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
