FOMC Decision – Trick or Treat?
Crude Oil – Today figures to be a volatile day for the Crude Oil market, as traders await weekly petroleum inventories figures and the Fed rate decision. Crude inventories are expected to show a weekly gain of 600,000 barrels, but Distillates and Gasoline are expected to show a draw of 1.1 million and 300,000 barrels, respectively. Two conflicting reports by tanker tracking companies regarding OPEC making good on its promise to increase exports by half a million barrels a day starting November 1 has led to some confusion among traders. The Fed has stuck with its forecast of moderate growth next year, which is favorable for petroleum demand, and may lead to inaction later this year to stave off inflationary pressures. December Crude Oil had a weak close, finishing near the lows of the day after trading below $90 late in the session. The market was able to find some support this morning around the 9-day moving average. Momentum is still slightly outpacing RSI, which sets a moderately bullish tone short-term. Support comes in at 88.50 and 85.00, while resistance can be found at contract highs of 93.70 and 95.00.
E-mini S&P – Index futures are trading higher this morning ahead of the Fed rate decision. Today is a report-heavy day for the stock market, and traders will have plenty of data to digest. GDP – expected to show an annual growth rate of 3.2 percent – is released at 7:30 AM CST, followed by Chicago PMI, Construction Spending and the weekly petroleum inventories report. Weakness in the figures, especially GDP and Construction Spending, figures to be bullish for stocks, as it would likely force the Fed to lower rates even further at its December policy meeting. U.S. stocks have done well on overseas exchanges in early trading, with many investors viewing the shares as a great value because of the weak Dollar. Technically, the December E-mini remains in a holding pattern, waiting for direction. The market backed off of its initial test of the 1550 resistance area, and a solid close above this mark would be needed to turn the technicals bullish. A close below the 1525 mark could be viewed as bearish near-term. Support comes in at 1525 and 1500, while resistance can be found at 1550 and 1570.
Silver – Precious metals took a hit yesterday on weaker energy prices and profit-taking. Nothing has fundamentally changed for the sector, although the Wall Street Journal’s resident Fed watcher did cast some doubt over tomorrow’s expected rate cut, saying that the housing sector has not slipped enough to cause the central bank to act. Writer Greg Ip’s statement caused some jitters in the equity markets and offered some support to a battered greenback, sending metal prices lower. An increasing number of traders are beginning to come to the conclusion that the Fed will not act this time around to leave the door open for a rate cut at the end of the year. If the Fed does act, traders believe the policy statement will likely have a very hawkish tone, which would likely bolster the Dollar and send metal traders into retreat mode. There was widespread profit-taking in commodities and Silver traders were no exception, especially with the market at overbought levels. Technicals will likely take a back seat to fundamentals today as traders await word from the Fed. Longer-term, the December Silver chart remains bullish and is measuring a possible move toward the $16-16.50 area. The initial rejection at the 14.55 resistance area is a negative sign shorter-term. Momentum remains strong despite the market finishing lower, and the indicator is showing bullish divergence from RSI. Support comes in at 13.80 and 13.50, while resistance can be found at 14.55 and 15.05.
Rob Kurzatkowski, Commodity Analyst
