USDA Sparks Wheat
Wheat – Wheat is close to limit up once again in overnight trading due to a far lower-than-expected seedings figure in the latest USDA report. This news was exactly what Wheat bulls were looking for with the market nearing key technical support levels. The lower U.S. acreage – specifically in the hard, red crop – coupled with continued dry weather caused by the La Nina weather pattern could significantly reduce the size of the winter crop and pressure dwindling stocks. The lower seedings figure could also more than offset what is seen to be a possible record Australian crop. Look for spreads between the old crop and new crop to possibly narrow due to the bullishness in the winter Wheat figures. July futures rallied to new contract highs of 836 overnight, which would signal a bullish breakout from a wedge pattern if the market is able to hold these levels. The measured move on a breakout could spark rallies beyond the $9 mark. Momentum has shifted back into positive territory as a result of the nearly 60-cent rally over the past session and a half, albeit to a relatively tame +25. Support comes in at 775.50, 744.75 and 714, while resistance can be found at 836.25, 866.50 and 897.25.
Crude Oil – Crude Oil futures try to recover after dropping three consecutive trading sessions and six of the last seven trading days. The slumping U.S. economy has the market falling despite bullish inventory data and geopolitical news. Oil bulls grew worried when OPEC publicly stated its concern last week that an extended period of slow growth or recession could easily spill over to the global economy. The market has found some price support after President Bush denounced Iran as a state sponsor of terrorism, reacting to recent actions by Iran's navy in the Strait of Hormuz seemingly aimed at provoking an incident between the two nations. These tensions – along with instability in Nigeria and the Turkish/Kurdish conflict – could act as price support even as the U.S. economy slows. March Crude closed below the 50-day moving average on Friday, which could be viewed as bearish longer-term if the market is unable to bounce back above the average. Momentum had shifted into negative territory briefly, but is now on the positive side due to price strength in overnight trading. Oil is approaching oversold territory, which could offer price support over the near-term. Support comes in at 91.29, 90.41 and 89.02, while resistance can be found at 93.55, 94.95 and 95.82.
S&P – Stock index futures are higher overnight on increased expectations of a Fed rate cut. Fed Fund futures are now pointing to a 66 percent chance of a quarter point cut, and a 34 percent chance of a half point. IBM stated that the company's quarterly earnings will easily surpass analyst estimates, which has helped lift futures in the early going. The statement, along with an upgrade of Apple, has more than offset negative guidance from Sears Holdings. The market will digest earnings data from Citigroup tomorrow and Merrill Lynch on Thursday, which could offer downside surprises. Today is a report-free day for the market, but the week will give investors plenty of data to mull over, including CPI and PPI inflation data, retails sales and housing data. The March e-mini S&P looks to be in a bearish consolidation pattern on the daily chart, pointing to the possibility of more downside. A close above the 1455 mark could be needed to swing sentiment to the bulls. Support comes in at 1397.50, 1387.25 and 1374, while resistance can be found at 1420.75, 1434 and 1444.25.
Rob Kurzatkowski, Commodity Analyst
