Report Day
S&P – Stock index futures are higher in overnight trading on strength in European shares and hopes that today's FOMC policy statement will focus on curbing inflation. Many believe the central bank has focused so much of its attention on the credit market crisis and attempting to stave off inflation, that it has created an inflationary firestorm that constitutes the single biggest threat to the economy. Yesterday's consumer confidence figures give concrete evidence that consumers are having a difficult time grappling with higher food and fuel prices. As the prices of these necessities continue to climb, consumers are left with less purchasing power, making a recovery unlikely. While the Fed must take steps to bolster the U.S. Dollar in order to slow rising prices, weak economic data may prevent the committee from making an overly hawkish statement. In addition to the FOMC policy statement this afternoon, durable goods orders and new home sales data will be released in the morning. Durable goods orders, released at 8:30 AM EST, are expected to show zero growth following a drop of half a percentage point last month. New home sales, released at 10:00 AM EST, are expected to fall to 510,000 from 526,000 last month. Estimates for both of these economic indicators are low enough that an upside surprise may be more likely than one on the downside, which could set a positive tone for the market going into the FOMC statement. The September e-mini S&P formed a spinning top pattern on the daily chart, suggesting the market may get a bounce near-term. This view may be supported by the momentum indicator outpacing both price and RSI to the upside, which can be viewed as short-term bullish. Support comes in at 1304.50, 1293.50 and 1281.75, while resistance can be found at 1327.25, 1339.00 and 1350.00.
RBOB – Gasoline futures are slightly lower this morning ahead of the weekly inventory data, which is forecast to show a decline of 750,000 barrels. Demand for gasoline has been very weak given the state of the U.S. economy and rising costs. MasterCard's Spending Pulse survey indicated that demand for motor fuel was down 2.7 percent last week versus the same period a year ago, and the 4-week average of the survey is down 3.6 percent versus the same period last year. China, which has recently raised its subsidized fuel prices, has had strong fuel demand, leading to higher global prices. Traders will now focus on the Asian giant's demand figures to see if the rise in prices was simply a token gesture or if it will actually curb demand. RBOB prices could be susceptible to declines if global demand continues to cool and the greenback strengthens. Otherwise, the trend of rising prices may continue or, at the very least, stabilize at these high levels. The August RBOB chart shows that the market is consolidating and traders are uncertain of where the market will move next. Momentum is showing slight bearish divergence from RSI, suggesting that the market may be vulnerable in the short term. Support comes in at 3.4474, 3.4217 and 3.3919, while resistance can be found at 3.5029, 3.5327 and 3.5584.
Wheat – Wheat prices are higher for the second consecutive session on news that heavy rains have slowed the harvest. The sharp rise in Corn prices has forced Japan and South Korea to hike imports of Wheat to feed cattle. Japan, which is the world's largest importer of grains, could follow the South Korean model and replace half of its Corn requirements with feed-Wheat. This rally could be short-lived if Japan fails to substantially increase its imports of the grain, as the U.S. harvest is more than sufficient to meet domestic demand. December Wheat recently saw the 18-day moving average cross the 50-day average to the upside, while can be seen as bullish mid-term. If the market fails to advance beyond near-term resistance at 954, prices may fall below the key 900 market and beyond. Momentum is showing strong bullish divergence from the RSI indicator, suggesting strength in the short- to mid-term. Support comes in at 901, 890 and 878, while resistance may be found at 924, 936 and 947.
Rob Kurzatkowski, Commodity Analyst
