tag:www.futuresblogs.com,2012://3 2012-02-06T17:25:06Z Movable Type 4.35-en tag:www.futuresblogs.com,2012://3.2603 2012-02-06T17:21:23Z 2012-02-06T17:25:06Z

Monday, February 6, 2012 The E-mini S&P 500 futures have continued their bullish move, breaking out to the upside and now within range of testing the 2001 high of 1373.50. However, some technical factors may be suggesting a near-term price...

Futures Monday, February 6, 2012 The E-mini S&P 500 futures have continued their bullish move, breaking out to the upside and now within range of testing the 2001 high of 1373.50. However, some technical factors may be suggesting a near-term price correction is well overdue. The 14-day RSI has moved well into overbought territory, and trading volume on the rally has been moderate at best. In addition, CBOE Volatility Index (VIX) has fallen to levels where we have seen downside corrections take place in the past few years. Some contrarian traders looking to establish a short position or equity bulls looking for a short-term hedge may perhaps wish to explore buying puts in the E-mini S&P 500 futures options. For example, with the March futures trading at 1340.00 as of this writing, the March 1320.00 puts could be bought for 20.00, or $1,000 per option, not including commissions. The total investment in the put would be the maximum potential risk on the trade. The position would be profitable at option expiration in March should the March futures be trading below the strike price minus the premium paid for the puts. Fundamentals Traders got a positive surprise when the Labor Department announced the employment figures for January. Non-farm payrolls rose by 243,000 last month, nearly 100,000 jobs greater than the pre-report estimate and the largest increase since April of last year. The revisions to prior months' data was also supportive, with an additional 60,000 jobs added the prior two months. The private sector, once again, accounted for all the increases, rising by 257,000 jobs in January, with manufacturing jobs increasing by 50,000. Public sector employment continues to decline, falling by 14,000 jobs, as government entities continue to struggle with budgetary shortfalls. The unemployment rate fell by a larger than expected 0.2% to stand at 8.3%, which is the lowest rate in 3 years. The market's reaction to the positive payrolls report was as expected, with equity indices rallying sharply and bond prices falling, as traders are now beginning to believe that an improving jobs picture will allow the Federal Reserve to delay any implementation of further easing measures. If there was any downside to the report it would be that the aggregate hours worked increased by a very moderate 0.2% and the size of the workforce continued to decline, with the participation rate dropping by 0.3% to 63.7%. Even with the rather solid job gains the past few months, we are still a long way from recovering all the jobs lost since the start of the financial crisis back in 2008. Job increases need to be even more robust if we are to really acknowledge a recovery of the jobs market, however, few could argue that January's employment reports were solid and equity bulls should enjoy the moment! Technical Notes Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice how well prices have held above the 20-day moving average since the recent lows were made back on December 20th. The index has rallied over 140 points since that time, with only a very minor correction earlier this week. To keep the rally going, prices must move above solid resistance in the 1350.00 to 1370.00 range, and volume needs to increase, as much of the recent price rally occurred on rather lackluster volume. The 14-day RSI has moved well into overbought territory, with a current reading of 75.26. The CBOE Volatility Index has fallen to lows not seen since July of 2011, which happens to correspond to the last major high made prior to a nearly 300-point drop in the S&P 500 index. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2599 2012-02-02T15:26:45Z 2012-02-06T17:20:37Z

Thursday, February 2, 2012 Crude Oil fundamentals have turned a bit sour in recent days. The US remains well supplied and there are questions about automobile and truck fuel demand. There is also concern that the weak ADP job number...

Futures Thursday, February 2, 2012 Crude Oil fundamentals have turned a bit sour in recent days. The US remains well supplied and there are questions about automobile and truck fuel demand. There is also concern that the weak ADP job number on Wednesday may be a precursor to a disappointing non-farm payroll number tomorrow. Technically, Crude Oil is in a vulnerable position. If prices break through the 95.00 level on the downside, bearish momentum may accelerate. If the market is able to hold 95.00, prices may trade in the 95-100 range for the foreseeable future. Traders may look to enter into a bear call spread, selling the March Crude Oil 100.50 calls and buying the 102.50 calls for a credit of 0.40, or $400. The max profit is the initial credit and the trade risks $1,600. Fundamentals Crude Oil futures have been drifting lower over the past several sessions after consolidating for the better part of two weeks. The weight of the larger fuel supplies and lackluster demand has finally caught up to the market. Yesterday's EIA data showed a build of 4.2 million barrels of Oil versus estimates of an increase of 2.6 million barrels. This can be attributed to both a milder than expected winter, which has led to softer than expected demand for Heating Oil, as well as weaker demand for motor fuel. Pair these factors together with virtually zero economic growth in Europe and uncertainty over Chinese economic growth and we can see the case for the bear camp. The strong PMI numbers from China may also make the PBoC reluctant to lower interest rates in the near term, which was almost a given just a couple of weeks ago. The inability to reach an accord over Iran's nuclear program may, however, limit the downside for Crude. Also, the low interest environment may embolden commodity bulls, which could bring value buyers in if prices drop quickly. Technical Notes Turning to the chart, we see the March Crude Oil contract drifting lower at a swifter pace over the past few sessions. The relative low at 95.00 is the next support level the contract may test. This level coincides with the 100-day moving average, suggesting a close below this support would be seen as a technical setback. The RSI near oversold levels as well, which could add to the bearish sentiment in the even the market breaks support. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2596 2012-02-01T14:10:47Z 2012-02-01T14:12:29Z

Wednesday, February 1, 2012 Longer-term Gold bulls must be happy with the yellow metals resurgence of late, but the prospects for higher volatility remain -- especially with the technicals starting to show that Gold may be becoming overbought in the...

Futures Wednesday, February 1, 2012 Longer-term Gold bulls must be happy with the yellow metals resurgence of late, but the prospects for higher volatility remain -- especially with the technicals starting to show that Gold may be becoming overbought in the near-term. Some bullish traders who are looking for some staying power may perhaps wish to explore buying bull call spreads in Gold futures options. For example, with June Gold trading at 1737.70 as of this writing, the June 1800 calls could be bought and the June 1900 calls sold for a net debit of 25.00, or $2,500 per spread, not including commissions. The total investment in the call spread would be the maximum risk on the trade, with a potential profit of $10,000 minus the premium paid, which would be realized at option expiration in May should June Gold be trading above 1900.00. Fundamentals Just like the Energizer rabbit, the bull market in Gold futures just keeps going and going, with prices posting their largest monthly gains since August of 2011. Among the reasons for Gold's renewed appeal was the weakening of the value of the U.S. Dollar, especially versus the Euro. A weaker U.S. Dollar makes Dollar-denominated commodities "cheaper" for non-Dollar holders, which increases the demand. This is demonstrated by the large purchases coming from China, despite their annual increase of domestic Gold production of 6% in 2011. The potential for a low interest rate environment in the U.S. may also be contributing to Gold's renewed investor interest, particularly after the Federal Reserve extended their outlook holding interest rates steady into late 2014. Since Gold offers no yield, investors are losing out on little income by holding Gold vs. interest bearing assets. Though Gold is currently trading nearly $200 below its all-time highs, prices have rebounded over 50% of the nearly $400 price decline seen in the last several months of 2011, when some traders were calling for the end of the Gold bull market. With few signs of Europe getting its act together to stem the sovereign debt crisis, Gold may once again assume its status as a viable alternative investment to both equities and government debt. Technical Notes Looking at the daily continuation chart for Gold futures, we notice what appears to be a "bull flag" formation, with prices now breaking out to the upside. Prices are now solidly above both the 20 and 200-day moving averages and momentum as measured by the 14-day RSI is strong, with a current reading of 68.20. The only real negative is that the test of resistance near the 1750.00 level was initially successful, but failed to hold above this key level for long, which may be a sign that the rally may have become a bit overdone. Should prices close above 1750.00, the next resistance level is seen at 1800.00, with support found at the 200-day moving average near the 1644.00 level. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2593 2012-01-31T15:40:56Z 2012-01-31T15:42:27Z

Tuesday, January 31, 2012 The Silver market may be in the best position to post solid gains in 2012 due to its poor showing in 2011 and strong demand for the metal. Industrial demand continues to outpace supply, making the...

Futures Tuesday, January 31, 2012 The Silver market may be in the best position to post solid gains in 2012 due to its poor showing in 2011 and strong demand for the metal. Industrial demand continues to outpace supply, making the already tight market even tighter. Technically, the March Silver contract has made significant progress, but prices need to sustain rallies above 35.00 to keep the rally going. Some traders may perhaps wish to consider entering into a bull call spread -- for example, buying the March Silver 34 calls and selling the 35 calls for a debit of 0.30, or $1,500. The trade risks the initial cost and has a maximum profit of $3,500 if the underlying futures close above 35.00 at expiration. Fundamentals Silver has been one of the brightest commodities during the month of January, rallying over $7.50. Oversold conditions and increased demand from industrial users of the metal have contributed to the rebound. Investors have also become a bit numb to the financial crisis gripping Europe, and they appear to be less convinced that the worst case scenario is a real possibility. Silver has also ridden the coattails of the Gold market, which has performed well as an inflation play. Silver traders also got a boost from the FOMC, which forecast interest rates to remain at extremely low levels for the next 2-3 years, stoking some inflation fears. Chinese economic growth is expected to slow significantly in 2012, but raw material prices have fallen in 2011. The People's Bank of China is expected to lower interest rates and shift toward a more expansionary approach, which suggests that manufacturers could use cheap financing to buy raw materials, including base metals and Silver, at attractive prices in 2012. Technical Notes Turning to the chart, we see the March Silver contract crossing the 100-day moving average. This gives further technical confirmation of the recent breakout above the 33.00 level. The next area of resistance comes in near the 35.00 mark, near November highs. The overbought conditions on the RSI indicator have led to the recent consolidation. Prices may continue to consolidate, or possibly correct in the near-term before the market tests the 35.00 resistance level. A breakout above 35.00 while overbought on the RSI could result in an explosive move. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2590 2012-01-30T14:45:49Z 2012-01-30T14:48:12Z

Monday, January 30, 2012 Some traders who are expecting Coffee futures prices to decline may perhaps wish to explore buying bear put spreads in Coffee futures options. For example, with May Coffee trading at 221.15 as of this writing, the...

Futures Monday, January 30, 2012 Some traders who are expecting Coffee futures prices to decline may perhaps wish to explore buying bear put spreads in Coffee futures options. For example, with May Coffee trading at 221.15 as of this writing, the May 215 puts could be bought and the May 200 puts sold for a net debit of 5.50, or $2,062.50 per spread, not including commissions. The total investment in buying the put spread would be the maximum potential risk on the trade, with a potential profit of $5,625 minus the premium paid, which would be realized at option expiration in April should May Coffee be trading below 200.00. Fundamentals Coffee futures have been rather quiet recently, with range-bound trade being the norm ahead of 2012-13 output estimates. The most widely watched estimate from CONAB, the Brazilian government agency, is estimating this coming season's Brazilian crop between 49 and 52 million bags, which is well above the 43.48 million bag estimate this past season. The size of the estimate is more surprising given CONAB's history of underestimating the size of the harvest. Among the reasons for the higher estimate are improving weather conditions and better care of Coffee trees, as relatively high Coffee prices have encouraged producers to spend more on their production investments. If the numbers are correct, Brazilian output should be ample to make up for any production shortfalls from Columbia this season, as the second leading South American producer suffered its second consecutive production shortfall due to heavy rains. Many traders will also keep an eye on events in Europe, as any set-back in dealing with the European debt crisis could spark a further sell-off in commodities, with the Coffee market being particularly vulnerable should global supplies rebound this coming season. Technical Notes Looking at the daily chart for March Coffee, we notice prices have been rangebound during the past several weeks, with the market currently trading near the low end of the recent price range. Bears seem to have the upper-hand, as prices are below both the 20 and 200-day moving averages and momentum as measured by the 14-day RSI has started to weaken, with a current reading of 43.19. Major support for March Coffee is found at the recent low made back on December 19th at 212.35, with resistance found at the January 12th high of 238.50. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2587 2012-01-27T14:56:50Z 2012-01-27T14:58:39Z

Friday, January 27, 2012 Some traders who are looking for the recent rally in Soybean futures to falter may perhaps wish to explore buying just-out-of-the-money puts in Soybean futures options. For example, with the March futures trading at 1225.25 as...

Futures Friday, January 27, 2012 Some traders who are looking for the recent rally in Soybean futures to falter may perhaps wish to explore buying just-out-of-the-money puts in Soybean futures options. For example, with the March futures trading at 1225.25 as of this writing, the March 1200 puts could be bought for 20 cents, or $1,000 per option, not including commissions. The total investment in the option would be the maximum risk on the trade, with a potential price objective on the futures of the recent low of 1150.00. Fundamentals Soybean futures have rallied over $1 per bushel the past 4 weeks, as dry weather in Argentina and Brazil sparked concerns over the size of the South American harvest. With only a brief lapse due to a "bearish" USDA crop production report, it appeared that bean bulls were regaining the upper hand. However, there now appears to be some signs that the recent price gains may be in jeopardy. First, we are starting to see some signs of improved crop conditions in South America, as much needed rains reached the parched growing regions this past weekend. Additionally, weather forecasts are now calling for another rain event in early February. US Soybean export demand is expected to be light this week, as Chinese buyers are on holiday for the Lunar New Year. US export demand was already in question, as a relatively strong US Dollar made US Soybeans more expensive -- especially when compared to Brazilian and Argentinean competitors. Should the South American Soybean harvest turn out better than anticipated, we could see Soybean futures prices turn weak as concerns of tight global supplies are diminished. Technical Notes Looking at the daily chart for March Soybeans, we notice prices holding above the 20-day moving average (MA), but still remaining well below the longer-term 200-day MA. Trading volume has started to decline as the rally has progressed, leading some to believe that the up-move is starting to lose some strength. The 14-day RSI is still relatively strong, with a current reading of 57.91. Resistance in March Soybeans is seen at the January 3rd high of 1244.75, with support seen at the 20-day moving average, which is currently near the 1205.50 area. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2584 2012-01-26T15:38:34Z 2012-01-26T15:40:12Z

Thursday, January 26, 2012 The appeal of Gold futures as a hedge against inflation rose with the FOMC's confirmation that interest rates will be kept low over the next 2-3 years. The Fed's focus on growth versus inflation may be...

Futures Thursday, January 26, 2012 The appeal of Gold futures as a hedge against inflation rose with the FOMC's confirmation that interest rates will be kept low over the next 2-3 years. The Fed's focus on growth versus inflation may be a bit misguided, as inflation data has been skewed by the financial crisis in Europe and lower raw material prices in China. Inflation may be an uncontrollable beast once it is let out of its cage. Technically, the April Gold chart shows a breakout above congestion at the 1680 level and prices have crossed into the psychologically important 1700's. However, prices seem to be nearing overbought levels, which could affect prices in the near-term. Some traders may perhaps wish to consider entering into a bull call spread, such as buying the April Gold 1750 calls and selling the April 1800 calls for a debit of 15.00, or $1,500. The trade risks the initial cost and has a maximum profit of $3,500 if the underlying April futures close above 1800 at expiration. Fundamentals Federal Reserve Chairman Ben Bernanke further fueled the recent Gold rally by forecasting that interest rates will remain low through 2014. The central bank noted that inflation risks are presently low, and that economic growth is a primary concern. This is good news for Gold bulls, many of whom understand that inflation is often difficult to control once it does rear its ugly head. The statement also did not rule out further large-scale Bond purchases, which may temper some of the bullish enthusiasm for Gold as a safe haven asset. If the Fed backtracks from this statement in the future, Gold's appeal to flight to quality investors could be further bolstered. Outside of the friendly FOMC statement, the debt-swap stalemate in Greece has fueled some new concerns that a soft landing may not happen after all. Technical Notes Turning to the April Gold chart, we see prices breaking out above the 1680 level at the upper end of recent consolidation. The next areas of resistance may be found near 1735 and 1800. Prices are now trading above the major moving averages, with prices closing just above the 100-day simple moving average yesterday. This can be seen as further technical validation of the recent uptrend and breakout. Tempering some of this recent bullish enthusiasm is the fact that the RSI indicator is nearing overbought levels, which may cool buying in the near-term. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2579 2012-01-24T15:41:20Z 2012-01-24T15:42:51Z

Tuesday, January 24, 2012 Crude Oil traders have once again proven to be a fickle bunch, resulting in the wind coming out of the sails of the most recent rally. Investor confidence has eroded to an extent on the failure...

Futures Tuesday, January 24, 2012 Crude Oil traders have once again proven to be a fickle bunch, resulting in the wind coming out of the sails of the most recent rally. Investor confidence has eroded to an extent on the failure of Greece to come to a debt arrangement and also on economic concerns from China. Technically, signs are pointing to possible consolidation. Some traders may perhaps with to consider entering into a bear call spread, such as buying a March Crude Oil 107 call and selling a March 105 call for a credit of 0.35, or $350. Fundamentals Crude Oil futures have been drifting lower during recent sessions, unable to sustain any upward momentum. The news of the European embargo on Iranian goods, including Oil, has done little to shake Crude bulls out of hiding. In their response statement, Iran took a much less threatening tone, notably omitting any mention of a possible shutdown of the Strait of Hormuz. The Greek debt impasse has weighed on the commodity and equity markets overnight, demonstrating that nothing is certain with the embattled nation and further shrinking investor confidence, if that is even possible. The renewed concerns about Greece and assurances from Saudi Arabia that they will keep Oil flowing have largely neutralized any bullish sentiment that may have arisen from the Iranian embargo. The deciding factor in the near-term direction of the Oil market could come from economic and supply data, although more aggressive posturing from Iran could be a wild card. Technical Notes Technically, the March Crude Oil has once again failed to have a meaningful breakout above the 104 level, reversing and drifting lower. The 50-day moving average has acted as support recently, suggesting that some traders may wish to keep a close eye on prices near the average. Successive closes below the average could be a signal that prices may move lower in the near-term. The 95.00 mark may be an important level near-term, as closes below the price could suggest prices may test the low 90's. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2576 2012-01-23T15:28:37Z 2012-01-23T15:30:12Z

Monday, January 23, 2012 Improving economic data out of the U.S. and more refinery closings may make Gasoline inventories tight going into the summer, especially on the east coast. This is important as the delivery point for NYMEX RBOB futures...

Futures Monday, January 23, 2012 Improving economic data out of the U.S. and more refinery closings may make Gasoline inventories tight going into the summer, especially on the east coast. This is important as the delivery point for NYMEX RBOB futures is the New York Harbor. Traders expecting U.S. Gasoline prices to rise going into the summer may wish to explore bull spreads in RBOB futures with the buy leg of the spread beginning in the summer delivery months. One possible trade would be to buy the July 2012 RBOB futures and sell the September RBOB futures for a 0.0725 July premium. Traders holding this bull spread would wish to see the July premium widen over the September futures. Fundamentals U.S. drivers have certainly capped their gasoline usage of late as refining output has begun to overwhelm demand causing supplies to surge to 10-month highs. According to the Energy Information Administration (EIA), in their weekly energy stocks report, U.S. Gasoline inventories rose by 3.717 million barrels last week to stand at 227.5 million barrels, which is the highest inventory level seen in 10 months. In addition to higher production, the U.S. Gasoline imports were higher last week as European refiners are exporting Gasoline due to slow demand on the "Continent." Globally, the refining industry is in the midst of a shakeout, with refineries in Europe closing due to poor profit margins tied to high input costs and lower domestic demand and competition from state run oil companies in developing countries. In the U.S., east coast refineries have been closing at an alarming rate because of a lack of access to cheaper WTI grade Oil which has benefited refineries that have access to Oil in Cushing, Oklahoma. Stricter pollution standards have made turning a profit a difficult proposition. Just recently, Hovensa LLC announced it will shut its St. Croix refinery, one of the largest in the western hemisphere, due to continued losses. Though current U.S. Gasoline supplies remain ample, especially given the current lackluster demand, one has to wonder what will occur in the Gasoline market once the global economy begins to rebound, or a major U.S. refinery has production issues, or a bottleneck occurs in a pipeline that ships Gasoline from the Gulf Coast to the Mid Atlantic and East Coast states? Any of these scenarios has the potential to send Gasoline prices sharply higher in the coming year, and this concern should remain on traders' minds as we move towards the summer driving season. Technical Notes Looking at the daily chart for the daily continuation chart for RBOB Gasoline futures, we notice prices have broken decisively above the downtrend line drawn from the 2011 highs made back in late April. Though this is a bullish technical indicator, prices have failed a test of the 200-day moving average and in the near-term a price correction may be in the cards. The 14-day RSI has started to turn down with a current reading of 57.43. Resistance is seen at the January 18th highs of 2.8529, with support seen at the January 12th lows of 2.7178. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2573 2012-01-20T18:03:28Z 2012-01-20T18:04:58Z

Friday, January 20, 2012 Though Sugar futures have turned positive on a technical basis, the still large surplus expected this year combined with the potential for larger export quantities from India, may weigh heavily on prices, especially if the European...

Futures Friday, January 20, 2012 Though Sugar futures have turned positive on a technical basis, the still large surplus expected this year combined with the potential for larger export quantities from India, may weigh heavily on prices, especially if the European debt situation continues to linger and much of Europe falls into a recession. Traders looking for the Sugar rally to stall may wish to explore selling out of the money call options in Sugar futures options. For example, with March Sugar trading at 24.84 as of this writing, a possible trade idea would be to sell the March 26.50 calls for about 0.23 or $257.60 per contract, not including commissions. The premium received is the maximum potential gain on the trade which would be realized at option expiration in mid-March should the March futures be trading below 26.50. Fundamentals Sugar futures prices have awoken from their nearly 2-month long slumber, as the lead month March contract approaches the 25-cent level for the first time since November. Weakness in U.S. dollar, and signs of an improvement in the global economic environment, are among the reasons given for higher Sugar prices of late, despite a global surplus this year. Another more offbeat catalyst may be coming from Brazil, which has become the leading importer of U.S. ethanol. This is important as Brazil is the largest producer of Sugar Cane which can be used more efficiently for ethanol production than U.S. produced Corn ethanol. So the fact that Brazil is coming to the U.S. for ethanol may be a sign that more cane will be dedicated towards fuel usage in the coming months, which will limit the amount of Sugar available for export. Larger Sugar exports out of the Philippines have been met by eager Asian buyers such as Japan, South Korea, and most importantly China, which has been seen restocking several commodities in the past weeks. For the rally to really take hold we will need to see continued strong demand as countries that are holding large Sugar surpluses, such as India, will be eager to allow higher quotas for Sugar exports which will increase supplies available to the market and potentially cap further price rallies. Technical Notes Looking at the daily chart for March Sugar, we notice prices breaking out of the 2-month long consolidation phase as well as closing above the downtrend line drawn from the 2011 highs. The 14-day RSI has turned positive with a current reading of 61.38. Two technical barriers remain for Sugar bulls, with psychological resistance found at 25.00 and more importantly the 200-day moving average, currently near the 25.24 level. Support is seen at the 20-day moving average, currently near the 23.64 area. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2570 2012-01-19T18:11:55Z 2012-01-19T18:13:17Z

Thursday, January 19, 2012 The current Sugar surpluses may be on the way out, replaced with a supply shortage in the future. Growing conditions remain an unknown, but food and ethanol demand is on the rise, suggesting conditions would have...

Futures Thursday, January 19, 2012 The current Sugar surpluses may be on the way out, replaced with a supply shortage in the future. Growing conditions remain an unknown, but food and ethanol demand is on the rise, suggesting conditions would have to be ideal to meet 2012/2013 demand. Technically, the March Sugar contract appears to have found a bottom, but the market has yet to catch upward momentum. Traders may look to enter into a bullish to neutral trade, such as a short March 22.50 put position at a premium of 0.30, or $336. The trade's max profit is the initial credit and it has unlimited loss potential, so the position will need to be managed. Fundamentals Sugar futures seem to have found a base just above the 22.50 level, after selling off from the 30.00 mark. The supply shortage of several years ago has had farmers planting Sugar cane at a brisk pace, leading to a supply glut in the near-term. The supply surplus was also aided by favorable growing conditions, which is something that growers cannot control. Traders' focus now lies on whether or not growing conditions will once again cooperate in India and Brazil. Sugar food usage continues to increase at an impressive rate. Brazil continues to import a significant amount of ethanol, suggesting that, when the current crop comes to harvest, a large portion could be diverted to ethanol use. Technical Notes Turning to the chart, we see the March Sugar contract forming a bottom near the 22.50 level. The 20 and 50 day moving averages appear to be on the verge of crossing over to the upside, which can be seen as bullish in the near-term. The market may be able to gain upward momentum in the event that prices are able to breach the 25.00 level and the 100 day average just above this level. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2567 2012-01-18T15:48:05Z 2012-01-18T15:49:34Z

Wednesday, January 18, 2012 Since the 2011 lows were made back in October, Crude Oil futures have made a series of higher highs and higher lows which is supportive of bullish leaning trades in Crude Oil futures. Until this trend...

Futures Wednesday, January 18, 2012 Since the 2011 lows were made back in October, Crude Oil futures have made a series of higher highs and higher lows which is supportive of bullish leaning trades in Crude Oil futures. Until this trend changes, traders may wish to explore bullish trading strategies using Crude Oil futures options. One such strategy is selling out of the money puts. For example, looking at the daily chart for March Crude Oil, we see chart support points near 92.50, 90.00, and 85.00. Traders may wish to explore selling puts with strike prices below these support levels with more aggressive traders looking to sell puts below the higher support levels. For example, with March Crude Oil trading at 100.13 as of this writing, a trader could sell the March 87.50 puts for 0.50 or $500 per option, not including commissions. The premium received is the maximum potential gain on the trade, which would be realized at option expiration in mid-February, should March Crude Oil be trading above 87.50. Fundamentals A "soft landing" for the Chinese economy may be the key to determine the direction for Crude Oil prices in 2012 as any signs of higher demand from the world's most populous country looks to be supportive for prices. Chinese gross domestic product for the 4th quarter rose by 8.9%, which was the slowest rate of growth in 10 quarters, but ahead of analysts' expectations. The slowing rate of Chinese economic growth is expected to allow for a more accommodative monetary policy in the coming months. This outlook has shifted some of the concerns of a "hard landing" for the Chinese economy and improves the outlook for commodity demand including Crude Oil. Oil prices have remained at elevated levels of late, mainly on geopolitical concerns running from a potential Iranian threat to block the Straits of Hormuz, to a potential strike in Nigeria that could shut down the country's oil industry. Though both these issues have not yet come to fruition, even the fear of possible oil export disruptions has put a "risk premium" into oil futures prices. Speculators continue to add to existing long positions in Crude Oil futures, with the most recent Commitment of Traders report showing an increase in long positions by both non-commercial and non-reportable traders, totaling a combined 28,238 contracts as of January 10th. Bullish comments from Saudi Arabia's oil minister stating that $100 barrel oil was "desirable" took some of the speculation away from the market that Saudi Arabia was prepared to raise its oil output sharply should economic sanctions be put in place against Iran. Technical Notes Looking at the daily chart for March Crude Oil, we notice prices holding near the short-term 20-day moving average(MA) and are over $3 above the longer-term 200 day MA. Since mid-November, prices have been holding within a relatively narrow $11 price range though recently we have started to see prices having some difficulty holding below $100 per barrel for any length of time. The 14-day RSI is neutral with a current reading of 51.14. Strong support is seen at the recent lows made back on December 16th at 92.95. Resistance is seen at the recent highs of 103.90 made on January 4th. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2564 2012-01-17T16:15:43Z 2012-01-17T16:17:19Z

Tuesday, January 17, 2012 Copper futures have seen support from both strong electronic sales and the expectation that China will begin easing interest rates. European concerns are slowly losing their place in the forefront of traders' minds and inflation is...

Futures Tuesday, January 17, 2012 Copper futures have seen support from both strong electronic sales and the expectation that China will begin easing interest rates. European concerns are slowly losing their place in the forefront of traders' minds and inflation is once again a hot topic of discussion due to the sheer volume of cash thrown at economic problems. Turning to the chart, we see the March Copper contract breaking out of a wedge formation to the upside, suggesting that an upside breakout has taken place. The Copper market can be an extremely difficult market to trade due to its violent swings and illiquid options market. Traders can use Copper as a gauge to make trading decisions in more liquid markets. For those bold enough to test the waters of the Copper market, a possible strategy is to buy the March future on a close above 3.75 with an upside objective of 4.15 and a stop at 3.38. Fundamentals Copper futures are higher on the expectation that China will loosen its interest rates amid growth concerns. The metal is often seen as a barometer for the commodity market as a whole, which suggests that inflationary concerns may once again trump growth concerns over the longer term. This could be a positive boost for precious metals as an inflation play. Chinese growth forecasts remain robust, albeit much lower than previously projected. Consumer electronic sales continue to weather the economic storm much better than other sectors, which could provide good demand for industrial metals. This can be seen as a positive force for Copper, as well as outside markets, such as Silver, that have been plagued by worries over growth. Interest rates are very likely to remain extremely low across the globe as long as Europe is mired in its current mess and the US and other nations are unable to grow at a reasonable pace organically, suggesting consumers will have cheap financing to continue buying electronics and, also, inflation could be difficult to stop once it starts. Technical Notes Turning to the March Copper chart, we see prices breaking out of the wedge formation that has been forming for several months. The measure of the wedge suggests prices may come up to test the 4.50 level over the long-term. Prices are above the major moving averages, which can be seen as positive for prices. The RSI indicator is nearing overbought levels, suggesting prices may face a bit of near-term resistance. Rob Kurzatkowski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2561 2012-01-13T14:20:49Z 2012-01-13T14:22:20Z

Friday, January 13, 2012 The bearish January USDA report has sparked a sell-off in the old crop/new crop Corn spread, lowering the old crop price premium by nearly 20 cents on Thursday alone. A look at the daily spread chart...

Futures Friday, January 13, 2012 The bearish January USDA report has sparked a sell-off in the old crop/new crop Corn spread, lowering the old crop price premium by nearly 20 cents on Thursday alone. A look at the daily spread chart for the May/December 2012 Corn spread shows the May futures trading at a 59-cent premium to the December futures. The major support area for this spread is not found until the 44-cent area, and major support is not seen until just below a 30-cent May premium. Some traders who are looking for a potential test of the support levels in this spread may perhaps wish to explore buying December 2012 Corn and selling May 2012 Corn. Traders initialing this bear spread would wish to see the May price premium narrow. Fundamentals The USDA January Crop Production report has become notorious for being the catalyst for volatile price moves in the grain futures market, and this year's report was no exception, as bearish data sent prices plummeting. Corn futures were particularly hard hit -- especially old crop futures -- with prices declining by the daily 40-cent limit. The USDA raised its final estimate of the 2011-12 Corn crop to 12.358 billion bushels, which is up 48-million bushels from the December estimate and sharply higher than the average analyst estimate of 12.310 billion bushels. The USDA revised higher the average yield estimate by ½ a bushel to 147.2 bushels per acre. Traders who were expecting a nearly 100 million bushel cut in the 2011-12 Corn carryout estimate were met instead with a very modest 2 million bushel decline, to stand at 846 million bushels. Global Corn carryout estimates were raised as well to 128.1 million metric tons. The sell-off in Corn futures prices was more severe than the numbers may have dictated due to the recent 10% rally in prices the past month, as dry weather in Argentina and Brazil had many traders estimating much lower Corn production out of South America. However, recent rains in the South American growing regions may have taken some of the "risk" premium out of Corn prices, and the bearish USDA data just added fuel to the downward price slide seen since the highs were made back in August of 2011. New-crop Corn futures posted more moderate price declines, as many traders seem to be viewing potentially lower cash Corn prices in 2012 as a deterrent for producers who were considering expanding the planted acreage for Corn production this spring. Traders will get the first official estimate for this year's Corn planting estimates on March 30th when the USDA releases its prospective planting report. Until then, we may see continued price weakness until this fresh data is released. Technical Notes Looking at the daily chart for March Corn, we notice the limit-down price move on Thursday caused a nearly perfect 61.8% retracement of the 4-week rally started at the December 15th low of 576.25. Prices are now below both the 20 and 200-day moving averages, and the 14-day RSI has plunged to a 41.75 reading. Notice that the recent high of 664.25 just failed to reach the 200-day moving average. This rejected test of this key moving average drew in fresh sellers, capping any further gains as the market moved sideways until Thursday's limit-down move. The 664.25 high should now act as stiff resistance for the March futures, with support found at the recent low of 576.25. Mike Zarembski, Senior Commodity Analyst ]]> tag:www.futuresblogs.com,2012://3.2558 2012-01-12T15:30:07Z 2012-01-12T15:46:27Z

Thursday, January 12, 2012 Crude Oil futures got a jolt from the Iranian and Nigerian situations, as many traders put European debt concerns on the back burner for the time being. While the market is well supplied at the moment,...

Futures Thursday, January 12, 2012 Crude Oil futures got a jolt from the Iranian and Nigerian situations, as many traders put European debt concerns on the back burner for the time being. While the market is well supplied at the moment, the geopolitical situation may take precedence in the near-term. Technically, it looks as though Oil may be in store for more range-bound trading. Some traders might possibly wish to consider initiating a short futures options position in the Crude Oil, like selling a Feb Crude Oil 97.5 put for a credit of 0.50, or $500. The maximum profit would be the initial premium received and the trade carries unlimited risk, so traders may wish to exit the position should the underlying futures contract dip below 98.00. Fundamentals Crude Oil futures have bounced due to mounting tensions over Iran's nuclear program and a possible strike in Nigeria that could significantly cut production. There has been much posturing over the Iranian nuclear program in recent years, and the situation seems to be coming to a head now, with possible sanctions looming, Iran's war games, and the US moving a carrier into the region. This is not the first time the situation has heated-up, and previous contentious situations have eventually cooled off. Oil traders, nonetheless, have been concerned about a supply disruption from the Oil-rich nation. In Nigeria, Oil workers' unions have begun taking workers out of Oil fields and shutting down platforms in protest to the government eliminating fuel subsidies. This tension in Nigeria could ease, however, if the government bows to the demands of workers. Crude Oil also got a boost from rising stock prices. Equities have been on the rise due to reduced fears over Europe and a modest improvement in the US economic outlook. Technical Notes Turning to the chart, we see the February Crude Oil contract looking as though it was set to break-out to the upside, after trading into the 103's for several sessions to start off the year. Subsequently, prices pulled back and stabilized near 100. This indicates that prices may be locked into a range once again, albeit a tighter one between 100 and 104. The direction of the market over the near to medium-term will likely be determined by where prices are able to snap out of this range. The oscillators are giving neutral readings, also suggesting range-bound trading in the near-term. Rob Kurzatkowski, Senior Commodity Analyst ]]>