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November 2007 Archives

November 1, 2007

Gold Sparkles

Gold – The Gold market topped the $800 mark intraday on strong Crude Oil and a weak Dollar, which cannot seem to find a bottom. With the greenback plummeting against all of the majors, overseas and institutional traders stayed away from Dollar-based assets and went back into accumulation mode on the commodities side. The FOMC statement mentioned inflationary pressures remaining in the market, but also noted that inflation should be held in check by slowing economic activity. The ever-cryptic central bank did leave the door open for future rate cuts, but seemed to lean toward a pause in its December meeting. With plenty of fresh cash on hand, commodity funds have been instrumental in driving prices higher than even the most bullish traders had expected. Gold remains bullish on the daily chart, but the market is overbought at the moment, which could trigger some profit-taking. The market briefly traded above the $800 mark both yesterday and this morning, but immediately backed off of this key psychological resistance area. Momentum is begging to flatten out, suggesting the possibility of profit-taking going into the weekend. Support comes in at 775 and 760, while resistance can be found at 810 and 825.

Dow – Stock index futures rallied sharply on the Fed rate decision and stronger-than-expected GDP and Construction Spending. The solid GDP figure suggests that corporate earnings will remain strong through the end of the year, although the enthusiasm was somewhat tempered by a dismal Chicago PMI Index reading below 50, showing contraction in the sector. Futures are lower this morning ahead of the PCE Inflation report at 7:30 AM CST, which is expected to show inflation at 0.2 percent for the month. The FOMC statement opened the door for further rate cuts, but at the same time tempered this by saying inflationary pressures remain. This is why the market is keenly watching the PCE figure, which is the Fed's favorite inflation gauge. The December Mini-Dow failed to move beyond its key 14,000 resistance mark yesterday, which disappointed technicians. Momentum is showing bearish divergence from RSI, suggesting a near-term downward bias. Yesterday's close above the 18-day moving average is near-term bullish and could mean that a near-term low is in place. Support comes in at 13,750 and 13,610, while resistance can be found at 14,000 and 14,090.

Crude Oil – Crude Oil was bolstered in early trading by a stronger-than-expected GDP figure and another unexpected drawdown in inventories. Crude inventories for the week ending October 26th fell 3.894 million barrels versus estimates of a 600,000 barrel build. The 4-week average of Crude Oil imports is roughly half a million barrels short of the 2005-06 average, while domestic production is in line with seasonal norms. U.S. Crude Oil stocks, which have been above the normal ranges since May, have actually dipped back into the average range, so there is by no means a shortage of supply. The FOMC policy statement was a mixed bag for Crude Oil traders. The Board suggested that the economy will continue to cool through the early part of next year, which suggests that petroleum demand will fall. On the other hand, the Fed acknowledged that it is keeping an eye on the climbing Oil prices, maintaining a close watch for inflationary pressures making their way into the economy. December Crude is off the charts – literally. Even after closing at record highs, the RSI indicator is not giving overbought readings, leaving the door open for more upside. Momentum is screaming higher and is outpacing RSI, which is bullish near-term. Today’s range of 6.36 marked the largest intraday range for Crude in recent memory, sending volatility indicators through the roof and giving no technical indication of topping out. Support comes in at 92.25 and 90.00, while resistance can be found at 97.50 and 100.00.

Rob Kurzatkowski, Commodity Analyst


Euro Loses Ground, But Bullish Trend Continues

The Euro took a slight dip today, but remains up over 10% year to date. Yesterday's Fed interest rate cut sent the Dollar to a new all-time low versus the Euro, and today’s bears are likely just profit-taking from the overall bullish market.

Looking at the chart, we are still above both the 15- and 25-day moving averages. In fact, the moving averages are at 143 (15-day), and 142.5 (25-day), showing just how fast this is moving lately. In the slow stochastic indicator, we are approaching the 80 mark, but it's difficult to say if this will mean a reversal due to the strong overall trend. There is no resistance since we are making new highs (unless you want to consider yesterday’s close). However, the next level of support is around the 138 area which was reached last August.

One thing that will be of interest to both currency traders as well as stock index traders is the employment report that comes out tomorrow morning at 8:30 AM Eastern time. With the current prices in both currencies and stock indexes, this could have a major impact across several markets. With housing numbers continuing to move lower, Dollar bulls need a good number tomorrow.

Director of Education, Mike Tosaw

November 2, 2007

Currency Weekly Overview

Did anyone get the plate number of the truck that ran over the U.S Dollar? Current price levels in the forex market border on the obscene after Ben Bernanke and friends voted 9 to 1 to cut interest lending rates by another quarter point this week. The Euro surged through 1.4500 on the news, the Dollar/Canada dropped to .9450, the Pound/Dollar spiked to 2.0825, and the Dollar/Swissie dipped to 115.55.

Keep in mind, the Loonie hasn’t been this high against the buck since 1960, and the British Pound is trading at levels not seen since 1981! If we turn to the Dollar Index contract – which has been trading in New York since 1973 – at a base of 100, an all-time new low was seen at 76.43. This represents an almost 25% loss in value for the Dollar against the combination of the six major currencies – the Euro, Yen, Krona, Loonie, Pound and Swiss.

The decision to cut interest rates happened on the same day that the U.S. Bureau of Labor Statistics released a surprisingly strong 3rd quarter Gross Domestic Product report. GDP was forecasted to drop to 3.0% from the previous quarter’s report of 3.8, but actually came in higher at 3.9%, signaling economic growth. This bright spot may have factored into the Fed’s accompanying statement indicating that this cut might be the final action needed to stimulate the economy for the remainder of 2007.

Non-farm payrolls may come in above estimates, judging by Thursday’s ADP private sector employment report showing a 106,000 gain in jobs created for October. The median expectation this morning is for unemployment to remain steady at 4.7% and non-farm payrolls to decline from 110,000 to around 80,000 representing a cool down in the workforce. The non-farm payroll number represents roughly 80% of workers producing the entire U.S. gross domestic product. The Bureau of Labor Statistics releases this information on the first Friday of every month, providing FOMC policy-makers and economists with valuable insight regarding the current state of economic activity and a guide for future predictions of economic growth.

Those traders bearish on the Dollar may need to take pause ahead of the release at 8:30 AM Eastern, as we could see a bounce in the market should the report come in above expectations. Also due for release this morning are September Factory and Durable Goods Orders. Factory orders are forecast to come in minus .5% from the previous reading of minus 3.3%.

Currently, EUR/USD trades 1.4475, Pound/Dollar trades 2.0820, and Dollar/Swiss trades 1.1540.

Heather Mitchell, Currency Analyst

November 5, 2007

Early Indecision

10-Year Notes – Treasuries got a lift last week from weaker economic data, a Fed rate cut and subprime woes that began to seep from brokerage and investment banking into commercial banking as well. The "flight-to-quality" effect may be short-lived in 5- and 10-Year Treasury Notes, however, as both domestic and overseas funds have poured into these offerings, which may curb further advances. A weak Dollar could also curb overseas demand for U.S. investments, likely leading traders to shift funds into physical commodities. With the departure of Citigroup's Charles Prince, two major banking executives in as many weeks have become casualties of the recent mortgage downturn. With more disclosures likely in the coming weeks and months, treasury prices may find further support, even if the Fed opts not to lower rates at its December meeting. Last week's decision to cut rates by a quarter point seemed forced on the Fed to keep the markets happy, and the one dissenting vote makes future cuts no sure thing. December Notes broke out to new highs, but the market is trying to test the newly established 111-00 support area in early trading. Short-term direction may be difficult to predict given the conflicting technicals, with slow stochastics showing overbought levels, but momentum continuing to show bullish divergence from RSI. Support comes in at 110-25 and 110-00, while resistance can be found at 111-25 and 112-07.

Crude Oil – Crude Oil is slightly lower overnight as tensions ease between Turkey and Kurdish rebels. The Kurdistan Worker's Party freed eight Turkish soldiers captured last month and Turkish Prime Minister Erdogen is meeting with President Bush to discuss the conflict. The Dollar is weaker this morning, which has kept the losses modest. The slumping greenback has helped catapult Crude Oil and commodities in general, due to lower cost and inflation concerns. The drop in supply over the last few weeks has opened some eyes, but reserves remain within the 4-year average. Crude Oil remains strong technically, and the chart has not shown any indication of a reversal unfolding. The market remains overbought, which could slow upward momentum. Support comes in at 93.70 and 90.00, while the market may run into resistance at 96.00 and 100.00.

E-mini S&P – Stocks will start the week in negative territory on continued subprime concerns. The Citigroup board is bringing former Treasury Secretary Robert Rubin in to help right the ship and send a strong message to investors. It could also be interpreted as a message that troubles in the subprime sector are here to stay for some time. Large commercial banks like Citi could be hit especially hard in the second quarter of next year when ARM loans peak, as borrowers delay or renege on payments for auto and credit card loans. The December e-mini S&P broke down last week, despite closing above the 1550 resistance area on Wednesday. Momentum is beginning to show positive divergence from RSI, suggesting some short-term upward bias. The ESZ07 is currently trading below the 9-, 18-, and 50-day moving averages and further weakness could bring a downward crossover of the 18- and 50-day averages, which would be bearish longer-term. Support comes in at 1500 and 1460, while resistance can be found at 1525 and 1550.

Rob Kurzatkowski, Commodity Analyst


Coffee Perks Up After Friday's Losses

Coffee was hit by a bearish wave on Friday, dropping the price from 122 down to the 118 level. Although unable to make a full recovery, it did manage to get back to around the 120 level with a close at 119.95. With the overall trend the last few weeks going to the downside, traders will definitely be keeping an eye on the pot over the next few weeks.

Coffee prices have dropped about 14% since reaching the 140 plateau about three weeks ago. At this point, the price is below both the 15- and 25-day moving averages, and the trend in the past few weeks has been moving down fast. Support in September was around the 120 area. Take away Friday's activity below 120, and you might have a loose interpretation of support right now. However, stochastic indicators still do not give us a reversal indication, remaining above the 20 mark.

It is often thought that whenever we are in a rough economy that people still use certain products like toothpaste, soda, and yes…Coffee. The perception of the economy is negative right now based on the Fed lowering rates .75% in its last two announcements. Using that indication, people may not want to buy the new car, but they may want to continue to enjoy a cup of Coffee – a small luxury. The perception of a slumping economy may be an indication of upcoming increased demand in Coffee.

Mike Tosaw, Director of Education

November 6, 2007

Rising Supplies Tarnish Copper

Copper – Copper extended its recent slide on rising LME warehouse stocks and increased production. In a year marked by worker turmoil, order seems to have been restored on the labor side for the most part, which should help boost output barring anything unforeseen. Weakening global demand – especially in the U.S. housing sector – does not appear to be on the rebound and Copper traders fear the Chinese government may intervene with higher interest rates in the early part of 2008, which could further trim demand. Despite the numerous bearish factors surrounding the market, traders were given some hope last week with strong GDP and payroll data showing that the economy may be in better shape than previously thought. The Chicago PMI data was less encouraging, however, posting a sub-50 reading to suggest contraction of the manufacturing sector. European factories may stimulate demand, as the sagging Dollar could attract buyers looking to capitalize on relatively cheap commodity prices. Copper is slightly higher this morning on expectations that inventories will be worked down due to increased demand. December Copper seems to have some support around 330 after sliding from the 375 area a month ago. The 18-day moving average crossed through the 50-day average, which is bearish longer-term. Momentum is a very bearish -0.311 and the RSI is an oversold 22 percent, which suggests today's rally may be a technical bounce due to some profit-taking. Support comes in at 325 and 305, while resistance can be found at 342 and 355.

Gold – Gold managed to post modest gains in a turbulent trading session to close at record highs. The Gold market also detached itself from the energy sector, which posted losses across the board. Energies and treasuries were out of favor yesterday due to technically overbought levels and easing political tensions, setting up the precious metals sector the safe haven de jour. The banking sector has been hit hard by the mortgage crisis and a correction in the stock market which, coupled with low interest rates, could keep the Dollar depressed and thus aid Gold prices. Gold continues to edge higher this morning on a weak USD and rising energy prices. Gold remains bullish on the daily chart, rocketing to the highest levels since 1980 in early trading. The market appears overbought at the moment, but this hasn't dissuaded traders. Momentum continues to climb higher and there was a bullish crossover of the ADXR indicator, suggesting the possibility of further upside. Support has been solidly established at 800 and 780, while resistance may be found at 835 and 850.

Bean Oil – With Crude Oil and Gold prices soaring, Bean Oil has been off of the radar for many traders while the market has quietly made a run to new highs. Increased bio-fuel demand and a weak Dollar leading to higher export demand have fueled the market recently, as has the strength in Soybean prices. Worries that the USDA will show increased production may weigh on the market in the coming days and restrict upward price movement. This figures to be a volatile week in the grain markets ahead of Friday's report, as traders readjust their positions. December Bean Oil remains bullish on the daily chart and the market is breaking out above the 42.75 resistance area in overnight trading. Momentum is starting to turn somewhat flat, which could signal further consolidation or, possibly, a small correction. The RSI is also showing overbought readings, which may hamper upside price action. Stochastics have crossed to the upside, which is bullish near-term. Support comes in at 42.00 and 41.00, while resistance may be found at 43.33 and 44.00.

Rob Kurzatkowski, Commodity Analyst


Soybeans Break Through Double Top On Way To New High

Soybeans cruised to a new high today, breaking through a double top en route. In late September, a new high was established at 1012, and that level has been tested for about the last week and a half. Today, Soybeans managed the breakthrough with a close of 1031 for the December contract.

Since this price has remained fairly stable for the last few trading sessions, the moving averages have not been seriously violated. The 15-day moving average had acted as a support level in the sideways trade over the last few days, before the movement away to the upside today. The 25-day moving average, meanwhile, has lagged over the last 10 days, but is now on its way up. Since the fast stochastics were above 80, this indicated a violation of the reversal indicator.

Elsewhere, Crude Oil continued its march to $100, spiking briefly above $97 today before closing with another new high at 96.82. Oil traders will be keeping an eye on inventory numbers tomorrow, with the EIA release set for 10:30 AM Eastern time. With tensions in the Middle East continuing to fester, Crude figures to be a closely watched market over the next several weeks.

Mike Tosaw, Director of Education

November 7, 2007

Dollar Drops, Crude Pops

Crude Oil – December Crude Oil passed the $98 mark in overnight trading on a weaker Dollar and expectations that inventories will once again drop. A Chinese official stated that the government favors stronger currencies and that the Dollar has lost its status in the world, which suggests that the nation will likely further diversify away from the greenback. Today's petroleum inventories report is expected to show a drawdown of 1.6 million barrels for the week because of disruptions to Mexican imports. Last week's report showed that Oil reserves were at their lowest levels since 2005, and further drawdowns could push prices above the $100 mark. Despite the high prices, Crude Oil demand is expected to increase by about 1 percent in the U.S., and the IEA is expecting China's demand to double by 2030. December Crude remains bullish on the daily chart, despite being technically overbought. Momentum is showing bullish divergence from RSI, which suggests upward bias near-term. Stochastics remain overbought, but there has been no bearish crossover. Support comes in at 95.00 and 91.50, while the market may find resistance at 100.00 and 101.50.

Gold – Gold is having another stellar trading session this morning, as it continues to march toward all-time highs. Strong energy prices and the weak greenback helped further propel the market in early trading. Due to uncertainty in the financial markets, Gold ETF's have seen an inflow of funds, which figures to bolster physical demand for the metal. There is some talk now of Gold ETF's becoming a safe haven for investors going forward if the market does not perform, similar to the way REITs became a safe haven following the bursting of the tech bubble. The December Gold chart remains bullish, but the market did reject advances to the 850 mark in the early going. Gold is very overbought on the 9-day RSI, giving a 91 percent reading this morning, which hints at possible profit-taking in the near future. Gold is now firmly trading above the all-time high settlement price of 825.50 and traders are beginning to wonder what the next upside target will be. Support comes in at 814.20 and 800, while resistance may come in at all-time highs of 850.00.

Silver – Silver prices, like Gold, have rallied sharply overnight, but the market has given back half of the early gains. Silver has been flying under the radar for many traders because of the booming Oil and Gold prices, but many market observers are now hinting that Silver may outperform Gold in 2008. The slumping Dollar and rapidly rising energy costs have really driven up prices, but either of these factors reversing course would likely spark a wave of profit-taking. December Silver is bullish on the daily chart, but the intraday price action has been bearish. Further intraday price declines would set up a bearish pattern on the chart and possibly bring about a near-term correction. December Silver is registering a very overbought 93 percent reading on the RSI this morning, which suggests prices may have to correct or move sideways in the near-term before any further advances. Support comes in at 15.200 and 14.550, while resistance can be found at 16.00 and 16.27.

Rob Kurzatkowski, Commodity Analyst


Dollar Sinks as China Bails

Plenty of developments around the markets today. Crude Oil inventories dropped by a lower-than-expected 800,000 barrels, meaning this wouldn't be the day for the flag to be planted atop the $100 peak. U.S. stock markets plunged on continued bad news related to the credit crunch.

But the continuing story to focus on is the U.S. Dollar, which managed to hit another all-time low today as China proclaimed its lack of confidence in the currency. With the large amount of money that China has tied up in the Dollar, the country's decision to back off is a factor that cannot be ignored – and the market certainly paid attention. China plans to shift up to 1.43 trillion of currency reserves out of the Dollar and into stronger currencies.

On this news, investors started shifting money into Gold. Though prices for the day finished basically flat, at one point the December Comex contract was as high as 848. Tomorrow, traders will be watching the initial claims numbers to see how the employment picture is stacking up this week.

Mike Tosaw, Director of Education

November 8, 2007

Wheat Makes a New 2-Month Low

December Wheat futures (WZ7) hit a new 2-month low today with a closing price of 762. This is part of a downtrend that started at the end of September when the high was established at 961. Since then, there has been a classic trend to the downside. There was a little bit of congestion at the 800 mark last week which could have acted as a support line. However, after being penetrated to the upside briefly, it wound up acting as a general point of resistance. On the chart you will notice that the sellers came in yesterday when the 810 mark came onto their screens at the open. At that point, the bears took control and never gave it up.

Looking at the moving averages, we see that the prices are below both the 15- and 25-day MAs. Although not terribly far below, it still shows that the market is moving fairly quickly. What is interesting is that the fast stochastic indicator is approaching the low end of the spectrum. If that is an indication of an upcoming reversal, it will happen without the support of the chart. The nearest level of support is in August at around the 725 mark. With almost 40 points of wiggle room, the bulls will have to do a little dancing on air to make a turnaround from this level.

In other news, Crude Oil couldn’t quite make it over the $100 mark today, closing at 95.31 after getting as high as 97.69. With the relationship of Oil to the Dollar, it will be interesting to see how the Fed reacts to spiraling prices in the petroleum sector.

Mike Tosaw, Director of Education

November 9, 2007

Ben Cautions Slowdown

Gold – Gold futures rallied to a new high close yesterday on inflation worries and a sliding greenback. Cautionary inflation comments from Fed Chairman Ben Bernanke sent the market flying higher in early trading, but a short-lived midday recovery in the Dollar and a Crude Oil sell-off combined to bring prices down well off of the day's highs. Gold is slightly lower this morning on profit-taking and thoughts that a slowdown will decrease inflationary pressure. Profit-taking pressure and weaker energy prices could keep the market from making new highs today. December Gold had an inside day on the daily chart and the market is trapped within the same range this morning, failing to push above the 850 mark. Wednesday's bearish hammer, followed by yesterday's spinning top candlestick, suggests a bearish near-term bias. Gold is showing a very overbought 89.8 percent on the 9-day RSI, which could explain some of the profit-taking this morning. Support comes in at 825 and 808, while resistance may be found at 850 and 865.

E-mini S&P – Stock index futures are lower this morning on fears of an economic slowdown, a weak Dollar and continued subprime worries. Fed Chairman Bernanke, testifying before the Joint Economic Committee, cautioned that the economy is slowing and inflationary pressures remain. The market did recover later in the day, as many traders interpreted Bernanke's statements as opening the door for a rate cut in December. Driving the market lower this morning, Qualcomm cut its earning expectations for 2008 and Wachovia Bank is increasing its allowances for bad loans in the fourth quarter. The December e-mini S&P looks bearish on the daily chart, having fallen below the 1485 support area. Momentum remains very weak and comes into trading at -30.50. The market does look technically oversold, which could support prices in the near-term. Support now comes in at 1442 and 1400, while resistance can be found at 1485 and 1505.

Crude Oil – Crude Oil prices are trading lower for the third day in a row on fears that a U.S. slowdown could decrease petroleum demand. The market traded higher in the early going, as storms in the North Sea have interrupted production by about 220,000 barrels a day, but Bernanke's statement about slower economic growth, coupled with inflationary comments, drove prices lower late in the day. Oil traders viewed the statement as a warning that the Fed will remain hawkish and not cut rates in December – a completely different view than equity and fixed income traders, who saw the statement as opening the door for further cuts. The sagging stock market and profit-taking have weighed on Crude prices today and fresh bullish news may be needed for buyers to step in. The December Crude chart formed a spinning top candlestick on Wednesday and yesterday's candle had a long upper shadow, which suggests a bearish near-term bias. The market has found some support near the 9-day moving average in the early going, but a close below the average of 94.60 would be considered bearish near-term. Support comes in at 93.70 and 92.50, while resistance can be found at 97.50 and 98.62.

Rob Kurzatkowski, Commodity Analyst

November 12, 2007

Profit-Taking Tarnishes Gold

Gold: Gold futures are sharply lower this morning on profit-taking and lower energy prices. After climbing to record high closes last week, traders are looking to take some profits off the table in this technically overbought market. Metal traders have been talking about $800 Gold for some time, but now that this figure has been eclipsed, there is widespread indecision on where we go from here. Longer-term fundamentals remain bullish – the Dollar is weaker, energy prices are still near historical highs, physical demand is strong in India and China, and inflationary pressures remain high in the U.S. December Gold comes in at a very overbought 89 percent on the RSI, which has heavily influenced the selling pressure this morning. Momentum has turned somewhat lower this morning, but remains strong at +54.7. Friday's spinning top pattern, coupled with two candlesticks with long upper wicks, also sets a bearish technical tone for the day, as it indicates bulls did not have control of the market, even as the market made new record high closes. Support now comes in at 808.70 and 780.00, while resistance can be found at 848.00.

Dow: Stocks tumbled last week on the continuing subprime mortgage concerns and earnings warnings. Retail sales showed the weakest October figures since 1995, which could be a prelude to a slower-than-expected holiday shopping season. Wachovia and E-Trade have joined the subprime fray, with both companies issuing warnings on Friday. Surprisingly, bank shares are leading the charge this morning, as value investors have stepped in to buy shares in the beleaguered sector. On a sour note, Deutsche Bank released a report suggesting that subprime losses are expected to reach the $300 to $400 billion mark globally, far outstripping prior forecasts. Technology stocks have dipped this morning due to several downgrades in the sector and worries that the Christmas shopping season may be slower than anticipated. Friday's tumble sent the market toward the 13,000 support area and dragged the RSI below 25 percent, which could partially account for the bounce we are seeing in the early going. Momentum has begun to show bullish divergence from the RSI, suggesting short-term strength. Support comes in at 12,815 and 12,650, while resistance can be found at 13,250 and 13,500.

Crude Oil: Crude Oil futures are lower this morning on weaker U.S. economic growth forecasts and the possibility of OPEC production increases. There is speculation that Saudi Arabia – the only OPEC nation not pumping at capacity – may increase output by as many as 500,000 barrels a day. Fed Chairman Ben Bernanke's slower growth forecast for the U.S. has weighed on the market and prevented further advances. Several North Sea facilities that were shut last week have restarted production. Some traders have been disappointed that Crude prices did not test the $100 mark last week, which has eroded some confidence in the market. Three consecutive small body candlesticks on the daily chart show that traders have been indecisive, with bulls unable to control the trading sessions. The market is currently trading below the 9-day moving average, and a close below the average could signal short-term weakness. The stochastics and TRIX indicators crossed to the downside this morning, also suggesting short-term technical weakness. Support comes in at 93.70 and 90.00, while resistance can be found at 97.10 and 98.50.

Rob Kurzatkowski, Commodity Analyst


Crude Marks Veteran’s Day With a Parade of Bears

Crude Oil may still hit $100, but it wasn't happening today, as the Dollar Index took a stand against the world's currencies. Since Crude and the Dollar have been tightly correlated, today's decline in Oil prices was not surprising. The December contract (CLZ7) was trading at 93.72 at the time of this writing. With all of the upside surge in recent weeks, today shows once again that anything is possible in any market at any time.

Looking at the chart, we can finally see something besides a straight line upward – notice how we are heading back to both the 15- and 25-day moving averages, almost touching the 15-day average today. Even if this (or the 25-day average) acts as support, we still have some downside wiggle room before either average will be hit. Another interesting study on the chart is the fast stochastic, which suggests a possible reversal in trend that would keep the markets waiting quite a while for $100. But if this is a pullback, $100 Oil in the near-term is still a very real possibility.

There was little economic news to be had on Veteran’s Day, but later this week traders will be watching for pending home sales, retail sales, PPI, and initial claims. As the week progresses, Crude Oil will likely play a big part in how almost all the markets are moving.

Mike Tosaw, Director of Education

November 13, 2007

Gold Meltdown

Gold – Gold futures are little changed this morning, but are trading above the $800 mark. Gold suffered the perfect storm of negative factors yesterday: technically overbought levels, lower energy prices, a sharply higher Dollar, and renewed fears that a U.S. slowdown could curb inflation. Traders may view yesterday's steep decline as a healthy correction following the accelerated run-up in recent weeks. Gold has bounced back from overnight lows on a weaker greenback, and the market may find longer-term support if the Dollar continues to trend lower. December Gold closed below the 9-day moving average, which could be seen as bearish near-term. Gold bulls may be encouraged by a bounce from the 18-day moving average and above the psychological $800 mark. Support comes in at the 38.2 percent Fibonacci retracement of 772.80 and 750, while resistance can be found at 825 and 850.

Crude Oil – Crude Oil futures are lower for the second consecutive day on an expected decrease in demand. The EIA slashed its expected demand for 2008 by 300,000 barrels a day due to record high prices. Crude Oil traders had a disappointing day yesterday due to continued subprime worries affecting the global economy, which could stymie demand and reduce inflationary pressures, making Crude Oil less attractive for speculators. Further talk of a possible OPEC output increase could keep prices lower. December Crude closed below the 9-day moving average, which can be seen as bearish near-term. Momentum is starting to lose ground and comes in at +7.22, well off of the +17.19 high. The 18-day moving average at 92.30 now comes into play, with a close below this level possibly signaling a near-term high in place. Support now comes in at 92.30 and 90.00, while resistance can be found at 94.50 and 96.55.

S&P – Stock index futures are higher this morning on stronger-than-expected earnings by Wal-Mart and Apple's plans to launch the iPhone in China. Stocks were battered once again yesterday, as subprime worries refuse to go away. There is a possibility that E-Trade will file for bankruptcy after the embattled brokerage firm indicated that write-downs will be much larger than previously anticipated. Tighter credit markets are likely to limit growth of the overall economy, which sparked the broad sell-off. The December e-mini S&P chart continues to look bearish, but the market was able to hold above key weekly support at 1435.00. Momentum is showing some slight bullish divergence from RSI, which indicates that the market may bounce near-term. Support can be found at 1435.00 and 1413.50, while resistance comes in at 1475.00 and 1500.00.

Rob Kurzatkowski, Commodity Analyst


Crude Falls with the Dollar

As the value of the U.S. dollar has been heading lower of late, Crude Oil prices have been going higher. But today, these two got together for a drop. The December Crude contract (CLZ7) closed the day at $91.41, while the December Dollar Index contract (DXZ7) is trading at 75.79. Although the Dollar is slightly above its all-time lows, it can still be considered to be in a decided downtrend.

In the news today, the Paris-based International Energy Association cut its estimate for fourth quarter global Oil demand by more than 500,000 barrels, inspiring bears to pull prices down to 90.13 at one point. Oil bottomed out at around 1:00 PM Central, at which point the bulls came in to give the market a slight pullback.

What is interesting about the chart today is that the low was right at the 25-day moving average, which turned out to be the spring for the late day pullback. Another level of support that should not be overlooked is October's $89 level. Below that, the next level of support is around $85 set a week earlier in October.

Tomorrow, Oil traders will be watching for Crude inventories, due out at 9:30 AM Central time. Other announcements include retail sales, PPI, and business inventories.

Mike Tosaw, Director of Education

November 14, 2007

Profit-Taking Continues to Take Its Toll

Crude Oil: Crude Oil futures are higher ahead of the weekly inventory data release on expectations of a drop in inventories and a weaker U.S. Dollar. Inventories of Crude Oil are expected to fall by 750,000 barrels, which would mark the fourth consecutive week of declines. The market sold off sharply yesterday on heavy profit-taking, even though Saudi Arabia contradicted earlier reports by indicating that it would not ramp up production. Despite the Saudi statement, indications are that OPEC nations do not want petroleum prices at these levels, fearing that it could stifle demand. Things have been very quiet on the geopolitical front in recent days, the lack of market-driving news stories likely influencing some traders to take profits. The Dollar is weaker against the major currencies this morning, making physical commodities more attractive. December Crude closed below the 18-day moving average, which suggests that a near-term high may be in place. The market came down to test the $90 mark, but bounced before reaching this psychological and technical support area. Momentum has drifted lower and is at the lowest levels since prices were at $80. Support comes in at 90.00 and 88.50, while resistance can be found at 93.70 and 95.00.

Gold: Gold prices have rebounded sharply this morning on strength in energy prices and a weaker U.S. Dollar. Prices fell for three consecutive days on heavy profit-taking and weakness in commodities in general. Gold has been driven by the currency markets recently, and a slumping greenback could bring bulls back into the market. Continued worries in the U.S. mortgage and housing markets could also result in a “flight to quality” effect in the Gold market. Despite the solid fundamentals, Gold may been susceptible to further profit-taking, having rallied sharply in recent weeks. Traders will focus on today's PPI figures, which are expected to show an increase in core PPI of 0.2 percent. More inflationary figures could give the market a lift. December Gold held above the 18-day moving average, which is a positive sign for bulls. Momentum has swung higher at a steeper pace than RSI, which suggests short-term technical strength. Support comes in at 785.00 and 775.00, while resistance can be found at 810.00 and 825.00.

S&P: Stocks had a stellar showing yesterday on strong earnings from Wal-Mart and suggestions that the recent wave of subprime write-offs may be slowing. Goldman Sachs said it does not plan to write off a significant number of bad loans, bucking the current trend and offering investors some encouragement. Retail sales are expected to show a decline today, but the market will likely focus on profitability of retailers and not the raw sales figures. Nonetheless, weaker sales figures could indicate slower economic growth, as consumers find themselves in a credit crunch amid rocketing energy costs. Traders will also have to digest today's PPI release, which could show that producer prices climbed due to higher energy costs. The December e-mini S&P closed just below resistance at 1485.00 and the market was unable to push above the 9-day moving average in early trading this morning. Momentum continues to outpace RSI, but to a lesser degree, which suggest that the market may have run out of steam in the short-term after rallying over 40 points yesterday. Support comes in at 1460.00 and 1435.00, while resistance can be found at 1485.00 and the key psychological 1500.00 area.

Rob Kurzatkowski, Commodity Analyst


Bulls Eat Some Corn

The December Corn contract (CZ7) closed at 383 today – an almost 2.5% increase from yesterday's 373. Corn has been trading sideways now for almost a year, leading many to believe it may be set to make a break one way or the other. The 375 mark has acted for both support and resistance lately.

On the daily candles, the 375 level appears to be somewhat of a magnet from either side. Last week 375 seemed to be resistance, but now that we have had some breaks in resistance, that same number is emerging as a support mark. Buyers came into the market yesterday when the market slipped below 375. The next level of support is around the 350 level. The moving averages were also split to start the day, but we are above both the 15- and 25-day averages now. The stochastic indicators are choppy at best right now, not giving us anything like the nice rounded showing we had seen in early October.

On the economic front, CPI, initial jobless claims, and Crude inventories will all be released tomorrow. Crude traders will be paying close attention to the inventory numbers after yesterday's announcement lowering estimates for the fourth quarter.

Mike Tosaw, Director of Education

November 15, 2007

Chinese Imports Boost Beans

Soybeans – Beans rallied to new highs on strong Chinese imports of Bean Oil and speculation that domestic production will fall below USDA estimates. Stronger energy prices and a weaker U.S. Dollar also helped lift the market to 19-year highs. China is expected to continue stockpiling imports of Soybeans and related products in an effort to bolster reserves and stave off food inflation. Informa is expecting the 2008 U.S. Bean crop to be around 60 million acres – larger than the 2007 crop, but lower than prior estimates. Beans were down in overnight trading on profit-taking and weakness in energy prices. The Dollar is slightly higher this morning, making exports a bit less attractive. January Beans are technically overbought, with the 9-day RSI registering an 85 percent reading. The overbought levels may leave the market susceptible to further profit-taking. Stochastics are close to crossing over to the downside, which could signal short-term technical weakness. Support comes in at 1052 and 1020, while resistance may be found at 1100.

Copper – Copper had its strongest showing in over two months, jumping almost two cents. There was also speculation that Chilean production may stall due to the 7.7 magnitude quake in the Copper-rich nation. Yesterday's enthusiasm for the base metal has been tempered by a host of factors, including a bleak U.S. economic outlook, record Chinese production and comments by Copper miners that Chile's mines can make up for the lost production in a short period of time. China's domestic production for October jumped 44 percent over last year, which tempered a 10 percent monthly increase in imports. Australian and Indian production also increased over the past month, which could be a drag on prices. The bounce the market has seen over the prior two sessions could also be attributed to technically oversold levels, but the market remains in a downtrend. December Copper has a wall of resistance between 320 and 340 that it must rally through to reverse the current trend. Support comes in at 315.00 and 303.50, while resistance can be found at 340.00 and 358.10

Gold – Gold futures are sharply lower this morning after recovering almost half of their losses over the prior two days. In addition to a stronger greenback, lower global stock prices are putting downside pressure on precious metal and energy prices. Slowing economies could signal lower inflation, making Gold a less attractive investment. The decline in equities may also force traders to liquidate Gold positions to generate cash in their accounts to meet margin calls. After eclipsing the $800 mark, there has been some confusion among traders as to where the next upside target may be. Thousand dollar gold was the talk by some of the more bullish analysts, but traders may have a tough time justifying this type of move in the near-term, as inflation has not yet been shown in U.S. economic data and energy prices have come down from record levels. December Gold is forming a bearish consolation pattern, suggesting further downside is possible. The market did bounce once prices flirted with the 800 area, and the 18-day moving average has acted as support over the past three trading sessions. Momentum has taken a sharp turn downward, but remains bullish at +37.60. Support comes in at 800 and 780, while resistance can be found at the 9-day MA of 817.90 and the high close of 837.50.

Rob Kurzatkowski, Commodity Analyst


The Week in Currency

Strong mid-week resistance at 1.4700 is preventing a further run-up for the Euro/U.S. Dollar pair, but traders continue to keep the uptrend intact. Monday presented some early buying opportunities for the Euro, as the market dipped below 1.4530 for the first time since November 6th. Traders nimble enough to get long saw bullish momentum expand, even in the face of technically overbought price levels. This is not new territory for the market, as the Euro/U.S. Dollar pair has a history of ignoring technical indicators and forging its own price path. Fundamentally, EU nations Germany, Norway, Spain and Italy all reported accelerated gross domestic product growth for the third quarter after poor second quarter showings.

French President Nicolas Sarkozy took the EU to task in the media recently for a lack of solid monetary policy compared to several other nations, and had critical words for the current European Central Bank policy limiting economic growth for his country as well. It appears the recently elected president is campaigning to have interest rates lowered to help foster economic expansion in France. However, it is important to note that the principal function of the ECB is to battle inflation, not necessarily to craft policy to control the strength or weakness of the Euro currency. The next ECB rate decision is scheduled for November 22nd, with expectations for a rate increase growing. Just how much influence Sarkozy has on the central bankers remains to be seen, however.

Volatility has seemingly touched every currency this week, with the sharp downside price movement in Crude Oil factoring into the gentle pullbacks in both the Canadian and Australian dollars. However, the most violent price swings battered the Dollar/Yen pair. The on again/off again attractiveness of the carry trade in this pair has caused significant high-low ranges, as savvy Japanese investors find ways to make their savings work harder. Though somewhat overlooked in terms of its ability to move the markets, the investing public tends to flex its muscle when it acts independently of large banks and government and institutional trading by moving away from the paltry half-percent interest offered by the Bank of Japan into higher-yielding currencies and investments abroad. The carry trade phenomenon can do some strange things in foreign exchange – the speed at which these trades are established and unwound caused an irrational boost to U.S. Dollar prices against the Yen, contradicting the Dollar's softness relative to every other currency.

Dollar-related data this morning includes the core consumer price index for October, a favorite inflation barometer used by the Fed. Median expectations call for an increase from 2.1% to 2.2% compared to 2006, and unchanged at .2% from last month. Sharp increases in CPI in short periods of time can be an indication of inflation on the horizon. CPI represents today's Dollar event risk, as the markets will likely react if the actual number deviates from the 2.2%.

Currently, Euro/U.S. Dollar trades
Aussie/U.S. Dollar trades
and U.S. Dollar/Canada trades

Heather Mitchell, Currency Analyst

Gold Fever Cools a Bit

After yesterday's 15+ point gain in the December Comex contract (GCZ7), Gold gave it back and then some with a loss of 25 points in today's session to close at around 789. The low on the day was 783 before buyers came in around noon to bring the close up to the higher level.

On the chart, we see that today’s close is almost even with the 25-day moving average, as buyers came in below this line. Gold remains below the 15-day MA, showing that we have a quick market to the downside based on the downward action on November 12th. The fast stochastic indicators are right around the 20 mark. If this turns out to be a short-term reversal forming, it has three supporting factors – stochastics, the 25-day MA, and a little bit of support left over from late October. If the market goes to the downside, the next level of support is around the 770 area and below that, 730.

In the news, both CPI and core CPI came in right at expectations, initial jobless claims came in above expectations at 339,000 (325,000 forecast), and Crude inventories rose by a surprising 2.8 million barrels.

Mike Tosaw, Director of Education

November 19, 2007

OPEC Meeting Gives Crude a Boost

Crude Oil – Crude Oil starts the week on a positive note after a rare high-level OPEC meeting. At the summit in Saudi Arabia – only the third of its kind in 47 years – skyrocketing prices and the decline of the U.S. Dollar were the hot topics. While the majority of the member nations expressed concern over how the near-record prices could stifle demand, Iranian and Venezuelan leaders voiced dissenting opinions over the high prices. More moderate member nations, including Saudi Arabia and Nigeria, expressed concern over the high prices, tempering the statements from Iran and Venezuela. One topic that seemed to concern all member states was the declining value of the Dollar and talk of further diversification to stronger currencies. Although this last point was not necessarily agreed upon, such talk sent the greenback lower and commodity prices higher in overnight trading. January Crude is currently trading above the 9-day moving average, and a close above the average could signal short-term bullishness. Momentum was showing positive divergence from RSI heading into trading this morning, adding to the bullish sentiment. Support comes in at 91.00 and 88.20, while resistance can be found at 95.15 and 96.05.

S&P – Stock index futures are lower this morning on continued economic concerns, both domestically and in China. An increasing number of economists are now forecasting that the U.S. will slip into recession due to the fallout from the housing/lending crisis. The Christmas shopping season is expected to be the softest in years due to consumers having less expendable income because of higher fuel costs and tighter credit, which could impact larger-ticket items. Oil prices have moved higher overnight, which has also weighed on the market. The December e-mini S&P has been trading sideways for the past week, as traders try to determine the direction of the market. Momentum has drifted lower, while the RSI has remained fairly steady, which is bearish short-term. The weekly chart shows a spinning top candlestick after a sharp drop, suggesting a possible near-term bounce. Support can be found at 1440.00 and 1407.50, while resistance comes in at 1475.00 and 1500.00.

Bonds – Bond futures are slightly higher this morning ahead, aided by lower equity prices. With the recent turbulence in the stock market and tame inflation figures, Bonds have rallied to two-year highs. Even as the market moves higher, fixed income traders have been very cautious due to the Fed's cryptic statements regarding the economy, inflation and rate policy, as well as the weakening Dollar, which could result in lackluster interest from overseas investors. Tomorrow will be an interesting day for Bond traders with the release of housing starts and permits in the morning and FOMC minutes in the afternoon. With the housing market already battered, traders may opt to focus on the FOMC minutes. If the Fed's language suggests that interest rates will remain steady going forward, Bonds could be susceptible to a sell-off. Bond futures have broken out above resistance at 114-25, but the market now finds itself overbought. Momentum is showing bearish divergence from the RSI, which is bearish in the near-term. Support can be found at 114-25 and 113-13, while resistance now comes in at 115-30 and 116-23.

Rob Kurzatkowski, Commodity Analyst

November 20, 2007

Gold Shines in Early Trading

Gold – December Gold is higher in early trading today after suffering losses over the past three sessions. The U.S. Dollar dropped to all-time lows against the Euro in overnight trading on expectations that this morning's housing starts and permits data will show further weakness. The recent slide in precious metals – despite firming energy prices – has mainly been driven by profit-taking and is generally viewed as a healthy correction for the market. Technical buying is also driving Gold higher, with the market finding support near the first Fibonacci retracement, which comes in at 772.60. The market was also trading near oversold levels on the RSI, helping attract buying interest. Momentum is showing bullish divergence from RSI, suggesting positive near-term sentiment. Tempering the positive technical factors is the crossover of the 9-day and 18-day moving averages, which is considered bullish in the short- to medium-term. Support can be found at 772.60 and 749.30, while resistance can be found at 800.00 and 819.40.

Copper – Copper continues its month-long slide ahead of today's housing data. Housing starts are expected to fall to 14-year lows, severely decreasing demand for the base metal. LME stocks have risen 15 percent over the past year and inventories jumped 350 tons today. The recent loan write-offs by banks has led to tighter lending standards, dimming the long-term prospects for Copper and suggesting that things may get worse for the housing market before we see a turnaround. The weakening greenback has done little to aid the market, which has been in a virtual freefall since peaking in early October. December Copper has fallen below key psychological support at $3.00 in early trading, but buying pressure seems to have emerged below this mark, helping to slow declines. Momentum is showing bearish divergence from the RSI, suggesting more downside is possible for the market. Support now comes in at 285.00 and 263.00, while resistance can be found at 315.00 and 330.00.

Bean Oil – Bean Oil futures finished the overnight session slightly lower, despite higher energy prices and a weaker Dollar. Chinese demand has jumped recently due to a smaller-than-expected Soybean crop, and the Chinese government has stepped up its stockpiling on the weaker Dollar. Near-record Crude Oil prices have also fueled speculation that bio-fuel demand will increase, further aiding Bean Oil prices. The weaker Dollar has also helped the market post strong export sales figures outside of China as well. December Bean Oil continues to trade in a sideways consolidation pattern near contract highs, suggesting a possible continuation of the uptrend. The 9-day RSI has fallen below overbought levels for the first time in several weeks and is outpaced by the momentum indicator, which is bullish over the near-term. In another positive development for the market, the December contract has found support near the 9-day moving average this morning. Support comes in at 43.75 and 42.50, while resistance can be found at yesterday's intraday contract highs of 45.26.

Rob Kurzatkowski, Commodity Analyst


Gold and Oil Take a Turn to the Upside

December Gold (GCZ7) went on a run with the bulls today, gaining 25 points for a close back over the $800 level. Meanwhile in the Crude Oil market, the January contract (CLF8) set another new record, closing at $98.38. Both of these contracts had a big day to the upside while the Dollar set another new record low.

Looking at the charts, Gold had a bit of a reversal in relation to the past three days in the red, closing above the $800 level for the first time in several days. The 800 mark is becoming a weak level of psychological resistance at best, and a consolidation pattern may be forming around that number. The true measure of this rally will be revealed when and if Gold manages to top the 840 level like it did earlier this month.

Oil kept traders on the edge of their seats again today with a new record high of 98.62, as the $100 level again emerges as a reachable target. As usual, tomorrow’s inventory number at 9:30 AM Central time will be a closely watched event, and may be the catalyst to send prices to that $100 level.

In the news, housing starts came in 3% higher than October, while building permits took a bit of a slide. This is mixed information, but for the sake of the housing market, any good news is welcome. However, the big news on the day was the FOMC minutes, in which the Fed noted the potential for a slowing economy over the next year. The Fed also indicated that its October decision to cut rates was a “close call."

Mike Tosaw, Director of Education

November 21, 2007

Energy Bulls Giving Thanks

Crude Oil – Crude Oil futures rallied to touch all-time highs yesterday and set a new high for the January contract. The rally was fueled in large part by a rapidly declining U.S. Dollar and an expected drop in Heating Oil inventories. In addition to the uncertainty plaguing the U.S. economy in the wake of the credit crunch, talk of OPEC nations and China diversifying away from the Dollar has put a lot of downside pressure on the greenback. The release of the FOMC minutes showed that the October rate cut passed by only a slim margin, but traders seemed to think the central bank will continue to lower rates to stave off economic contraction that would likely lead to further declines in the value of the Dollar. Chairman Bernanke seems to prioritize economic growth over keeping inflation in check, unlike his predecessors Greenspan and Volcker. Today's weekly inventory figures are expected to show a build of roughly 1 million barrels of Crude Oil, but a surprise drop could push prices beyond the $100 mark, especially with the market hunting for bullish news. January Crude had a technical breakout above the prior contract high of 97.63, but did so on lighter volume. Crude made a new all-time high of 99.29 in overnight trading before retreating below 98.50, as traders were reluctant to continue buying ahead of the inventories data. Momentum has shifted lower, while RSI climbed slightly, suggesting a slight bearish bias. Support comes in at 97.63 and 93.06, while resistance may be found at 100.00 and 105.00.

Heating Oil – January Heating Oil made new contract highs in overnight trading on speculation that inventories are going to show a decline of 400,000 barrels for the week. This winter is expected to be much milder that prior years, but much of the country will be dealing with below average temperatures for the next couple of weeks. The rising cost of Crude Oil and the seasonal decline in inventories have pushed prices higher. Last week, DOE data showed that Heating Oil inventories were at 30 days of supply after the market was oversupplied for much of the year. A drop below 30 days of supply could spark further rallies in both the Crude Oil and finished products markets. Like Crude, January Heating Oil rallied to a new contract high close yesterday and made new all-time highs in overnight trading. While this can be viewed as a breakout, traders remain cautious because of the low volume figures ahead of the Thanksgiving holiday. Momentum has fallen in early trading, but there is no divergence from the RSI indicator. The market did break sharply after making new highs, which could put some downward pressure on the market if inventories are in line with forecasts. Support comes in at 2.6700 and 2.5900, while resistance may be found at 2.7500 and 2.8000.

S&P – Stock index futures are lower this morning on the strength of the energy markets and lukewarm forecasts for the Christmas shopping season. Stocks managed to rally late in the day to post gains after the release of the FOMC minutes. The minutes showed the Fed lowered growth expectations for 2008, which led traders to believe that rate cuts could lie ahead. But yesterday's euphoria has worn off and rapidly rising energy prices have weighed on the market. If petroleum prices continue to climb, the Fed may be forced into inaction or even change its bias toward a rate hike early next year, which would not only slow down the economy but also kill demand for petroleum. Traders will focus on the Michigan Consumer Sentiment figure more than usual ahead of the holiday shopping season, and Wall Street seems concerned that rising prices at the pump and tighter lending standards may keep consumers away from the stores. December e-mini S&P futures continue to trend lower and are currently trading below the major moving averages. The 9-day MA has acted as resistance over the last seven trading sessions, and the market may need a close above the average to get some upside momentum. The momentum indicator continues to show bearish divergence from RSI, painting a negative technical picture for the market. Support comes in at 1425.00 and 1400.00, while resistance can be found at 1465.00 and 1496.00.

Rob Kurzatkowski, Commodity Analyst

November 26, 2007

Stocks Jump on Strong Black Friday Sales

NASDAQ – Stock index futures are higher in overnight trading on stronger-than-expected sales numbers to kick off the holiday shopping season. Forecasts were calling for “Black Friday” sales to be below last year's $9.5 billion mark, but consumers came out in full force and initial estimates put Friday's sales figures in the neighborhood of $10 billion. Analysts were expecting the rising cost of fuel and tighter credit standards to keep customers away from the cash registers. But deeply discounted electronics turned out to be the main driving factor, with big name retailers like Best Buy and Circuit City rolling out specials and zero percent financing. These are risky moves for retailers in the recent credit climate, as they cut into profit margins. Tech and electronics companies figure to get a boost from the initial figures, and online retailers such as eBay and Amazon are expected to show strong sales on what has become known as "Cyber Monday.” The December e-mini NASDAQ is trading above the 9-day moving average in the early going, and a close above the average could signal some short-term bullishness. Tempering this is the fact that momentum is staying flat, while prices and the RSI indicator are climbing, which can be seen as bearish near-term. The market has been trapped in a triangle/wedge pattern on the chart, showing indecision among traders. Price action indicates that the market is moving higher this morning with some restraint, initially backing off when approaching 2050.00. Support comes in at 2014.00 and 2000.00, while resistance can be found at 2060.00 and 2100.00.

Crude Oil – Crude Oil futures are higher this morning, but the market was reluctant to push above contract highs in the early going. Prices fell after last week's inventory figures, which were bullish on the surface, showing a large drawdown, but the report also showed a large build in the key Cushing, Oklahoma port – the delivery point for NYMEX Crude. Funds and large traders took some profits off the table ahead of the Thanksgiving holiday, which drove prices lower following new highs. Strong sales to kick off the holiday shopping season along with a weaker dollar are both bullish factors for the market. January Crude futures were reluctant to make a push to new contract highs in early trading and prices are now below 98.50. Momentum is showing bearish divergence from the RSI, suggesting that traders' enthusiasm may be wearing a little thin after the recent run-up. It also suggests that more fundamental news may be needed to drive prices higher. Support comes in at 96.15 and 95.00, while resistance can be found at contract highs of 99.29 and 100.00.

Gold – Gold futures are higher this morning on a weaker Dollar and higher Crude Oil prices. Unlike Crude, which has backed off considerably from overnight highs, the Gold market appears resilient due to the slumping greenback. Traders are not convinced that the strong weekend sales figures are going to boost the slumping economy, which may lead to another Fed rate cut in December and, more than likely, a weaker U.S. currency. With energy prices near all-time highs, the Crude Oil market may labor to move higher, as the high costs may cut demand. This may be a chance for the Gold market to detach itself from energy prices and, once again, become the main inflation hedge for investors. December Gold has rebounded solidly after flirting with the first Fibonacci support area – in theory a market could rally to prior highs or make new highs after bouncing off of this key support area. December Gold closed above the 50-day moving average and resistance at 819.40 on Friday, which is considered bullish medium-term. In contrast to these bullish indicators, momentum is beginning to show some bearish divergence from the RSI and prices, suggesting that the market may consolidate or correct. Support comes in at 820.00 and 807.00, while resistance can now be found at 837.50 and 849.50.

Rob Kurzatkowski, Commodity Analyst

November 27, 2007

Stocks Move Cautiously Higher

S&P – Stock index futures are slightly higher this morning on value buying in U.S. stocks overseas and positive news from Citigroup. Citi will be receiving a $7.5 billion cash infusion from the Abu Dhabi Investment Authority, making the government the second largest shareholder. The move showed that there are still plenty of funds on the sidelines and offered some reassurance to the beleaguered banking sector. Yesterday's late sell-off did little to reassure traders, with e-mini S&P futures falling to their lowest levels since mid-March. The 10 percent decline from all-time highs in the S&P has kept traders on the sidelines, and it seems as though any good news – such as strong Black Friday sales – has been more than offset by dismal reports like the additional write-downs expected from HSBC. The December e-mini has honored the 1405 support area thus far, but a close below this figure could lead to sell-offs into the 1360's. Momentum has moved slightly higher, but at a much slower pace than RSI this morning, suggesting further downside may lie ahead. In addition to 1405, support can be found at 1383, while resistance comes in at 1425 and 1450.

Soybean – January Soybeans closed at new record highs yesterday in an indecisive day of trading. Beans and related products have gotten a lift recently from stronger Crude Oil prices and a weaker U.S. Dollar. The weaker U.S. currency is expected to result in higher export sales figures for the week, although some of the enthusiasm among traders has worn thin due to expectations that the December 1st USDA report will show higher stocks than previously expected. After making a strong run over the past month and a half, the market remains technically overbought and bulls are worried that funds will begin to liquidate longs to take profits. January Beans are giving conflicting technical signals. Momentum is showing bullish divergence from the RSI, which suggests that the near-term technical bias remains to the upside. This is tempered, however, by a spinning top candlestick, which suggests a negative short-term bias. Slow stochastics are showing overbought levels and there was a bearish crossover following yesterday's indecision. Support comes in at 1080 and 1057, while resistance may be found at 1115 and 1187.

Cocoa – March Cocoa is lower in early trading on strong exports from the Ivory Coast, the world's largest grower. There were concerns that the farmers' union may block ports, resulting in a price spike last week. Delays in shipments could have decreased the quality of the crop, but these fears never materialized. The market has felt downward pressure in recent days due to the larger-than-expected early harvest figures, but the market has failed to break sharply due to concerns that the turmoil between the farmers' union and the government over subsidies has not gone away. March Cocoa is currently trading at the 1930 support area this morning and traders will focus on how the market reacts at this level. Momentum is slightly outpacing both price and RSI, suggesting the market will continue to trade in the 1900-1975 range. In addition to 1930, support can be found at 1912 and 1898, while resistance comes in at 1960 and 1975.

Rob Kurzatkowski, Commodity Analyst

November 28, 2007

What a Difference a Day Makes

Dow – Dow futures surged 183 points yesterday, fueled by news that Citigroup will receive $7.5 billion in cash from foreign investors. Congress may pass a law as early as today to mandate improved fuel economy standards for U.S. automakers and encourage domestic production, hoping to keep over 17,000 jobs in the country. Yesterday's momentum seemed to disappear on news that Wells Fargo and Freddie Mac plan to cut jobs due to the slowing economy. Durable goods orders are reported at 7:30 AM CST and are expected to show no change. Also on tap today is the existing home sales figure at 9:00 AM Central, which is expected to see a drop in the annual pace to 5.0 million homes. The Fed Beige Book is also set to be released at 1:00 PM Central, and traders will scrutinize the report to get an idea of what the central bank has in mind for future rate adjustments. December Mini Dow futures closed just below the 9-day moving average and the market is currently trading above the average this morning. A close above the 9-day MA may signal some short-term strength in the market. Momentum is showing bearish divergence from the RSI, suggesting that yesterday's sharp rally was a “dead cat bounce.” The market did manage to hold above support at 12,750, but price action seemed to indicate that short covering helped lift the market higher. Additional support comes in at 12,500, while resistance can be found at 13,050 and 13,250.

Crude Oil – Crude Oil futures are lower for the third consecutive trading session on a stronger Dollar and expectations that the weekly inventory number will show a build of around 500,000 barrels. New reports suggest that OPEC plans to ramp up production to the tune of 750,000 barrels a day in response to rising prices and fears of a downturn in demand. Qatar's energy minister downplayed the report and stated that he was unaware of the proposal. Several OPEC member states – namely Saudi Arabia and Nigeria – have made comments recently that they fear that the rising price of Oil may curb demand, making recent word of increased production very plausible. January Crude Oil closed below the 18-day moving average, suggesting that a near-term high may be in place. Further price declines could bring about a downward cross-over of the 9- and 18-day averages, which could be considered bearish short- to medium-term. Momentum is climbing slightly this morning, but has been outpaced by the RSI indicator. Support comes in at 93.50 and 91.85, while resistance can be found at 96.15 and 97.65.

Wheat – Wheat futures are slightly lower in overnight trading on a weaker Dollar. The market had a good bounce yesterday, aided by news that Morocco is buying 316,000 of Soft Red Wheat (CBOT), suggesting that world stocks of the grain remain tight. The USDA also reported that crop conditions for winter Wheat were the poorest since 1999, but traders are waiting to see if the southern Great Plains region will get some much needed moisture, which could improve the condition of the winter crop. An extended rally in the Dollar could put some downside pressure on the market. March Wheat futures closed above the 50-day moving average for the first time in almost a month, which could add to the recent momentum the market has seen. The 9-day moving average crossed above the 18-day this past Friday, which is a bullish signal medium-term. The market has been trapped between 825 and 860 over the past three trading sessions, suggesting some indecision among traders. Momentum is outpacing RSI to the upside, which could be seen as slightly bullish near-term. Support comes in at 825 and 815, while resistance can be found at 860 and 874.50.

Rob Kurzatkowski, Commodity Analyst

November 29, 2007

Bulls Turn Green on the Greenback – For Now

Today's noteworthy mover was the Dollar Index. With the overall downtrend in the U.S. Dollar lately, today's was the biggest single-day gain in a long time, leading to questions about whether this is a harbinger for the long-term health of the currency.

A lot of Dollar bears, for instance, are saying that if the Fed cuts rates again in December – which it hinted at earlier this week – it will create a stability problem. After all, why would someone want to invest in our currency when the interest rates are not there? If we have another rate cut, foreign investors will not be motivated to invest in U.S. debt such as government bills, notes, or bonds.

Dollar bulls, on the other hand, may view this as a good opportunity to get into the Dollar. The stock market reacted positively last Tuesday when word came down about a possible rate cut. When the U.S. stock markets rally, foreign investors are attracted to our stock, which can stoke the market further and eventually give the Fed a good reason to raise rates as the economic cycle continues.

Looking at the chart, we are still below both the 15- and 25-day moving averages. The 25-day average acted as resistance several times today with the high brushing against it before sellers came into the picture. We have also moved closer to the top end on the fast stochastic, indicating potentially oversold conditions.

Tomorrow, we look forward to announcements regarding personal income, personal spending, and construction spending among other things.

Mike Tosaw, Director of Education