Gold – Gold prices continue to tumble on broadly lower commodity prices and a higher U.S. Dollar. Subprime write-downs by European banks have led to a stronger greenback, which could find further support if the ISM number comes in better than expected. Funds have significantly reduced the size of their positions in commodities, putting pressure on the precious metals market. Even today's indication by ETF Securities LTD that Gold investment with the firm has exceeded 1 million ounces has not been able to stop the slide. Recovery in the U.S. equity markets could further pressure prices, negating Gold's “flight to quality” effect. The June Gold chart confirmed a bearish consolidation pattern yesterday, signaling the market may be ready to test lows near 860. Momentum has shown bearish divergence from RSI, suggesting the possibility of further weakness. Support comes in at 910.50, 899.50 and 881.90, while resistance can be found at 939.10, 956.70 and 937.70.
S&P – Stock futures are trading higher this morning, despite UBS and Deutsche Bank both increasing their subprime write-downs. Some market observers believe the market is beginning to see the light at the end of the tunnel in the credit crisis. News that Lehman Brothers and UBS are raising new equity was seen as a positive sign that these companies' problems are nearing an end. Traders are awaiting today's release of the ISM manufacturing data after yesterday's surprising Chicago PMI report. Analysts are forecasting the index to register a 47.5 percent reading, which would be a signal that the economy is contracting. A stronger reading – especially above the key 50 percent mark – would be seen as a positive sign and could result in a strengthening U.S. Dollar on expectations that the Fed will not have to be as aggressive with rate cuts. The technical landscape for the June e-mini S&P contract looks to be improving. After confirming a W bottom formation, the daily chart shows a bullish consolidation pattern, which may bring about a test of relative highs at 1392.50 and 1402.50. Momentum has been outpacing RSI, suggesting near-term strength. Support comes in at 1312.25, 1300.25 and 1291.25, while resistance can be found at 1333.25, 1342.25 and 1354.25.
Wheat – Wheat prices continue to tumble on news that farmers will increase their spring plantings of the grain by 7.8 percent. Fund liquidation has driven the July contract down by over three and a half dollars from contract highs, fueled by speculation that global supplies will not be as stressed as they have been over the past two years. The stabilization of the greenback, or rather its inability to make new lows, may be a sign that the currency is ready to recover, which could significantly hurt exports. The July Wheat chart remains bearish. After reversing sharply from contract highs, the chart shows the contract violating a triangle pattern that measures a move to relative lows at 893.75. Failure to hold this level could result in further liquidation and may result in a reversal of the uptrend. Support comes in at 909.25, 881.75 and 827.25, while resistance can be found at 991.25, 1045.75 and 1073.25.
Rob Kurzatkowski, Commodity Analyst