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
