keep the U.S. economy on track. This comes after yesterday’s meeting with Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Christopher Dodd, in which Dodd was quoted as saying that Bernanke agreed to use “all of the tools at his disposal'' to help stabilize the financial markets. Many analysts believe this includes lowering the Fed Funds rate at the Fed’s upcoming September 18th meeting. In early trade, September e-mini S&P500 futures are at 1460.75, up 10.50, and September Dow Jones futures are at 13191, up 74.

Mike Zarembski, Senior Commodity Analyst

Soybean futures were not spared the recent “flight to liquidity” that triggered a large speculative liquidation in the commodity markets. November Soybeans were down the 50-cent limit last Thursday, but have rallied back modestly since then, rising 33 ½ cents from those lows to the end of the overnight session this morning. Some of the rally has been tied to weather concerns – in the northern Midwest, too much rain, raises the prospect of disease in the Soybean crop there, and in the South, too little rain and too much heat may adversely affect yields. On Monday, The USDA reported that 54% of the U.S Soybean crop was rated good-to-excellent, down 2% from last week and 4% from a year ago. With Soybean acres down this year due to increased Corn plantings, any “disappointment” in yields from current USDA estimates could send U.S. carryout totals to multi-decade lows!

Looking at the daily chart for November Soybeans, we notice prices moving above the 100-day moving average for the second consecutive day this morning. Yesterday’s attempt to close above this key moving average failed, so traders will be carefully watching today’s day session to see if bulls can once again regain the upper hand. Momentum has moved back into neutral territory with a 14-day RSI reading of 43.65. The next major resistance point is seen at the 20-day moving average near $8.52, with strong support at last Thursday’s lows of $8.04 ½. At the end of the overnight session, November Soybeans were trading at $8.38, up 7 cents.

Mike Zarembski, Senior Commodity Analyst

Wall Street finished on the upside today, as the Dow posted a 145-point gain. The S&P 500 added 16 points, while the NASDAQ gained 31. Over in the bond pit, the 10-year Note finished slightly to the downside.

In the news, rumors persist that the Fed will lower rates at its September 18th meeting, but it remains to be seen if these rumors will hold true. New Home Sales coming out later this week and Existing Home Sales coming out on Monday may provide an indication of what will happen in September. Tomorrow, we look forward to Initial Claims.

Overseas, the Nikkei finished down slightly (.7%), while the Hang Seng ended its last trading session 2.84% to the upside.

Economic Data Scheduled for Thursday, August 23, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims week ending 8/18 (Consensus 320k)

Canada
None

European Union
1:00 AM: (Germany) Gross Domestic Product QoQ 2nd qtr (Consensus 0.3%)

Japan
10:00 PM: BOJ Interest Rate Decision

Chicago Wheat futures soared to new all-time highs for a non-deliverable period, as strong export prospects are keeping sellers at bay. Some initial support came from Europe, where LIFFE London Wheat made new all-time highs this morning, as continued wet weather in the U.K. has delayed the harvest with nearly 50% of the Wheat crop still in the ground. Speculative buyers were active, with commodity funds re-establishing long Wheat positions after last week’s commodity-wide sell-off due to liquidity concerns. Buy stops were also seen triggered above the previous contract high of $7.19 in the December Contract. The all-time high for Wheat futures was $7.50, but that took place in the last minutes before expiration of the March 1996 contract. $7.50 is seen as the next resistance level for December Wheat, with support now found at the recent highs of $7.19. December Wheat closed at $7.31 ¾, up 27 ¾ cents.

Gasoline futures were the lone bright spot for energy bulls this afternoon, as prices eked out modest gains on a higher-than-expected drawdown in Gasoline stocks last week. In the weekly energy stocks report, the Energy Information Administration reported that U.S. Gasoline stocks fell by 5.7 million barrels last week. This was well below pre-report estimates of a 600,000 barrel draw. However, a higher-than-expected build of both Crude Oil and Distillates – plus a shifting of concern about the level of Gasoline stocks to Heating Oil inventories as the peak driving season comes to a close – kept the Gasoline rally in check. 1.8000 is seen as the next support point for October RBOB, with resistance found at 1.8550. October RBOB Gasoline closed at 1.8234, up 0.0057.

Japanese Yen/currencies: It appears that an appetite for risk among traders and investors has returned in the currencies. September Japanese Yen futures are sharply lower this morning, as traders start to sell Yen and buy higher-yielding currencies such as the Australian and New Zealand Dollars, once again initiating the so-called “carry trade.” The resumption of this popular trade appears to be bolstered by stabilization in world equity markets, as well as assurances from central banks around the globe that they will step in to supply liquidity as necessary to the short-term credit markets. In the early going, September Japanese Yen is trading at 0.8591, down 0.0131, September Australian Dollar is trading at 0.8192, up 0.0134, and the September New Zealand Dollar is trading at 0.7154, up 0.158.

Chicago Wheat: Soft Red Winter Wheat futures continued their surge to near all-time high prices overnight, as several more nations are seeking Wheat purchases amid continuing tight world supplies. Taiwan, Japan and India are either looking to purchase or have already announced purchases of Wheat this morning. India is the second largest Wheat consumer behind China, and additional purchases from this region are strongly supportive to Wheat prices. In addition, there are concerns that Australia, the world’s third largest Wheat exporter, may experience warmer than normal temperatures this spring according to some forecasters, which has the potential to hurt crop yields. At the end of the overnight session, December Wheat was trading at $7.43, up 11 ¼ cents.

Sugar: October Sugar surged to near 2-week highs this morning, as Russia proposes to raise its raw Sugar duty from $140 per ton to $220 per ton. This news is expected to increase short-term demand as buyers obtain supplies ahead of the scheduled December increase. In early trade, October Sugar stands at 9.69, up 0.19.

Mike Zarembski, Senior Commodity Analyst

Natural Gas futures have been solidly in the bear camp of late, with the lead month September contract hitting 10-month lows. This week was particularly hard on prices, especially after Hurricane Dean missed the Oil and Gas producing areas of the U.S. Gulf Coast, and traders who previously bought back their short positions ahead of Dean are now re-establishing their positions as prices continue to plummet. Current Gas in storage is approaching 3 trillion cubic feet (tcf) – currently standing at 2.903 tcf – and traders will be looking for another 30 bcf to have been added last week when the weekly EIA gas storage figures are released at 9:30 AM Chicago time. With Gas storage levels nearly 15% above the 5-year average and the summer cooling season starting to wind down, it appears we may have a record amount of Gas in storage to begin the winter heating season. Traders should be cautious, however, as we are still in the prime of the Atlantic hurricane season, and even the threat of a storm reaching the U.S. Gulf Coast can spur a sharp short-covering rally and result in quick volatility spikes.

Looking at the daily chart for October Natural Gas futures, we notice a modest bounce this morning, as higher Crude Oil prices and some minor short covering buying ahead of today’s Gas storage report is supporting prices. However, the market remains well below the major moving averages, and momentum is weak. The 14-day RSI has reached oversold territory with a reading of 25.22. The next support point for October Natural Gas is seen at $5.750, with major support found at $5.50. Resistance is seen at the 20-day moving average near $6.560. In the early going, October Natural Gas is trading at $5.844, up $0.024.

Mike Zarembski, Senior Commodity Analyst

Chicago Wheat futures hit an all-time high this morning at $7.54 a bushel in the December 2007 contract, as strong exports and extremely tight world ending stocks have buyers scrambling to obtain supplies. Statistics Canada lowered that country’s Wheat production estimate to 20.322 million tons, well below the average pre-report estimates. Wheat futures in London and Paris also made new all-time highs today to add to the buying pressure, before profit-taking selling emerged once new highs were made. Prices fell sharply inter-day before a late short-covering buying surge near the close kept Wheat prices in the green at the close. Resistance for December Wheat is now seen at the new highs of $7.54, with support found at $7.15. December Wheat closed at $7.39, up 7 ¼ cents.

It was turnaround Thursday in the Cocoa ring today, as short covering buying propelled prices sharply higher after 6 ½-month lows were made on Wednesday. The only real fundamental news out this morning was the current arrival totals out of the Ivory Coast – the world’s leading Cocoa producer. Current arrivals totaled 1,186,000 metric tons, down nearly 10% from last year’s levels. However, traders report today’s rally was mostly technical in nature, with buy-stops being triggered above the recent highs of $1780 in the December Contract. $1815 is seen as the next resistant point for December Cocoa, with support found at Thursday’s lows of $1750. December Cocoa closed at $1792, up $38.

Mike Zarembski, Senior Commodity Analyst

US stocks were relatively flat today, as both the Dow and the S&P 500 finished down just one point, while the NASDAQ lost 11 on the day. Over in the bond market, the yield on a 10-year Note fell to 4.63%.

Initial Claims came in slightly above expectations this week at 322,000 versus a consensus expectation of 320,000. Tomorrow, traders will be waiting to see what the New Home Sales numbers are going to be. Although the discount rate cut will not be factored into the number (positive or negative), it will interesting to see if we get a break in the bad news from the housing sector or continued downward momentum.

In the Asian markets, the Nikkei finished ahead 2.6% and the Hang Seng ended its last trading session 2.7% to the upside.

Treasuries: Traders will be watching the Bonds today with New Home Sales set to be announced at 9:00 AM Chicago time. With the expectation at 825,000, we will see if there is a rush to Bonds after the announcement, business as usual, or reason to get out of the Treasuries. Last month’s Housing Starts number did give an indication that we may get some good news today in the housing market, but building permit numbers were down from expectations a month earlier. In the early going, the 10-year Note is trading higher.

S&P e-mini: The S&P 500 is just coming off of its starting point for 2007. Although we did dip into negative territory for a while last week, the stock market has since gained some ground back to the positive side. The S&P never quite hit its lows for the year from back in March, but it did come close. Traders will be watching to see whether the market will consider where we have been support, or will it test the yearly lows from March? The S&P e-mini contract was trading down 3 points at 6:00 AM Chicago time.

Coffee: Coffee is holding its own of late. It could have continued to drop earlier in the summer, but instead managed to hold on around the 110-115 mark, and has remained more or less range-bound between 110-120 for the summer. Are we seeing a bottom forming or is Coffee due for a breakout to the downside in the next few weeks? In early trade, Coffee was slightly higher this morning.

Durable Goods Report: It appears that business spending remains unaffected by the U.S. housing slump, as durable goods orders for July rose by a sharply higher 5.9% versus pre-report estimates of only a 1.0% gain. Excluding transportation equipment, durable goods orders rose by 3.7%, the highest in nearly two years. September Treasury Bond futures fell as low as 110-15 after the figures were released, but have recovered earlier losses and are now trading near unchanged levels. New Home Sales for July are set to be released at 9:00 AM Chicago time (consensus 825,000).

Mike Zarembski, Senior Commodity Analyst

Yield is the key word these days with long-term investors. Considering all of the uncertainty in the markets, having a steady paycheck every month doesn’t seem like a bad thing to a lot of investors. As a long-term fixed income investor, no matter what the Fed does with interest rates, you still get a check every month. The downside is that the value of your bond may decrease in value due to interest rate risk. That brings us to today’s topic – the 10-year Note.

We are at an interesting technical point with the Note right now. With prices currently testing March levels, a bullish market could be just on the other side of this resistance. Making things even more interesting is the upcoming Fed meeting on September 18th. There is increasing speculation that the Fed will announce a quarter-point cut to 5%, most likely leading to lower yields on Bonds as a whole. So where does that leave the 10-year Note? The next few weeks will tell the tale.

Currently, September 10-year Note futures are trading at 108-220.

S&P 500 futures closed higher today at 1468, primarily on good news from the economic calendar. New Home Sales came in at 870,000 versus expectations of 820,000, while Durable Orders increased 5.9%, well above the expected 1%. Monday’s Existing Home Sales number will also play a part in what the market does next week. With all of the bad press that the subprime market has been generating lately, today’s news gave bulls a reason to get out on the floor and dance.

On the charts, the S&P 500 was above the 1500 level briefly on August 8th, and as of today’s close we are 20 points away from that mark again. The previous flirtation with this level created a resistance point, so bulls will need some momentum to stage a true rally and send the S&P back over 1500.

Natural Gas: Lead month Natural Gas futures continue to plunge to lows not seen since September of 2006, as continued moderate temperatures in the major U.S. Gas consuming regions and near record high Gas storage levels are keeping bears firmly in control. In addition, the Atlantic hurricane season has been mild, with no major threats to the U.S. Gulf Coast. Current Gas in storage stands at 2.926 trillion cubic feet (tcf), or nearly 13% above the 5-year average. In early trade, October Natural Gas is trading at $5.441, down $0.298.

Lean Hogs: After slumping for most of August, Lean Hog futures surged on Friday in the wake of a 60-million-pound pork deal made with a Chinese trading company. This sparked a round of short covering buying, with the most-active October contract trading close to the 300-point limit at one point in the session. China, the world’s largest consumer of Pork, was rumored to be looking to purchase U.S. pork due to disease issues in the country that have forced a reduction in the country’s Hog herd. October Lean Hog futures closed on Friday at 70.65, up 2.17.

Corn: December Corn futures fell sharply in overnight trading, as industry group Professional Farmers of America estimated the U.S. Corn crop at 13.109 billion bushels, up from the 13.054 billion USDA estimate in the August Crop report. In addition, forecasts calling for drier condition in the Midwest may allow some areas to start the Corn harvest earlier than expected. At the end of the overnight session, December Corn was trading at $3.50 ¾, down 8 cents.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Monday, August 27, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Existing Home Sales for July (Consensus 5.70M)

Treasury Bond futures prices have remained strong, with the September contract hitting highs not seen since May, despite signs that the Fed will cut rates at its September 18th meeting and shift from its main stance of fighting inflation. Even Friday’s surprisingly strong New Home Sales figure for July could not spark a sell-off in the long end of the yield curve. Flight-to-quality buying was most likely responsible for the initial Bond rally earlier this month, but with fears of a lingering short-term credit crunch starting to abate, we would expect Bond prices to start to tumble, especially given the rally in equities futures the past week. So what is keeping Bond prices up? First, large speculators continue to hold a net-short position in 30-year Bond futures, with the most recent Commitment of Traders report showing large speculators holding a net-short position of 73,867 contracts, up 43,783 contracts as of August 21st. This may signal that last week’s rally was mostly due to short covering buying or unwinding of spreads against 10-year Note futures, where large speculators are holding a large net-long position. The second factor might be the market’s opinion that the world economy may start to slow more rapidly, with the fall-out from a weak U.S. housing market spreading throughout the globe. The market’s reaction to this morning’s Existing Home Sales figure for July may hint at the near-term trend in Bond futures prices – a stronger-than-expected figure will confirm a bump in housing sales on the heels of Friday’s new home sales surprise, while a weaker figure will add fuel to the argument that the U.S. housing slump continues and that the Fed will be forced to lower rates at its September meeting.

Looking at the daily chart for September Bond futures, we notice the bull move that started at the June lows continues nearly unabated, with prices well above the major moving averages and the trendline drawn from the June 13th lows. The 14-day RSI remains strong with a current reading of 65.19. The next resistance point for September Bonds looks to be at the May 11th highs of 112-02, with major resistance seen at the May 8th highs of 112-11. Support is seen at the 20-day moving average of 110-04. In early trade, September 30-year Bond futures are trading at 110-28, up 0-01.

Mike Zarembski Senior Commodity Analyst.

As oil prices continue to hover near record high prices, the drive to find an alternative to our insatiable appetite for foreign oil continues to increase. One such product that has recently come into the spotlight is ethanol.

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Mike Zarembski
Senior Commodity Analyst
optionsXpress

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Friday's sharp rally in Lean Hog futures was short-lived, as lower cash Hog prices, weak pork cut-out values and bear-spreading wiped out most of last week's gains. News that China contracted to purchase 60 million pounds of U.S. pork was largely responsible for Friday's sharp gains, as traders short the Hog market were forced to buy back positions, triggering buy-stops along the way. Today, however, bearish fundamentals took over, with Midwest direct Hog markets reporting lower cash prices this morning, as packer demand remains soft going into the Labor Day holiday. Traders are reporting good speculative interest in the October/December bear spreads, as traders position themselves for the start of the "Goldman Roll" in early September. Technically, today’s sell-off moved prices through the widely watched 50- and 100-day moving averages, which may spur some further selling pressure by momentum traders. The next support point for October Hogs is seen at last week’s lows of 66.87, with major support at 65.67. Resistance is now found at the 50-day moving average currently at 69.12. October Lean Hogs closed at 67.70, down 2.95.

Gasoline futures have been on fire of late, rising for the fourth consecutive session as analysts expect U.S. Gasoline inventories to have fallen again last week with traders looking for an additional 2 million barrel decline for the week ending August 24th. This comes after last week’s surprising 5.7 million barrel decline, as Gasoline demand was unexpectedly strong. Some of the recent gains in Gasoline prices have come from the unwinding of Heating Oil/Gasoline spreads by large speculators, who were recently favoring Heating Oil over Gasoline as the end of the peak summer driving season nears. However, continued refinery outages and the upcoming switchover to increased production of Heating Oil versus Gasoline have supported Gasoline prices of late. Today’s rally sent October Gasoline futures above the 20-day moving average on a closing basis, which may spark further buying by momentum traders. The 100-day moving average – currently at 1.9636 – looks to be the next resistance point for October Gasoline, with support found at 1.8781. October RBOB Gasoline futures closed at 1.9485, up 0.0425.

Mike Zarembski, Senior Commodity Analyst

The U.S. stock markets had a pullback today on disappointing Existing Home Sales data. The Dow dropped 56 points, the S&P lost 12 and the Nasdaq ended the day 15 points in negative territory.

Treasury bonds finished higher today, as traders are still fearful of the housing market. The 10-year Note yield dropped 5 basis points from last week to close with a yield of 4.58%.

The Existing Home Sales figure was the big news on Wall Street today. Although the number came in near expectations, it still wasn’t a cause for celebration. The inventory of unsold homes hit a 16-year high, meaning that at the existing rate, there is a nine month supply of unsold homes on the market.

In overseas trading, the Nikkei gained .32% while the Hang Seng added 2.86% in its last trading session.

Tomorrow, we look forward to Consumer Confidence, as well as the FOMC minutes.

Economic Data Scheduled for Tuesday, August 28, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Consumer Confidence for August (Consensus 104.5)
1:00 PM: FOMC minutes from August 7th meeting

Great Britain
None

Canada
None

European Union
3:00 AM:(Germany) IFO-Business Climate for August (Consensus 105.2)

Japan
None

Copper: Lead month September Copper fell sharply in early trade, as exchange warehouse stocks increased sharply this morning. The London Metal Exchange (LME) announced that Copper stocks increased by 10,075 metric tons to stand at 135,625 mt. In addition, a large increase of Nickel stocks on the LME was also weighing on the base metals complex. In early trade, September Copper was trading at 327.30, down 7.65.

Wheat: Chicago December Wheat fell just short of a new record high in overnight trade, as traders look for a continuation of the strong demand for U.S. Wheat while the weather plays havoc with growing conditions worldwide. Major Wheat exporters such as Canada, Ukraine, France and Australia have had production problems thanks to unpredictable weather this year. This morning, Egypt is looking to buy 60,000 mt of Wheat and Bangladesh plans to import 50,000 mt. At the end of overnight trade, December Wheat was at 748 ¾, up 10 ¾ cents.

Stock Index futures: Weakness in several European and Asian markets this morning is spilling over into U.S. trading, with e-mini S&P 500 futures trading in the red. This morning’s report on consumer confidence for August is expected to show a decline from the 112.6 reading in July. The Conference Board will release the figures at 9:00 AM Chicago time. In early trade, September e-mini S&P 500 futures are trading at 1463.00, down 6.75.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, August 28, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Consumer Confidence for August (Consensus 104.5)
1:00 PM: FOMC minutes from August 7th meeting

Coffee futures came under pressure Monday as traders reacted to a rise in the estimate for the 2007-08 Brazilian Coffee crop. The report by Brazil's National Commodity Supply Corp., or Conab, issued after the close of trading on Friday estimated the Brazilian Coffee crop at 32.6 million 60 kg bags – up a half million bags from the April estimate. However, Brazilian Coffee exports were expected to fall to 25 million bags, down from 28 million bags in 2006. Coffee prices saw further pressure from trading in London, where the Robusta contract fell as traders looked at the prospects for this year’s Vietnamese harvest. The world’s largest Robusta Coffee producer is expected to produce a larger-than-expected crop, with some estimates calling for a harvest of over 1 million tons versus this year’s 930,000 tons. Large speculators continue to hold a net-long position in Coffee, with the most recent Commitment of Traders report showing large non-commercial traders net-long 25,843 contracts as of August 21st. This sets up the possibility for some fresh long liquidation selling should near-term support fail this week.

Looking at the daily chart for December Coffee, we notice prices holding below both the 20- and 50-day moving averages. The 14-day RSI has turned neutral, with a current reading of 44.80. Major support is now seen near the 115.00 level, with the next support point not found until the 113.00 area. Resistance is seen near the 50-day moving average currently in the 118.25 area. In early electronic trade, December Coffee is trading at 117.30, up 0.10.

Mike Zarembski, Senior Commodity Analyst

Short-covering buying was responsible for today’s rally in Natural Gas futures, as traders eyed a tropical disturbance off the western coast of Africa may develop into a hurricane as it moves west toward the Caribbean. Today’s rally came after the lead month Natural Gas contract made 11-month lows at $5.192. The Commitment of Traders report shows large speculators holding a net-short position of 79,949 contracts in Natural Gas as of August 21st. Being in the heart of the Atlantic hurricane season, traders are nervous being short Natural Gas should a tropical storm strike the production infrastructure of the U.S. Gulf Coast. Resistance for October Natural Gas is seen at $5.925, with support found at $5.422. October Natural Gas closed at $5.820, up $0.230.

After hitting one-month highs of $3.70 last week, December Corn futures have fallen over 25 cents a bushel, as traders are starting to believe that the U.S. crop will be larger that current government estimates. In the August Crop Production report, the USDA estimated the U.S. Corn crop at 13.054 billion bushels, with an average yield of 152.8 bushels per acre. However, a private forecast by Professional Farmers of America has the U.S. Corn crop at 13.109 billion bushels and an average yield of 153.47 bushels per acre. Crop conditions also improved last week, with the USDA reporting 59% of the Corn crop rated good-to-excellent, up 1% from last week. Illinois and Iowa, the two leading Corn producing states, reported good-to-excellent ratings of 72% and 71%, respectively. Commodity fund selling was moderate with an estimated 3,000 contracts being sold by these large speculators. Today’s sell-off also sent December Corn below the widely watched 20-day moving average on a closing basis, which may spur further momentum-based selling. The next support point for December Corn is seen at $3.41, with resistance found at $3.55. December Corn closed at $3.44 ¾, down 8 ¼ cents.

Mike Zarembski, Senior Commodity Analyst

Stock Index futures fell sharply this afternoon, as the Conference Board reported consumer confidence fell sharply in August to 105.0 after posting a 111.9 in July. In addition, S&P/Case-Shiller reported property values in 20 metro areas fell by 3.5% in June from year-ago levels. Stock Index traders did not react kindly to this news, sending the September e-mini futures down by 31.50 points to stand at 1438.25. September NASDAQ 100 futures closed down 42.75 to end the session at 1907.75.

Treasury Futures finished on the upside, with the September 30-year Bond closing at 111-20, up 0-09, and the September 10-year Notes settling at 109-160, up 0-210.

Economic Data Scheduled for Wednesday, August 29, 2007

(All times in U.S. Central Time)

U.S.
9:30 AM: Weekly EIA Energy Stocks Report

Great Britain
None

Canada
None

European Union
1:10 AM:(Germany) Gfk Consumer Confidence Survey (Consensus 8.5)

Japan
6:50 PM: Retail Trade MoM for July (Consensus -1.1%)

Energy Futures: Overnight buying has sent energy futures prices to the upside this morning, as traders prepare for the weekly release of the EIA energy stocks report. Gasoline will be in the spotlight, with traders looking for a decline of 1.8 to 2 million barrels last week. Crude inventories are also expected to show a decline, with estimates ranging from a decline of 600,000 to 1 million barrels. Distillate stocks – which include Heating Oil – are expected to show a 600,000-barrel rise. In early trade, October Crude Oil is trading at $71.99, up $0.26, October RBOB Gasoline is trading at $1.9305, up $0.0151, and October Heating Oil is trading at $2.0230, up $0.0072.

Soybeans: New crop November Soybeans traded lower in the overnight session, as traders expect the USDA will raise its estimate for the U.S. crop in the September 12th production report. Last week, Professional Farmers of America estimated the U.S. Soybean crop at 2.658 billion bushels versus the August USDA estimate of 2.625 billion bushels. Soybean crop conditions improved last week, with 55% of the crop now rated good-to-excellent, up 1% from last week. At the end of overnight trading, November Soybeans stood at $8.68, down 4 ¼ cents.

Japanese Yen: September Yen futures are trading lower for the first time this week, as traders have lowered expectations that the Bank of Japan will raise short-term rates by 0.5% anytime soon. In addition, higher U.S. Stock Index futures this morning have some traders re-establishing the so called “carry trade” using the Yen as the short side of the trade especially against the Australian and New Zealand Dollars. In early trade, September Japanese Yen futures are trading at 0.8721, down 0.0032.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, August 29, 2007

(All times in U.S. Central Time)

U.S.
9:30 AM: Weekly EIA Energy Stocks Report

It appears that U.S. Corn producers did their job to help supply the insatiable appetite for the crop this year thanks in large part to rising demand for Corn-based Ethanol and livestock feed. The USDA’s August crop production report estimated the U.S. Corn crop at a whopping 13.054 billion bushels, but many observers believe the crop will be even larger. Professional Farmers of America came out with its own Corn crop estimate last week, estimating the U.S. crop at 13.109 billion bushels, or 0.4% above the USDA estimate. Early harvest reports from the southern Corn Belt showed better-than-expected yields, which also support higher crop estimates. 59% of the U.S. Corn crop was rated good-to-excellent last week, up 1% from the week before and 2% above conditions last year at this time. This news has kept Corn prices in check, with current prices nearly 90 cents below the mid-June contract highs of $4.35. Not all the news is bearish, however, as analysts expect Corn production from the northeast growing region of China to decline by about 6 million tons this year as drought conditions pare yields. Analysts look for China’s total Corn production to decline by between 1 and 2% this year. Traders should expect choppy trade in Corn futures until the next USDA crop production report on September 12th.

Looking at the daily chart for December Corn, we notice prices hovering below the major moving averages. Momentum as measured by the 14-day RSI has turned lower with a reading of 40.11. Last week’s high of $3.70 may have confirmed a double top formation, along with the July 13th highs of $3.71. This area will be formidable resistance for the December contract, and a test of support in the $3.24 to $3.26 area is not out of the question. At the end of the overnight session, December Corn was trading at $3.44 ¼, down ½ cent.

Mike Zarembski, Senior Commodity Analyst

Crude Oil stocks fell by 3.5 million barrels versus estimates of a 600,000 to 1 million barrel draw.

Gasoline stocks fell by 3.6 million barrels versus estimates of a 1.8 to 2 million barrel draw.

Distillate stocks – including Heating Oil – rose by 900,000 barrels versus estimates for a 600,000 barrel rise.

Refinery utilization came in at 90.3% versus 91.6% last week.

Mike Zarembski, Senior Commodity Analyst

Crude Oil futures rose sharply this morning, as the Energy Information Administration reported that Oil inventories fell more than expected last week. In this morning’s report, the EIA announced that Crude Oil inventories fell by 3.5 million barrels last week. This came as a surprise to many traders who were looking for a more modest decline of between 600,000 and 1 million barrels. This news sparked a sharp rally for Crude futures, with the most active October contract trading above the $73 level for the first time in nearly 2 weeks. Adding to fuel to Oil surge, was the sharp drop in Gasoline inventories, which fell by 3.6 million barrels vs. pre-report estimates of a 1.8 million barrel decline. Traders also report support coming into the Energy sector from higher stock index futures, especially after yesterday’s 30-plus point drop in the S&P 500 futures sparked fears of slowdown in the U.S. economy, which would be a negative for Oil prices. The next resistance point for October Crude is seen at $74.00, with support found at $70.00. October Crude Oil closed at $73.51, up $1.78.

Cocoa futures climbed this morning, posting highs not seen since August 17th, as higher Cocoa prices in London, a weaker U.S. Dollar vs. the British Pound, and a rally in stock index futures supported Cocoa prices in New York. Moderate buy stops were uncovered once December moved above the recent highs of $1816 sending prices as high as 1823, before origin selling came in and capped the day’s rally. Concerns about black pod disease in the West African growing regions were also seen as a supportive factor, which if widespread, could hurt production. The next resistance point for December Cocoa is seen at the 20-day moving average near $1834, with strong support found at the recent lows of $1750. December Cocoa closed at $1806, up $36.

Mike Zarembski Senior Futures Analyst

Without much in the way of clear-cut reason, the U.S. stock markets nevertheless made a nice move to the upside today as traders went long. The Dow gained 247, the NASDAQ added 62, and the S&P finished 31 points to the upside. Bonds also had a positive day, as the 10-year Note’s yield came in at 4.57% to close the day. The bottom line is that there were more buyers than there were sellers, which is what is going to drive the market.

Later this week, we look forward to numbers on Personal Income, Initial Claims, Personal Spending and more. Although the Fed didn’t offer any indication of a rate cut in its minutes release yesterday, the markets still saw a significant rally to the upside without any big news. Time will tell whether this was a simply short-covering rally or a genuine reversal.

Overseas, the Nikkei lost 1.69% and the Hang Seng slipped 1.5%.

Mike Tosaw Director of Education

Wheat: Chicago Wheat futures traders have had an exciting morning so far, with a surge in the last 90 minutes of the overnight session sending prices for the December contract to an new all-time high of $783 ½. Though no specific news seems to be responsible for the move, traders remain nervous over world Wheat ending stocks, with the Australian Wheat crop now forecasted to be in the 20 to 22 million metric tone range. However, rainfall has been light again this season, and many traders fear that this estimate may be overly optimistic once the harvest begins. Iraq has issued a tender to buy 50,000 of Hard Wheat this morning. At the end of the overnight session, December Wheat was trading at $7.81 ½, up 23 cents.

Stock Index Futures: The roller coaster ride for index traders continued this morning, as September e-mini S&P 500 futures gave back a portion of yesterday’s 27.25 point gain ahead of this morning’s release of the next preliminary estimate of 2nd quarter U.S. GDP. Expectations are for an increase to 4.1% versus the previous estimate of 3.4% growth rate, due mostly to a narrower-than-expected trade gap in June. In early trade, September e-mini S&P 500 futures were trading at 1457.75, down 7.75.

Dollar Index: September Dollar index futures were strong in early morning trade, as the seven major CME currency futures were all trading in the red after the Bank of England announced that it loaned 1.6 billion pounds at the penalty rate of 6.75 %. This news continued to stoke fears that the recent credit crunch is far from resolved, sending currency traders to safe haven buying of the U.S. Dollar. In early trade, September Dollar Index futures were trading at 80.96, up 0.32.

Mike Zarembski, Senior Commodity Analyst

World Sugar futures prices have moved sideways the past several sessions, as bulls and bears battle it out for control of the market. Making the bulls’ case is the announcement that Russia will raise the import duty for Raw Sugar, which should in turn raise near-term demand as importers obtain supplies ahead the imposition of the duty. Meanwhile, Brazil, the worlds largest producer of Sugar, is expected to see more of its cane crop go towards the production of Ethanol in the coming years, which would cut in to the amount of cane available for Sugar production. Bears counter with a report from the International Sugar Organization last week, which estimated a world Sugar surplus of 10.8 million tons through September of 2008, as production soared to a record 169.6 million tons. India, the world’s second leading producer of Sugar, is responsible for much of the surplus after producing a record 28 million tons this year. This comes at a time when China, the second largest consumer of Sugar, is expected to decrease it purchases as domestic production is predicted to increase.

Looking at the daily chart for October Sugar, we notice prices starting to form a symmetrical triangle pattern starting with the 8/16 lows of 9.08 and the 8/23 highs of 9.73. This pattern usually brings about a period of consolidation before the next move in prices. This morning’s current high of 9.56 is coming very close to moving above both the 20- and 100-day moving averages of 9.55 and 9.56, respectively. A weekly close above these key moving averages may spark fresh momentum buying, as short-term traders seek to cover short positions. The 14-day RSI has moved into neutral territory with a reading of 51.88. Major support is seen at the lows of 9.08, with recent highs of 9.73 looking to be stiff resistance. In early electronic trade, October Sugar is trading at 9.54, up 0.12.

Mike Zarembski, Senior Commodity Analyst

Wheat futures continued their torrid climb today, posting a new all-time high price of $7.88 ½ per bushel for the December contract as continued strong exports and concerns about Wheat production from Australia and Argentina have underpinned this historic bull market. This morning, the USDA reported U.S. Wheat export sales totaled 1.23 million metric tons for the week ending August 23rd, well above the high end of pre-report estimates. U.S. Wheat sales have soared the past few months despite prices that are nearly double that of last year. It appears that world Wheat ending stocks will be near 26-year lows, with the latest USDA estimate coming in at 114.8 million tons for the 2007-08 marketing year. This has forced Wheat buyers to obtain supplies from the few countries that currently have Wheat available for sale – including the U.S. – and is the key reason U.S. exports are up sharply despite high prices. The once unfathomable $8.00 level is now seen as the next resistance point for December Wheat, with support found near the $7.24 area. December Wheat closed at $7.84 ½, up 26 cents.

After falling to near 3-month lows yesterday, Cotton futures rebounded sharply this afternoon on the strength of solid export sales and short covering buying. The USDA announced this morning that U.S. cotton sales for the week ending August 23rd totaled 476,300 running bales for the 2007-08 marketing year. This was well above pre-report estimates, and sharply above the previous week’s totals of 400,500 bales. During yesterday’s sell-off, commercial buying emerged, allowing prices to close well above the day’s lows. Speculative short covering buying was seen above yesterday’s highs of 5810. A double-bottom formation appears on the daily chart for December Cotton in the 5560 to 5565 area, and should act as strong support. Minor resistance is seen at the recent highs of 5938, with major resistance found at the 20-day moving average of 5995. December Cotton closed at 5907, up 165.

Mike Zarembski, Senior Commodity Analyst

While the Dow dropped 50 points and the S&P lost 6, the NASDAQ refused to give in to the bears today, closing with a 2-point gain. Bonds had another positive day, as the 10-year Note finished with a 4.51% yield.

Initial Claims surprised traders today with a 334,000 post versus expectations of only 320,000. The help wanted index, however, came in right at expectations at 25.

Traders will be anxiously awaiting comments from Federal Reserve Chairman Ben Bernanke tomorrow, in addition to Personal Income, Personal Spending, and PMI.

Across the Pacific, the Nikkei closed up .88% and the Hang Seng ended its last trading session ahead by 2.02%.

Economic Data Scheduled for Friday, August 31, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: Personal Income for July (Consensus 0.3%)
7:30 AM: Personal Spending for July (Consensus 0.3%)
7:30 AM: Core PCE Inflation for July (Consensus 0.2%)
8:45 AM: Chicago PMI for August (Consensus 53.0)
9:00 AM: Factory Orders for July (Consensus 3.0%)
9:00 AM: University of Michigan Consumer Sentiment for August (Consensus 83.0)

Great Britain
4:30 AM: Gfk Consumer Confidence for August (Consensus -7)

Canada
None

European Union
4:00 AM: Consumer Confidence for August (Consensus -2)
4:00 AM: Unemployment Rate for July (Consensus 6.9%)
1:00AM: (Germany) Retail Sales for July MoM (Consensus 0.5%)

Japan
None

Stock Index Futures: Sharp gains are seen in U.S. Stock Index futures market this morning, as President George Bush will announce a plan to help subprime mortgage holders. It is believed the President will allow the Federal Housing Administration to guarantee loans for borrowers who are delinquent, which should help to avoid foreclosure and even allow refinancing of the loans at more favorable terms. Index traders are reacting positively to the news, as it should help ease the recent credit crunch brought on by the subprime loan situation. In early trade, September e-mini S&P 500 futures were trading at 1477.75, up 16.25.

Treasury futures: President Bush’s plan to help subprime mortgage holders is doing no favors for Treasury bulls, as traders start to price in a reduced chance of multiple Federal Reserve interest rate cuts. The short end of the yield curve has been particularly hard hit this morning, with December 2-year Note futures trading lower by 0-0850, at 102-3150.

Wheat: The historic $8 per bushel level didn’t put up much of a fight in overnight trade, as Chicago Wheat prices stormed to another new all-time high price of $8.07 ¾ for the December contract. With below-average production from most of the world’s leading Wheat exporters, world Wheat ending stocks are expected to be at 26-year lows for the 2007-08 marketing year. Now traders are starting to fear that dry conditions in Australia and Argentina – both among the Southern Hemisphere’s leading Wheat producers – will cut yields there as well. India’s State Trading Corporation is tendering for a large amount of Wheat, with some analysts believing India may be in the market for as much as 700,000 tons. Paris million Wheat futures also made new-all time highs this morning, rising by 7% to 272 Euro per ton. At the end of the overnight session, December Chicago Wheat was trading at $8.05 ¼, up 20 ¾ cents.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 31, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: Personal Income for July (Consensus 0.3%)
7:30 AM: Personal Spending for July (Consensus 0.3%)
7:30 AM: Core PCE Inflation for July (Consensus 0.2%)
8:45 AM: Chicago PMI for August (Consensus 53.0)
9:00 AM: Factory Orders for July (Consensus 3.0%)
9:00 AM: University of Michigan Consumer Sentiment for August (Consensus 83.0)

Earlier in 2007, traders were focused on the U.S. Corn crop, as soaring demand for Ethanol and strong usage for animal feed had the markets wondering how high Corn prices would have to go to curb demand. In retrospect, traders should have been asking the same question about Wheat, as Chicago Wheat futures have soared to new all-time highs this morning, with tight world stocks and strong U.S. exports combining to keep prices climbing. Yesterday, the USDA reported that U.S. Wheat export sales totaled a strong 1.23 million metric tons, despite prices that are well above year-ago levels. India is still aggressively looking to buy Wheat, receiving offers of 530,000 metric tons in its latest tender and looking perhaps to buy up to 700,000 mt if terms are favorable. The U.S. remains one of the few – if not only – Wheat exporters that can still supply large quantities of the crop, as poor weather conditions have wreaked havoc on nearly every major Wheat-exporting country this season. Wheat buyers are counting on improved crops from major Southern Hemisphere growers such as Australia and Argentina to help bring additional supplies onto the market, but so far dry weather condition are making it difficult for these countries to provide bumper crops and help curtail skyrocketing world Wheat prices.

Looking at the daily chart for December Wheat, we notice prices accelerating to the upside as commodity funds scramble to buy and those unfortunate to be short rush to cover their positions in the wake of new all-time highs. Needless to say, prices are well above the major moving averages, and the 14-day RSI is in vastly overbought territory with a current reading of 89.92. It is difficult to project support and resistance levels in this uncharted territory. Traders should be prepared for heightened volatility, and limit moves may become more common until traders can get a better handle on how strong demand for Wheat really is. At the close of the overnight session, December Chicago Wheat was trading at $8.05 ¼, up 20 ¾ cents.

Mike Zarembski, Senior Commodity Analyst

Gold futures ended the month on a high note, climbing to highs not seen since August 10th, as traders reacted to both Federal Reserve Chairman Ben Bernanke’s speech, as well as President Bush’s plan to help out delinquent homeowners. Both pieces of news were seen as supportive to the Gold market, as traders became convinced that the Fed will lower rates this year and hopefully keep the economy buoyant. In addition, lower rates may hurt the Dollar, which would be further supportive for Gold prices. Traders noted fresh buying emerging once the December contract moved above the recent highs of $679.00. $688.10 is seen as the next resistance point for December Gold, with support found at $670.20. December Gold closed the month at $681.90, up $8.00.

Lean Hog futures were weak to close the month, despite hints that China may still need to import pork from the U.S. Today’s trade was quiet overall, as most of the focus was on position squaring ahead of the long Labor Day holiday. Spread trading was moderate, as traders position themselves ahead of the start of the “Goldman Roll.” Cash Hog markets were generally quiet, as packers have already obtained adequate supplies in light of meat-packing plants being closed on Monday. Support for October Hogs is seen at the August 16th lows at 65.67, with resistance found at 68.57. October Hogs closed at 66.82, down 1.02.

Mike Zarembski, Senior Commodity Analyst