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Crude Recovers, Stock Fall

Crude Oil – July Crude Oil is up slightly this morning after losing over two dollars in yesterday’s trade. Refineries have been running smoothly of late, leading traders to believe that production will in fact meet demand. The final numbers on consumption over the Memorial Day weekend are not yet in, but demand is expected to have increased. Regardless, Crude is expected to show a build on the weekly inventory report. Easing tensions in Nigeria helped fuel yesterday’s sell-off, but early market chatter suggests that disruptions in the country’s 150,000-barrel a day output are still a possibility. China is trying to slow its economy, which may help keep prices in check today. July Crude remains bearish on the daily chart, unable to make a push above the 20-day moving average. Momentum is a very weak -4.06 and the RSI comes in at an oversold 29 percent, which could lend some technical support to the market. Crude is toward the bottom end of the downtrend channel formed after peaking in early April, which may also support prices in the near term. Support comes in at 62.36 and 59.00, while resistance can be found at 64.76 and 67.10.

S&P – Stocks are coming in on a sour note due to China tripling its investment tax. The government’s aim is to slow down the country’s booming stock market, but US equity traders are worried about how a loss of wealth and a slowing Chinese economy would impact international players. With the strong gains on the month, the bias for today and Thursday looks to be bearish as traders take profits before month’s end. The June S&P is still bullish on the daily chart, but looks like it may be vulnerable. After last Thursday’s sell-off, the market has had two quiet up-days that look like a small bear flag, which could trigger a short-term correction. Momentum remains bullish coming in to trading at +34.10 and the RSI is giving a neutral 48 percent reading. Support can be found at 1507.80 and 1496.20, while resistance comes in at contract highs of 1535.70.

Corn – December Corn is higher in overnight trading, recovering from a decline of 7 ½ cents yesterday. Ideal weather over the holiday weekend sparked the sell-off, and more rains are expected going into the upcoming weekend. Farmers are carrying a huge short position, which indicates that many are beginning to believe that too much Corn was planted. Planting progress and crop health are on schedule, leaving the market vulnerable to sharp selling pressure in the event that ethanol demand falls short of expectations. Technically, December Corn remains in a painfully slow downtrend with $3.50 a critical area. If the market is unable to gain any traction in this area, the market may fizzle, while strong fund buying in the area may get Corn bulls excited again. Momentum comes in at a slightly bullish +3 and the RSI is a neutral 40 percent. Support can be found at 363 ¼ and 354 ½, while resistance comes in at 376 ½ and 382.

Spread traders sparking Heating Oil rally!

Normally, Heating Oil futures are quiet in the summer, as traders focus on Gasoline supplies going into the peak US driving season. However, the past few sessions, Heating Oil has out- performed its product mate, as low Heating Oil stocks and unwinding of Gasoline/Heating Oil spreads by large speculative accounts have caught traders by surprise. Since May 24th, the July Gasoline/Heating Oil spread has lost 10 cents, mostly tied to unwinding of the spreads. With refineries continuing to ramp-up production of Gasoline to meet current demand, Heating Oil bulls may be the biggest beneficiary of current tight Gasoline supplies. Turning our attention to this morning's EIA energy stocks report, traders are looking for refinery utilization to have increased last week. Current estimates are for a 0.5% increase to stand at 91.6%, but well below the above 94% rate average for this time of year. Analysts are expecting a moderate 100,000 barrel build in Crude Oil stocks, a 1.5 million barrel increase in Gasoline, and an 800,000 barrel increase in Distillates. The market has started to diminish the concerns about the disruption to Oil shipments in the Persian Gulf from cyclone Gonu, as no major damage is expected in Oman.

Looking at the daily chart for the July Gasoline/Heating Oil spread, we notice a potential double-bottom pattern forming the past two weeks, with Major support found near a 40-cent Gasoline premium. The upside target is seen at the 100-day moving average near an 18-cent Gasoline premium.

Energy Traders Focus on Products

RBOB – RBOB Gasoline is down for the third consecutive day, as the market appears well-supplied at the moment. Prices at the pump have begun to stabilize around the nation with no major disruptions to refineries. Energy traders will be looking past the Crude Oil number, focused on the gasoline and distillates number. A broad sell-off in the petroleum complex is likely if RBOB inventories rise. The daily July RBOB chart looks bearish and is close to confirming a double top formation measuring the $2 mark on the downside. Momentum comes in at a bullish +.0662, and the RSI is a neutral 39 percent. Support can be found at 2.1300 and 2.1170, while resistance comes in at 2.2700 and 2.3190.

Copper – Copper is trading over 3 cents lower this morning, unable to get a lift from shrinking LME inventories. Workers at Mexico’s largest mine, Grupo Mexico, are expected to strike beginning June 10th if a resolution is not reached, which could interrupt supply. The hangover from sagging manufacturing reports and the uncertainty of China’s near-term economic growth is keeping markets lower. Technical weakness has also kept bulls on the sidelines. The daily chart looks bearish due to the recent crossover of the 20 and 50-day moving averages, coupled with the reversal of trend. July Copper has formed a wedge formation since mid-May, which also suggests further weakness if the lower boundary is breached. Momentum comes in at a bearish -27.40, and the RSI is a neutral 62 percent. Support can be found at 333.85 and 317.25, while resistance comes in at 350.00 and 369.70.

Gold – Gold is trading two dollars lower this morning, as traders remain indecisive about market direction after the recent run-up. Weaker energy prices kept the market lower yesterday, despite weakness in the stock market. Gold may be able to get a lift if today’s EIA inventory report shows tightening supplies. The precious metal market has been unable to find support, despite weaker equity prices. The August Gold chart appears to be forming a bull flag formation, signaling possible advances beyond the 680 resistance area. Momentum is beginning to show some bullish divergence from the RSI, suggesting a slight bullish bias for the remainder of the weak. Momentum comes in at a bearish -21.80, and the RSI is a neutral 61 percent. Support can be found at 668.00 and 657.50, while resistance comes in at 680.00 and 692.50.

Climbing the beanstalk

Soybeans: A higher open is expected for Soybean futures following a rally in overnight trading after the USDA reported a decline in U.S. Soybean crop conditions last week. Currently, 68% of this year’s Soybean crop is now rated good to excellent – down 3% from last week and on the high side of estimates. Michigan and Minnesota showed some of the largest declines in crop conditions, with Michigan reporting only 30% of its crop rated good to excellent, and Minnesota at 38%. At the close of the overnight session, November Soybeans were trading at $8.51, up 3 ¼ cents a bushel.

Crude Oil: Energy traders jumped back on the bullish Oil bandwagon, with the lead month September contract hitting a new 11-month high this morning. Crude futures got a lift from rising equity markets yesterday, after last week’s 87-point plunge in S&P 500 futures sparked fears that energy demand may wane. However, traders continue to focus on current world Oil supplies and the backwardation in Oil futures prices, showing the premium traders are paying for near-term delivery. In early trade, September Crude Oil is trading at $77.31, up $0.48.

Copper:
Base metal traders bid up Copper prices this morning, following news that workers at three Copper mines in Mexico were planning strikes. This news overshadowed a labor agreement reached at Codelco in Chile to end a 36-day strike. Some technical traders believe the failure of September Copper to move below support at 350.00 is responsible for the recent price rise. LME warehouse stocks fell by 50 metric tons this morning to stand at 101,750 metric tons. In early trade, September Copper is trading at 364.20, up 5.35.


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Crude Oil Soars to Near-Record Highs!

Lead month September Crude Oil surpassed the $78 per barrel mark this afternoon, as traders look for continued strong world demand. In the U.S., expectations for an increase in refinery utilization should result in another drawdown of Crude inventories last week. Current expectations for tomorrow's EIA energy stocks report are for Oil inventories to have fallen by 700,000 barrels last week, as refineries are expected to have operated at 92.4% capacity. RBOB Gasoline and Heating Oil futures also posted sharp gains, despite estimates that product inventories increased by 1.1 million and 1.4 million barrels, respectively. Technical Crude traders are looking at the all-time highs of $78.40 for the nearby contract as a key resistant point, with the potential for $80 barrels if fresh buying emerges above this level. Support is seen at the 20-day moving average of $74.50. September Crude Oil closed at $78.21, up $1.38.

October Sugar rallied sharply this morning, as commodity fund and trade-house buying emerged in electronic trading before the opening of the pit session. Near-record highs for Crude Oil futures were also seen as a supportive factor for Sugar, as high energy prices may spur increased demand for cane-based ethanol. Floor sources report some producer selling around 10.30 in the October contract, but fund buying absorbed the sell orders as prices closed near the highs of the session. Spread trading was active on the screen, with over 23,000 October/March spreads traded. The next resistance point for October Sugar is seen at 10.53, with support found at Monday's lows of 9.91. October Sugar closed at 10.33, up 0.31.


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Are Natural Gas Prices Ready to Fire Up?

After falling below the $6 level last week, September Natural Gas futures have started to heat up, sparking a nearly 80-cent rally since lows were made on July 25th. Forecasts calling for above-normal temperatures in the Gas-consuming regions of the Midwest and East Coast through the middle of August have traders looking for increased Gas consumption to start to draw down record high supplies in storage. In addition, the National Hurricane Center is tracking a system near Bermuda that has the potential to become a tropical storm. The most recent Commitment of Traders report shows large non-commercial traders net short 113,384 contracts as of July 24th, and any sign of activity in the Atlantic storm season could spark a violent short-covering rally as these large traders rush to the exits.

Looking at the daily chart for September Natural Gas, we notice prices closing above the 20-day moving average for the first time since mid-June. The 14-day RSI has turned positive, with a reading of 59.58. Despite the recent rally, solid resistance still looms at the July 20th highs of 6.840, as well as the July 11th highs near 6.960. Support is found at 6.000 and again at the lows of 5.855. In early trade, September Natural Gas is trading at 6.673, up 0.174.

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Crude for Thought!

Energy futures: After September Crude Oil fell just short of hitting an all-time high of $78.40 for the near-term contract yesterday, a modest profit-taking sell-off is taking place in early trade as traders square their positions ahead of this morning’s EIA weekly energy stocks report. Current estimates are for Oil stocks to have fallen by approximately 700,000 barrels last week, with refinery utilization expected to have increased by 0.7%. Gasoline stocks are expected to have risen by 1.1 million barrels, and distillates – including Heating Oil – are expected to have increased by 1.4 million barrels last week. In early trade, September Crude Oil is trading at $77.69, down $0.52.

Stock Index futures: Yesterday’s sell-off in the U.S. stock market spread overseas, with major European stock indexes down between 1 and 2 percent in early trade. Continued concerns over the subprime loan situation have stock index traders in a selling mood. After falling as low as 1442.25 overnight, S&P 500 futures are starting to come back before the day session begins. In early trade, mini-S&P 500 futures are trading at 1454.75, down 7.25.

Japanese Yen: September Japanese Yen futures rose to 3-month highs this morning, as continued risk aversion selling by large speculators is causing an unwinding of the so-called “carry trades” supporting the Yen. The Australian and New Zealand Dollars and the Euro Currency are among leading currencies taking a hit as the Yen rises. In early trade, September Japanese Yen futures are trading at .8488, up 0.0019.

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Bulls charge ahead at the close!

Today was quite the sea saw battle between the bulls and the bears in the US stock market. In the end, the bulls won today’s battle. The Dow closed the day at 13,366 gaining 154 points. The S & P ended the day 10 points on the positive side of the fence while the Nasdaq closed at 2553, up 7 points.

In the news, pending home sales came out with a surprise increase of 5% for the month of June. This could be a leading indicator of new and existing home sales for the report coming out at the end of August. The ISM index came in below expectations at 53.8. The concensus was 55.5.

Bond yields were on the rise today as the 10 year note closed the day with a yield of 4.78%.

In the overseas markets, the Nikkei closed yesterday at 16,870 (down 2.19%) and the Hang Seng closed at 24,455 (down 3.15%).

Economic Data Scheduled for Thursday, August 2, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims (Consensus 310K)
9:00 AM: June Factory Orders (Consensus +1.0%)

Canada
None

U.K.
6:00 AM: BOE Interest Rate Decision (Consensus 5.75%)

European Union
4:00 AM: June PPI Mom (Consensus +0.3%)
4:45 AM: ECB Interest Rate Decision

Japan
None

Stock Indexes Fly, Make Bears Cry!

Stock Index futures: Mini-S&P 500 futures are trading flat this morning after a flurry of buying hit the screen in the last 45 minutes of trading yesterday to send the index up 30 points at its peak and allow for a sharply higher close. European stock index futures are up as well, with gains of between 0.5% and just over 1% seen in afternoon trading in Europe. In early trade, September mini-S&P 500 futures are trading at 1472.00, up 2.00.

Natural Gas: September Natural Gas futures are pushing to the upside in the early going, as traders square positions ahead of this morning’s EIA storage report. Current estimates are for a 76 billion cubic feet (bcf) build in Natural Gas stocks last week. Currently, 2.763 trillion cubic feet (tcf) of Gas is in storage – a record high for this time of year. In early trade, September Natural Gas is trading at 6.395, up 0.043.

British Pound: September British Pound futures are trading slightly higher this morning after the Bank of England (BoE) voted to keep interest rates unchanged at 5.75%. Though widely expected, there is now talk that the BoE will raise rates 25 basis points at its September meeting. In early trade, September British Pound futures are trading at 2.0291, up 0.0024.

Economic reports out today: U.S. economic data is light today, as traders gear up for tomorrow’s Non-farm Payrolls report. Today’s agenda includes:

7:30 AM CDT: Initial Claims for 7/28 (consensus 310k vs. 301k prior)

9:00 AM CDT: June Factory Orders (consensus +1.0% vs. –0.5% prior)

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Crude Falls, Stocks Rebound!

Crude Oil: Follow-through selling from Friday’s weak close is keeping Crude Oil futures on the defensive in early trade. In addition, OPEC exports for July climbed by 181,000 barrels a day in July to 30.72 million barrels, according to a Dow Jones Newswire survey. Technical traders will note that September Crude Oil fell below the widely watched 20-day moving average today, which sparked further long liquidation selling. In early trade, September Crude Oil is trading at $74.06, down $1.42

S&P 500 futures: Buying emerged in the S&P 500 futures this morning, taking back some of the sharp losses from Friday after a disappointing U.S. Non-farm payrolls report. Lower Crude Oil prices and a rally in some of the major European stock indexes are helping support S&P futures this morning. In early trade, the September mini-S&P 500 futures are trading at 1453.00, up 10.00.

Soybeans: November Soybeans fell in overnight trading, as rain in Iowa and Illinois over the weekend figures to benefit the Soybean crop during its key pod-setting stage. In addition, traders will be squaring their positions this week ahead of the USDA August crop report due out on Friday. At the end of the overnight session, November Soybeans are trading at $8.46 ¾, down 14 ¼ cents.

No major U.S. economic reports scheduled today.

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Crude and Copper Crumble; Ten Year’s Tank!

Energy complex: Energy futures are all trading moderately lower this morning as traders gear up for the weekly EIA energy stocks report due out at 9:30 AM Chicago time. Current estimates are for another solid build in energy products, with Gasoline inventories expected to have increased by between 700,000 and 1 million barrels last week. Distillates – which include Heating Oil – are expected to have increased by 1.5 to 1.8 million barrels. Crude Oil inventories, however, are expected to show a decline of 2 million barrels last week, with refineries operating at 93.7% capacity. In early trade, September Crude Oil is trading at $72.15, down $0.27, September RBOB Gasoline is trading at $1.9387, down $0.0055, and September Hearing Oil is trading at $1.9592, down $0.0049.

Copper: September Copper futures fell sharply in early trade this morning, after LME Copper stocks rose by 8,675 metric tons to stand at 114,275 mt, the largest increase since December of 2005. Most of the increase is thought to have come from China, where domestic prices are below that of the world market. In early trade, September Copper is trading at 342.75, down 7.90.

Ten-year Notes: Treasury futures continue to slide, after the Federal Reserve announced that it expects the U.S. economy to continue to expand, despite the housing market slowdown. In addition, the Treasury will auction $13 billion worth of 10-year Notes this afternoon, with pre-auction hedge selling likely to keep prices on the defensive. In early trade, September 10-year Notes are trading at 107-025, down 0-155.

Economic Data Scheduled for Wednesday, August 8, 2007

(All times are U.S. Central Time)

U.S.
9:00 AM: June Wholesale Inventories (Consensus 0.4%)
9:30 AM: Weekly EIA Energy Stocks report


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Running Out of Gas!

Natural Gas futures soared to 6-week highs early in the session as storm activity in the Atlantic basin sparked a round of short-covering buying. Two tropical disturbances are being tracked by forecasters at the National Hurricane Center in Miami – one off the coast of Africa about 520 miles west-southwest of the Cape Verde Islands and another over the northwest Caribbean. Though neither storm has been upgraded to Tropical Storm status, traders will be watching developments carefully should these systems organize into stronger storms. In addition, cooling demand for the Midwest and East coast should remain strong as forecasters call for temperatures in the mid 80’s to low 90’s this week. Today’s rally sent prices above the 50-day moving average at $6.977 and through psychological resistance at $7.000, which triggered fresh momentum-based buying. Cash prices have moved higher with Henry Hub next day delivery up 60 cents this morning. However, bulls ran out of gas around midday, as one weather model predicted the depression near the Cape Verde Islands would move north away from the U.S. Gulf Coast, sending traders scrambling to sell out of existing long positions and knocking prices well off the session highs to end the day. The 100-day moving average at $7.526 looks to be the next resistance point for September Natural Gas, with support now seen at $6.684. September Natural Gas closed at $6.794, down 0.026.

After hitting 3-month lows on Friday, Cocoa futures rebounded to start the week, with trade and technical buying noted this morning. A return to some stability in the stock and commodity markets this morning has helped support Cocoa futures, along with higher prices in London. Origin selling has been light of late, especially once prices fell below the $2,000 per ton level. Technical traders will note that the 14-day RSI had fallen into oversold territory on Friday with a reading of 27.91, which may have contributed to some of the fresh buying seen today. Support for December Cocoa is seen at Friday’s lows of $1823, with resistance at $1923. December Cocoa closed at $1886, up $36.

Mike Zarembski, Senior Commodity Analyst


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A Growing Bull Market in Wheat!

December Wheat futures continued their ascent above the $7 per bushel level, as the French state grains board lowered France's 2007-08 soft Wheat production to 32.5 million metric tons, down 1.5 million tons from the previous estimate. Also supportive to Wheat prices was Egypt's purchase of 415,000 tons of U.S. soft red Wheat and 25,000 tons of Russian Wheat. This came shortly after Egypt bought 115,000 tons of Russian Wheat. World Wheat ending stocks look to be extremely tight, with USDA estimates calling for world Wheat carryout of only 114.7 million metric tons – the lowest total since 1981. Traders look for U.S. Wheat exports to continue strong despite sharply higher prices, as poor world production this year looks to leave the U.S. as one of the few outlets for exportable Wheat. The next resistance point for December Wheat is seen at $7.20, with support found at yesterday’s lows of $6.79 ¼. December Wheat closed at $7.11, up 20 ½ cents.

Crude Oil futures rallied this afternoon to close above the 50-day moving average, as the National Hurricane Center upgraded tropical depression four to Tropical Storm Dean. Currently located approximately 1490 miles east of the Lesser Antilles, Dean is forecast to become a Hurricane later this week. Though its path is still undetermined, traders are starting to cover short positions should the storm look to threaten the energy producing regions of the U.S. Gulf Coast. Position squaring was also seen as traders gear up for tomorrow’s weekly EIA energy stocks report. Analysts are looking for a 2 million barrel decline in Crude stocks last week, as refinery utilization is expected to have increased by 0.5%. Resistance for September Crude is seen at $73.20, with support found at Friday’s lows of $70.10. September Crude Oil closed at $72.38, up $0.76

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Are Energy Markets Starting to Heat Up?

Energy Futures: After dropping as low as $70.10 on Friday, September Crude Oil futures are trying to make a comeback and are higher in early trade this morning. Today’s focus will be on the weekly EIA energy stocks report, with traders looking for around a 2 million barrel drop in Crude stocks last week. Gasoline stocks should show a modest 400,000-barrel decline, and Distillates – including Heating Oil – are expected to show a 1 million barrel rise. Refinery utilization is expected to rebound by 0.5%. In addition to this morning’s report, a tropical depression in the Gulf of Mexico is expected to become a tropical storm, and traders are nervous that it may affect refinery operations on the Texas coast. In early trade, September Crude Oil is trading at $72.94, up $0.56.

Two-year Note futures: September Two-year Note futures prices soared to highs not seen since 2005 on the weekly continuous chart, as traders renewed speculation that the Federal Reserve will cut interest rates once or possibly twice by the end of the year. Continued fallout from the subprime loan situation and falling stock indexes have traders looking towards the Government debt markets with expectations that yields will continue to move lower. In early trade, September Two-year Note futures are trading at 102-247, up 0-030.

Platinum: Lead month October Platinum dropped to lows not seen since June for the lead month contract, as a higher U.S. Dollar – particularly versus the Euro – has some traders looking for lower precious metal prices as investment demand starts to decline. Spillover weakness from lower Gold and base metals prices is also contributing to Platinum’s recent sell-off. In early trade, October Platinum is trading at $1268.00, down $9.00.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, August 15, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July CPI (Consensus 0.1%, Core 0.2%)
8:15 AM: July Industrial Production (Consensus 0.3%)
8:15 AM: July Capacity Utilization (Consensus 87.1%)
9:30 AM: EIA Energy Stocks report

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Another Volatile Day in the Markets!

Japanese Yen: Lead-month September Japanese Yen futures soared to highs last seen in July of 2006, as a sell-off in many of the major stock markets continues to inspire a flight to “safe haven “ securities such as short term government debt and traders continue to liquidate “carry trades.” Traders will also be closely watching today’s U.S. housing starts figures for July, with expectations for a slowdown to an annualized pace of 1.4 million versus 1.467 last month. In early trade, September Japanese Yen futures were hovering at 0.8788, up 0.0199.

S&P 500 futures: No recovery in early trade for U.S. Stock Index futures, as a sell-off in major world stock markets has caused the September mini-S&P 500 contract to fall below the 1400.00 level for the lead month contract for the first time since March. The beneficiary of the flight of funds from the stock indexes appears headed to U.S. Treasuries, with the yield on the two-year note falling to a 22-month low this morning. In the early going, September S&P 500 futures are trading at 1393.75, down 20.75.

Crude Oil: Lead month September Crude Oil gave back all of yesterday’s gains and then some in early trade, as fears of a global economic slowdown tied to falling equity markets caused fresh selling in the Crude market. This comes despite yesterday’s weekly EIA report showing U.S. Crude inventories falling by a larger-than-expected 5.17 million barrels last week. However, traders will be watching the track of Hurricane Dean, which is located about 500 miles east of Barbados early this morning. Though it is still too early to tell if the refinery operations along the U.S. Gulf Coast will be affected by this storm, traders are preparing for increased volatility in the Crude market going into the weekend. In early trade, September Crude Oil stands at $71.46, down $1.87.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, August 16, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July Housing Starts (Consensus 1.405 million)
7:30 AM: July Building Permits (Consensus 1.400 million)
7:30 AM: Initial Claims for week ending 8/11 (Consensus 315,000)
11:00 AM: Philadelphia Fed for August (Consensus 8.0)


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Commodities Crash, But For How Long?

It was hard to find much green on the commodity quote boards today as liquidation selling pummeled nearly every commodity sector. Some of the highlights (or lowlights): December Cotton closed down the 300-point limit, September Lumber was down 9.50, November Soybeans were down 40 cents, December Gold was down $21.40, October Live Cattle was down 2.07, September Crude Oil dropped $2.33, and the list went on an on. The continuing shakeout from the credit crisis has spurred a flight to liquidity, with traders and investors looking to seek refuge in short-term government debt. Fundamentals were largely ignored in many markets, as forced liquidation of positions took center stage with margin calls looming. However, as of 2:46 PM Chicago time, the S&P 500 futures have staged a bit of a rally, and if they can finish unchanged or higher, we may see a different outcome in the commodity markets tomorrow.

Soybean futures were hit hardest in the grain complex sell-off this afternoon, with the most-active November contract falling the 50-cent limit at one point in the session to its lowest levels since mid-May. The entire commodity complex had been under pressure today due to the continued rush for liquidity in the wake of recent financial turmoil. Also weighing on the Soybean products was the improved chances for rainfall in the Midwest, including previously parched sections of the region. U.S. weekly Soybean exports came in at 313,300 metric tons for the week ending August 9th, with 236,000 mt for the 2006-07 marketing year. Soy products were not immune from the sell-off, as December Bean Oil posted triple-digit losses on the back of sharply lower Crude and Malaysian Palm Oil futures, and December Soy Meal broke through near-term resistance at the 20- and 100-day moving averages. The next support point for November Soybeans is seen at the psychologically important $8.00 level, with resistance found at the 100-day moving average of $8.34. November Soybeans closed at $8.14 ½, down 40 cents.


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Volatile Trade to End the Week!

Energy futures: After yesterday’s sharp sell-off in the energy complex and most other commodity markets, there’s been a bit of a recovery this morning as Crude Oil and energy product futures are trading moderately higher to start the day. Traders are beginning to focus on Hurricane Dean, which moved past the islands of St. Lucia and Martinique this morning as a category 2 hurricane. The current path has Dean moving west and possibly into the Gulf of Mexico, where a large potion of U.S. Oil and Gas production is located. In early trading, September Crude Oil is trading at $71.69, up $0.69 and September RBOB Gasoline is trading at $2.0201, up $0.0021

Nikkei 225 futures: Japan’s leading stock index future couldn’t find support from the late recovery in the U.S index futures markets, as a soaring Yen had traders fearing Japanese exports would be hurt. This caused the index to hit lows not seen in just over a year. In early going at the CME, September Nikkei futures were trading at 15395, down 555.

U.S. Stock Index futures: Yesterday’s dramatic late rally in the major U.S. indexes failed to support prices in early trade this morning, as spillover from a weak finish in Japan and continued fears that the worst of the credit crunch may not be behind us have put sellers back in control so far. Economic releases will be light today, with the
preliminary University of Michigan consumer sentiment survey for August on tap. In early trade, September e-mini S&P 500 futures are at 1412.25, down 12.25, and September mini-Dow futures stand at 12827, down 117.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 17, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: University of Michigan Sentiment Index (Consensus 88.5)
2:00 PM: Cattle on Feed

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Not So Calm Before the Storm?

Energy futures: Prices are sharply lower in the energy complex to start the week, as forecasters are now expecting Hurricane Dean to track south of the main Oil-producing areas of the Gulf of Mexico. The current track is expected to bring Dean through the Yucatan Peninsula and on to central Mexico. October Crude Oil is currently trading at $71.06, down $0.76, and October Natural Gas is trading at $6.668, down $0.455.

Short-term Interest Rate futures: The Federal Reserve’s surprise announcement of a cut in the discount rate on Friday has traders increasing the odds that the Fed Funds rate will be next on the chopping block when the Fed reconvenes on September 18th. Fed Fund futures are now pricing in a 64% chance of the Fed cutting rates to 4.75% at the September 18th meeting, up significantly from almost no chance last week. In early trade, September Fed Fund futures are trading at 95.055, down 0.010.

Gold: December Gold futures have turned positive in early trade this week, as concerns about inflation have sparked moderate buying interest. The statement released after the Fed’s unexpected 50 basis point cut in the discount rate did not mention its concern for fighting inflation, but instead focused on its attempt to control the recent short-term credit crunch. In early trade, December Gold is trading at $668.10, up $1.30.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Monday, August 20, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Leading Indicators for July (Consensus 0.3%)


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Unassuming Crude

Does anyone remember when we all use to obsess about the price of Crude Oil? With all of the attention being paid to the subprime market of late, it seems that the media has abandoned Oil like an unwanted puppy. 

With Oil giving a tease around the $80 mark a few weeks ago, it has since relinquished the upward momentum, closing at 71.12 today. Is it technical or weather related? 

If it is weather related, then traders must feel that Hurricane Dean will not be a factor to the Oil-producing areas in the Gulf of Mexico, and certainly no reason to drive prices further up at this time.

On the other hand, if recent moves are technical in nature, we may be nearing a long-term double top similar to last summer, when Oil was in this price range. We didn’t reach new highs at that point, but we did come close. 

Should we see the price of near $80 again soon, it will be interesting to see if the double top holds, or if bad news from the Gulf will push it over the top.

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Crude Falls as Dean Heads South of the Border

Energy futures tumbled as Hurricane Dean chugged toward the Mexican coast as a downgraded Category 2 storm, with the most-active October Crude Oil contract falling to lows not seen since late June. The weakening of Dean along its more southerly track suggests minimal impact on Oil production in the Bay of Campeche. Long liquidating selling was especially evident in Crude Oil futures, with today’s expiration of the September contract adding to the severity of the sell-off. Large speculators are not looking to take delivery of Crude, especially with deferred contracts in a backwardation to the lead month contract. October Crude fell through both the 100-day moving average and the psychologically important $70 per barrel level, sparking a double-whammy of sell-stops below two key support points. Traders will now turn their focus to tomorrow’s EIA energy stocks report, with estimates that Oil stocks fell between 2.5 and 3 million barrels last week. $68.50 is seen as the next support point for October Crude, with resistance found at $71.55. October Crude Oil closed at $69.57, down $1.39.

Strong demand for U.S. Wheat continues, with Egypt announcing a 450,000 ton purchase of U.S. and Russian wheat. 240,000 tons of the tender was said to be for U.S. Soft Red Winter Wheat, which sent December Chicago Wheat futures once again above the $7 per bushel level for the first time since last week’s commodity-wide sell-off took it as low as $6.70 ½. Today’s sales combined with yesterday’s higher-than-expected weekly export inspections continue to demonstrate the strong demand for Wheat, despite near-record prices. The next resistance point for December Wheat is seen at the contract highs of $7.19, with support found at the 20-day moving average, currently at $6.79 ¾. December Wheat closed at $7.04, up 13 cents.


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Traders Getting “Energized” for Today’s EIA Report!

Energy futures: After briefly falling below $69 on Tuesday, analysts will be watching for a rebound in Oil prices after this morning’s weekly EIA energy stocks report. Traders are anticipating between a 2.5 million and 3 million barrel decline in Crude stock last week, with the continued backwardation of Oil futures prices discouraging the storing of Oil. Gasoline stocks are expected to fall by between 600,000 and 800,000 barrels and Distillates – including Heating Oil – are expected to show a build of 800,000 barrels last week. In early trade, October Crude Oil is at $69.84, up $0.27, October RBOB Gasoline is at $1.8312, up $0.0135, and October Heating Oil is at $1.9770, up $0.0070.

Canadian Dollar: Fears that tightening credit concerns worldwide will force the Bank of Canada to change course and lower interest rates at its September 5th meeting have hurt the Canadian Dollar. With rates currently at 4.5%, the market initially was looking for one or perhaps two more rate hikes by the end of 2007, with inflation standing as the Bank’s top priority. However, in light of the recent credit crunch that view has changed, and short-term Canadian interest rate futures are now pricing in rate cuts by the end of the year. However, continued belief that the U.S. Federal Reserve will cut interest rates at its September 18 meeting has put a bid into the “loonie” this morning. In early trade, the September Canadian Dollar is sitting at 0.9456, up 0.0054.

Stock Indexes: Higher Stock Index futures in Europe are spilling over to the U.S. market, as traders believe the Federal Reserve will lower rates to help stem the credit crisis and keep the U.S. economy on track. This comes after yesterday’s meeting with Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Christopher Dodd, in which Dodd was quoted as saying that Bernanke agreed to use “all of the tools at his disposal'' to help stabilize the financial markets. Many analysts believe this includes lowering the Fed Funds rate at the Fed’s upcoming September 18th meeting. In early trade, September e-mini S&P500 futures are at 1460.75, up 10.50, and September Dow Jones futures are at 13191, up 74.

Mike Zarembski, Senior Commodity Analyst


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Bulls Ran Out of Gas!

Natural Gas futures have been solidly in the bear camp of late, with the lead month September contract hitting 10-month lows. This week was particularly hard on prices, especially after Hurricane Dean missed the Oil and Gas producing areas of the U.S. Gulf Coast, and traders who previously bought back their short positions ahead of Dean are now re-establishing their positions as prices continue to plummet. Current Gas in storage is approaching 3 trillion cubic feet (tcf) – currently standing at 2.903 tcf – and traders will be looking for another 30 bcf to have been added last week when the weekly EIA gas storage figures are released at 9:30 AM Chicago time. With Gas storage levels nearly 15% above the 5-year average and the summer cooling season starting to wind down, it appears we may have a record amount of Gas in storage to begin the winter heating season. Traders should be cautious, however, as we are still in the prime of the Atlantic hurricane season, and even the threat of a storm reaching the U.S. Gulf Coast can spur a sharp short-covering rally and result in quick volatility spikes.

Looking at the daily chart for October Natural Gas futures, we notice a modest bounce this morning, as higher Crude Oil prices and some minor short covering buying ahead of today’s Gas storage report is supporting prices. However, the market remains well below the major moving averages, and momentum is weak. The 14-day RSI has reached oversold territory with a reading of 25.22. The next support point for October Natural Gas is seen at $5.750, with major support found at $5.50. Resistance is seen at the 20-day moving average near $6.560. In the early going, October Natural Gas is trading at $5.844, up $0.024.

Mike Zarembski, Senior Commodity Analyst


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Commodities Back in the Spotlight!

Natural Gas: Lead month Natural Gas futures continue to plunge to lows not seen since September of 2006, as continued moderate temperatures in the major U.S. Gas consuming regions and near record high Gas storage levels are keeping bears firmly in control. In addition, the Atlantic hurricane season has been mild, with no major threats to the U.S. Gulf Coast. Current Gas in storage stands at 2.926 trillion cubic feet (tcf), or nearly 13% above the 5-year average. In early trade, October Natural Gas is trading at $5.441, down $0.298.

Lean Hogs: After slumping for most of August, Lean Hog futures surged on Friday in the wake of a 60-million-pound pork deal made with a Chinese trading company. This sparked a round of short covering buying, with the most-active October contract trading close to the 300-point limit at one point in the session. China, the world’s largest consumer of Pork, was rumored to be looking to purchase U.S. pork due to disease issues in the country that have forced a reduction in the country’s Hog herd. October Lean Hog futures closed on Friday at 70.65, up 2.17.

Corn: December Corn futures fell sharply in overnight trading, as industry group Professional Farmers of America estimated the U.S. Corn crop at 13.109 billion bushels, up from the 13.054 billion USDA estimate in the August Crop report. In addition, forecasts calling for drier condition in the Midwest may allow some areas to start the Corn harvest earlier than expected. At the end of the overnight session, December Corn was trading at $3.50 ¾, down 8 cents.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Monday, August 27, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Existing Home Sales for July (Consensus 5.70M)


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Add Fuel to Your Portfolio!

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Senior Commodity Analyst
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Nervous Bears Cover Natural Gas Positions!

Short-covering buying was responsible for today’s rally in Natural Gas futures, as traders eyed a tropical disturbance off the western coast of Africa may develop into a hurricane as it moves west toward the Caribbean. Today’s rally came after the lead month Natural Gas contract made 11-month lows at $5.192. The Commitment of Traders report shows large speculators holding a net-short position of 79,949 contracts in Natural Gas as of August 21st. Being in the heart of the Atlantic hurricane season, traders are nervous being short Natural Gas should a tropical storm strike the production infrastructure of the U.S. Gulf Coast. Resistance for October Natural Gas is seen at $5.925, with support found at $5.422. October Natural Gas closed at $5.820, up $0.230.

After hitting one-month highs of $3.70 last week, December Corn futures have fallen over 25 cents a bushel, as traders are starting to believe that the U.S. crop will be larger that current government estimates. In the August Crop Production report, the USDA estimated the U.S. Corn crop at 13.054 billion bushels, with an average yield of 152.8 bushels per acre. However, a private forecast by Professional Farmers of America has the U.S. Corn crop at 13.109 billion bushels and an average yield of 153.47 bushels per acre. Crop conditions also improved last week, with the USDA reporting 59% of the Corn crop rated good-to-excellent, up 1% from last week. Illinois and Iowa, the two leading Corn producing states, reported good-to-excellent ratings of 72% and 71%, respectively. Commodity fund selling was moderate with an estimated 3,000 contracts being sold by these large speculators. Today’s sell-off also sent December Corn below the widely watched 20-day moving average on a closing basis, which may spur further momentum-based selling. The next support point for December Corn is seen at $3.41, with resistance found at $3.55. December Corn closed at $3.44 ¾, down 8 ¼ cents.

Mike Zarembski, Senior Commodity Analyst


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Get Energized!

Energy Futures: Overnight buying has sent energy futures prices to the upside this morning, as traders prepare for the weekly release of the EIA energy stocks report. Gasoline will be in the spotlight, with traders looking for a decline of 1.8 to 2 million barrels last week. Crude inventories are also expected to show a decline, with estimates ranging from a decline of 600,000 to 1 million barrels. Distillate stocks – which include Heating Oil – are expected to show a 600,000-barrel rise. In early trade, October Crude Oil is trading at $71.99, up $0.26, October RBOB Gasoline is trading at $1.9305, up $0.0151, and October Heating Oil is trading at $2.0230, up $0.0072.

Soybeans: New crop November Soybeans traded lower in the overnight session, as traders expect the USDA will raise its estimate for the U.S. crop in the September 12th production report. Last week, Professional Farmers of America estimated the U.S. Soybean crop at 2.658 billion bushels versus the August USDA estimate of 2.625 billion bushels. Soybean crop conditions improved last week, with 55% of the crop now rated good-to-excellent, up 1% from last week. At the end of overnight trading, November Soybeans stood at $8.68, down 4 ¼ cents.

Japanese Yen: September Yen futures are trading lower for the first time this week, as traders have lowered expectations that the Bank of Japan will raise short-term rates by 0.5% anytime soon. In addition, higher U.S. Stock Index futures this morning have some traders re-establishing the so called “carry trade” using the Yen as the short side of the trade especially against the Australian and New Zealand Dollars. In early trade, September Japanese Yen futures are trading at 0.8721, down 0.0032.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, August 29, 2007

(All times in U.S. Central Time)

U.S.
9:30 AM: Weekly EIA Energy Stocks Report

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Hurricane Felix Moving Markets This Morning!

Crude Oil: Oil futures are currently trading lower in post-holiday trade, as bulls take profits with Hurricane Felix figuring now to bypass Mexico’s Oil rigs in the Gulf of Mexico. The category 4 storm is now on track to reach Nicaragua and Honduras later today. October Crude Oil is currently trading at $74.11, down $0.12.

Wheat: Chicago Wheat futures for December were up the 30-cent limit at the end of the overnight session, as India purchased 795,000 tons of Wheat yesterday – well above the 530,000 tons offered in last weeks tender. The increased purchase comes despite all-time highs in world Wheat prices. Australia, the world’s third leading Wheat exporter, is now expected to produce less than 19 million metric tons of Wheat this season, down from the June estimate of 22.5 million tons. At the end of the overnight session, December Wheat was trading at $8.05 ½, up 30 cents.

Coffee: New York Arabica Coffee futures are trading higher in electronic trade this morning, following higher prices in the London Robusta trade as traders fear Hurricane Felix will damage the Coffee crops in Honduras. This comes at a time when Coffee supplies are tight, with the International Coffee Organization looking for an 8-million bag deficit next season. In early trade, December Coffee was trading at 117.20, up 1.35.

Mike Zarembski, Senior Commodity Analyst


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$76 Crude Oil, Yet Supplies are Adequate?

Energy Futures: Lead month October Crude Oil rose past the $76 level in early morning trade, as traders fear recent refinery outages may have crimped fuel supplies. Refinery utilization last week is expected to have fallen below the previous week’s 90.3% capacity rate, which would not bode well for increased supplies of Gasoline. Traders are gearing up for this morning’s weekly EIA energy stocks report, one day later than usual due to the Labor Day holiday. According to a Bloomberg survey, Crude Oil stocks may have fallen by 2.2 million barrels last week. Gasoline stocks were estimated to show a 1.3 million barrel decline. Next week’s OPEC meeting in Vienna is not expected to produce any policy changes in current output, as several Oil ministers have recently announced that the supply of Oil is adequate to meet current demand. In early trade, October Crude Oil is trading at $76.12, up $0.39, and October RBOB Gasoline is trading at $2.0070, up $0.0105.

Wheat: Profit-taking selling came into the Wheat market overnight, as prices eased off record highs made yesterday. However, Wheat tenders continue, with Japan purchasing 175,000 metric tons of milling Wheat from the U.S., Australia, and Canada this morning.
Australia continues to suffer from poor weather conditions, with South Australia state – the third largest producer for the country – now expected to produce nearly 25% less Wheat than previously expected. At the end of the overnight session, December Chicago Wheat was trading at $8.20 ¼, down 15 ¼ cents.

British Pound: September British Pound futures were trading slightly lower in early trade, after the Bank of England kept interest rates steady at 5.75%. This pause comes after 5 straight rate increases this year, and until recently many economists were looking for another increase to 6% by the start of the fourth quarter to help keep inflation in check. In early trade, September British Pound futures were trading at 2.0182, down 0.0021.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, September 6, 2007
(All times in U.S. Central Time)

U.S.

7:30 AM: Initial claims wk-9/1 (Consensus 330,000)
7:30 AM: 2nd qtr Productivity revised (Consensus 2.4%)
9:00 AM: ISM Services for August (Consensus 54.5)
9:30 AM: EIA Energy Inventories

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EIA Energy Stocks Recap

Crude Oil inventories fell by 3.9 million barrels

Gasoline stocks fell by 1.5 million barrels

Distillate inventories rose by 2.3 million barrels

Natural Gas injections totaled 36 bcf

Items of Interest:

Cushing, Oklahoma Crude stocks rose by 1.8 million barrels

Gasoline imports rose by 321,000 barrels per day

Refinery rates rose by 1.8% to 92.1%

Black Gold?

Crude Oil futures continue to hover near 5-week highs this morning, after yesterday’s release of the weekly EIA energy stocks report showed that Crude Oil stocks fell by 3.97 million barrels last week, or more than twice the average analyst estimate. This was the 8th time in the past 9 weeks that Oil stocks have fallen, and the continued backwardation in WTI futures appears to suggest that the market considers the current demand strong and supplies tight. However, OPEC has a different opinion, with at least five members of the cartel having stated that the current supply of Oil is adequate to meet demand and that OPEC output should remain unchanged. Also supporting the Crude market is a “weather premium” being placed on current prices, as the Atlantic hurricane season is still in its prime. Traders are reluctant to hold large short positions in Crude, should a tropical storm disrupt the Oil infrastructure in the Gulf of Mexico. Another take on the continued rise in Oil prices is that some traders and investors are looking at Oil as an inflation hedge, adopting a portion of the role that Gold usually plays in this regard. However, if the recent credit market turmoil does spark a worldwide economic slowdown, then Oil prices may be ripe for a steep fall.

Looking at the daily chart for October Crude Oil, we notice a steep rise of nearly $9 since recent lows were made on August 22nd at $68.63 per barrel. During this time, prices have risen well above the major moving averages, and momentum looks strong. However, the 14-day RSI has moved into overbought territory with a reading of 78.67. Also, the contract highs of $78.15 made on August 1st need to be challenged soon, or a potential double top pattern may be forming, which could signal a correction in prices. In early trade, October Crude Oil is trading at $76.67, up $0.37.

Mike Zarembski, Senior Commodity Analyst

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Oil Higher Ahead of OPEC Meeting

Crude Oil futures closed higher to start the week with the second highest close ever for the lead month contract, as traders squared up their positions ahead of a meeting by OPEC ministers in Vienna on Tuesday. Though some OPEC officials have commented that the Oil market is well-supplied and current output is fine, there are a growing number of traders and analysts who believe that Saudi Arabia – the largest individual Oil producer in the cartel – will ask for an output boost of as much as 500,000 barrels per day. This possibility has some traders nervous, especially after the lead month October contract has posted five consecutive up days. However, bullish traders will counter that OPEC is currently producing above its official quota, and any increase will mostly be symbolic. Oil prices still include a “weather premium,” as this year’s Atlantic hurricane season could still produce a storm to interfere with Oil production in the Gulf of Mexico. Resistance is seen at the August 1st highs of $78.15, with support found at $73.48. October Crude Oil closed at $77.49, up $0.79.

Coffee futures soared to 3-week highs this morning, closing above two key moving averages as traders raise concerns over dry weather in Brazil. Early flowering in some Brazilian groves last month is increasing the need for ample moisture as the trees go through the blossoming stage this month. Also supportive to Coffee prices are concerns that Hurricane Felix may have caused more damage to Central American groves than previously reported. Brazilian growers continue to withhold supplies hoping for higher world prices later in the year. Technical traders noted that today’s rally took the December contract through the 20- and 50-day moving averages, which spurred some short-term momentum buying. This Friday is options expiration for October Coffee options, with traders noting decent open interest in the October 125 calls and 115 puts. December Coffee closed at 119.80, up 2.90.

Mike Zarembski, Senior Commodity Analyst

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Oil Traders Await OPEC’s Decision on Production Quotas

Crude Oil: October Crude Oil climbed past the $78 a barrel level in overnight trade, as traders await a decision by OPEC officials on whether the cartel will raise its production quotas. Current expectations are for a 500,000-barrel/day increase in production, but several oil ministers are calling for no change. After making a new contract high of $78.32, October Crude ran into some selling pressure to send prices lower in early morning trade. October Crude Oil is currently trading at $77.32, down $0.17.

Copper: December Copper is sharply higher in early morning trade, following a rise in base metals price in London due to declining exchange warehouse stocks. LME Copper stocks fell by 325 metric tons this morning to stand at 137,275. However, canceled warrants or stocks scheduled to be removed from storage rose by 13% to 8,200 metric tons – this is usually a sign that demand is starting to build for Copper. In early trade, December Copper is trading at 331.75, up 6.15.

Platinum: “Safe haven” buying of Gold has spilled into the Platinum market as well, as prices remain near 5-week highs this morning. In addition, near-record high Oil prices have some traders believing that motorists will begin to look for more economical vehicles such as diesel-powered cars – which use more Platinum in their emissions control – thus bolstering demand for the white metal. In early trade, October Platinum is trading at $1294.50, up $0.50.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, September 11, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Trade Balance for July (Consensus -59.0 billion)

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Corn Rallies Despite “Bearish” USDA Report

The long-awaited September Crop Report was released this morning, with the USDA raising its estimate for the U.S. Corn crop to 13.308 billion bushels versus 13.054 billion bushels in the August report. Average Corn yields were also raised to 155.8 bushels per acre, or 3 bushels per acre higher than the previous estimate. Corn carryout totals for 2007-08 were also raised to 1.675 billion bushels, up sharply from the average estimate of 1.529 billion bushels. However, despite this “bearish” report, Corn futures rallied sharply this afternoon, as a classic “sell the rumor, buy the fact” mentality took hold. Traders noted buy stops being triggered above the $3.50 level in the December contract, with few sellers willing to take the other side until prices moved even higher. Corn was further supported by spillover buying from the Soybean complex, as Beans, Soy Oil and Soy Meal all made contract highs this afternoon. The next major resistance point for December Corn is seen at the August 23rd highs of $3.70, with support found at $3.32 ½.

Crude Oil futures rose to near $80 per barrel as U.S. Crude inventories fell by more than pre-report estimates last week. In its weekly energy stocks report, the EIA reported that Crude Oil stocks fell by 7.1 million barrels last week – more than double the 2.7 million barrel decline expected. This was the ninth time in the last 10 weeks that U.S. Oil inventories had fallen, making traders nervous about tightening supplies. Oil stocks in Cushing, Oklahoma – the delivery point for the NYMEX contract – fell by 500,000 barrels last week. Refinery operating rates dropped to 90.5% versus 92.1% the previous week, which gave a boost to Heating Oil and Gasoline futures. Oil traders have mostly dismissed yesterday’s announcement from OPEC that the cartel will boost production by 500,000 barrels per day starting in November, as the boost is viewed as not nearly enough to tame tightening supplies as demand for Oil continues to grow.

Mike Zarembski, Senior Commodity Analyst

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Nothing Like a Government Report to Ruin a Good Bull Market!

Wheat: Chicago Wheat futures have started to pull back from their all-time highs, with traders beginning to unload long positions in light of the USDA’s better-than-expected forecast for global Wheat production. In yesterday’s crop production report, the USDA lowered world Wheat production to 606.24 million metric tons as of May 31, 2008, down 0.7% from last month’s estimate. However, the USDA only lowered the estimate for Australia’s crop to 21 million tons versus 23 million tons. Many analysts believe that a continued drought in Australia could bring that figure in at as low as 15 million tons. In early trade, December Wheat is trading at $8.55 ¾, down 4 ¾.

Crude Oil: After trading to a record high $80.18 per barrel for a lead month contract yesterday, October Crude Oil is down moderately in early trade as Hurricane Humberto begins to weaken as it moves across Texas today. In addition, an OPEC production increase of 500,000 barrels per day comes just as the International Energy Agency cut its prediction for world Oil demand by 90,000 per day to 85.9 million barrels. In early trade,
October Crude Oil is trading at $79.84, down $0.07.

Natural Gas: After hitting one-month highs in the October contract yesterday, Natural Gas futures are trading lower this morning as traders gear up for this morning’s EIA Gas storage report. Estimates are for an injection of just over 65 billion cubic feet (bcf) last week – well below the 103 bcf injection this time last year. In early trade, October Natural Gas is trading at $6.269, down $0.169.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, September 13, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims for week ending 9/8 (Consensus 325K)
1:00 PM: Treasury Budget (Consensus -85.0 Billion)

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Humberto Fires Up Gasoline Bulls!

RBOB Gasoline futures rose to nearly 2-month highs this afternoon, as Hurricane Humberto knocked out power to three Texas Oil refineries today. The refineries affected can use up to 850,000 barrels of crude a day, and this comes just one day after the EIA announced that Gasoline inventories fell by 700,000 barrels last week. With Oil prices continuing to hover near the $80 per barrel level, follow-through buying was expected in the energy products, especially Gasoline. Traders noted buy stops being triggered once the October contract moved above recent highs of 2.0278. The next major resistance point for October Gasoline is seen at the July 10th highs of 2.1297, with support found at the 50-day moving average of 1.9684. October RBOB Gasoline closed at $2.0464, up 0.0304.

Cocoa futures declined for the second consecutive session, falling to one-week lows as drier weather in the Ivory Coast should allow growers to move Cocoa beans to port this week. Origin selling was seen, especially after speculators attempted to rally the December contract once prices moved above yesterday’s close at $1829. Lower prices in London and expiration of the September contract were also seen as factors in today’s sell-off. The International Cocoa Organization is estimating a world Cocoa surplus of 117,000 tons in the 2007-08 marketing year. Support for December Cocoa is seen at the 20-day moving average of $1801, with resistance found at $1872. December Cocoa closed at $1818, down $11.

Mike Zarembski, Senior Commodity Analyst

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Storm Season Volatility Continues for Natural Gas Futures

It’s been a choppy weak for Natural Gas traders, as neither bulls nor bears can seem to take control. Just looking at the past two sessions, we notice prices rising 8.5% on Wednesday, as traders short the market bought back their positions ahead of Hurricane Humberto reaching the Gulf of Mexico. Then on Thursday, when no damage was reported to the Gas installations in the Gulf, prices plunged by 6.4%. Now this morning, prices are up sharply in early trade, as traders look east to find Tropical Strom Ingrid forming. Ingrid is currently about 805 miles east of the Lesser Antilles, and winds are still moderate at 40 mph. However, going into the weekend, traders are fearful of being caught short should the storm start to track towards the Gulf of Mexico. The volatile situation in Natural Gas is more acute this year, due to the rather bearish fundamentals affecting the market. Natural Gas in storage currently totals a hefty 3.069 trillion cubic feet, which is 9.3% above the 5-year average. This has caused large speculators to want to be short Natural Gas futures, with the most recent Commitment of Traders report showing large non-commercial traders holding a net-short position of 75,900 contracts as of September 4th. If a storm were to strike the energy installations in the Gulf and cause serious damage, there is no telling how high prices would climb, as those caught short would have to try to find sellers to cover their positions.

Looking at the daily chart for October Natural Gas, we notice a moderate uptrend in place, despite the recent choppy action. Prices are above the 20-day moving average and are currently flirting with the 50-day average as well. Momentum has started to turn up, with the 14-day RSI reading a fairly strong 62.04. Barring a major storm in the Gulf, $6.785 is seen as the next resistance point for October Natural Gas, with support found at the 20-day moving average, currently at 5.901. In early trade, October Natural Gas is trading at $6.414, up 0.385.

Mike Zarembski, Senior Commodity Analyst

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Coffee Starts to Heat Up!

Bulls awoke to the smell of a major Coffee rally this morning, as lead month December Coffee made 6 ½ month highs, with the dual threat of dry weather in Brazil and low domestic inventories sending bears scurrying to cover short positions. Buy stops were seen being triggered above the recent highs at 121.50, with additional buying found above the August 13th highs at 125.80. Support was also found across the Atlantic, as the London Robusta futures hit 9-year highs for the November contract. Origin sellers were scarce this morning, as growers await higher prices for their stocks, especially with the critical flowering period for the Coffee trees currently underway. 130.00 is now seen as the next resistance point for December Coffee, with support found at 121.50. December Coffee settled today at 127.80, up 6.90.

It’s all about the weather for Natural Gas traders, as forecasts calling for above-normal temperatures in the Midwest and a potential tropical cyclone near the Gulf of Mexico have combined to spark a buying frenzy to start the week. Much of today’s buying was seen as short-covering by large speculators, who are holding a net-short position totaling 72,138 contracts as of September 11th. Any further development of a tropical system near the Gulf of Mexico will be enough to spark additional buying, especially by traders who remember what occurred in the Natural Gas market after Hurricane Katrina struck in 2005. Temperatures are expected to be in the 80s and 90s in the Midwest this week, which should increase cooling demand and spur additional Gas usage. Technical traders will note that today’s rally sent prices above the 50-day moving average, which tends to draw momentum traders into the market. The next resistance point for October Natural Gas is seen at the 100-day moving average at $7.165, with support found at the 20-day moving average near $5.870. October Natural Gas closed at $6.653, up $0.374.

Mike Zarembski, Senior Commodity Analyst

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All’s Quiet Before the Fed Meets

Stock Index futures: Indexes in both Europe and the U.S. are little changed from yesterday’s close, as traders await what might be one of the most widely anticipated FOMC meetings in years. The slump in the U.S. housing market coupled with the recent liquidity crisis looks to have forced the Fed’s hand into lowering the Fed Funds rate by 25 basis points, according to survey of economists by Bloomberg News. However, the statement released after the rate announcement will be closely analyzed by the markets for any signs that further rate cuts are down the line, or if the Fed hopes to jawbone the market into believing it is ready to tackle further weakness in the economy if necessary without losing its grip on controlling inflation. In early trade, the December e-mini S&P 500 futures are trading at 1478.75, up 1.75.

Wheat: Chicago Wheat futures continue to rebound from last week’s sharp price correction after hitting all-time highs on Wednesday. The Australian Bureau of Agricultural and Resources Economics lowered its estimate for the country’s Wheat production to 15.5 million metric tons – down sharply from its previous estimate of 22.5 million tons. Australia is the third largest Wheat exporter behind the U.S. and Canada. South Korea bought 47,700 metric tons of U.S. Wheat today, with Taiwan and Japan also expected to tender for U.S. Wheat this week. Both Pakistan and Turkey may each need to import up to 1 million metric tons of Wheat this season to help replenish stockpiles. At the end of the overnight session, December Wheat is trading at $8.87, up 12 cents.

Crude Oil: Lead month October Crude Oil rose above $81 per barrel in overnight trade, as traders anticipate another drawdown in U.S. Crude inventories last week with rising demand continuing to overwhelm supplies. In tomorrow’s EIA energy stocks report, traders are anticipating another 2 million barrel draw in Oil stocks, which will be the 10th drawdown in 11 weeks should it come to pass. In early trade, October Crude Oil is trading at $80.91, up $0.34.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, September 18, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: PPI for August (Consensus -0.3%. Core 0.1%)
8:00 AM: Net Foreign Purchases for July (Prior 120.9 Billion)
1:15 PM: FOMC Policy Statement

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Fed Ignites Futures Traders With Surprising 50 Basis Point Rate Cut!

It was a wild afternoon for futures traders, especially after the Federal Reserve surprised some traders by lowering the Fed Funds rate by an aggressive 50 basis points to 4.75%. The FOMC vote was a unanimous 10-0 for the rate cut. The Fed also lowered the Discount Rate by 50 basis points to 5.25% – the second such cut in a month’s time. The news sparked an aggressive rally in Stock Index futures, with e-mini S&P 500 futures up well over 30 points at the peak. Bulls were also stampeding over to the metals sector, with December Gold trading over $730 per ounce, and December Silver leaping by nearly 25 cents. The energy complex was also sharply higher, with October Crude Oil futures moving above the $82.00 level for the first time. However, the cut was bad news for the U.S. Dollar, with the December Dollar index falling over 50 ticks at one point, as traders punished the greenback and the Japanese Yen. Long-term interest rate futures also posted sharp losses this afternoon. Traders now expect further interest rate cuts are in the offing, with March 2008 Eurodollar futures pricing in a 100% chance of a 4.5% Fed Funds rate by the first quarter of 2008, and an 88% chance of a 4.25% rate.

Mike Zarembski, Senior Commodity Analyst

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Fed Fuels Futures Markets, But Will Inflation Follow?

Stock Index futures: Equity index bulls continue to celebrate into the early morning trade, after the Federal Reserve started the party rolling by cutting the Fed Funds and Discount rates by 50 basis points each. This sparked a tremendous rally in the stock indexes, as traders believe that the rate cuts will be enough to stimulate growth in the U.S. despite the recent housing slump. Traders will now turn their focus to this morning’s economic reports, with the Labor Department scheduled to release its report on consumer prices in August. Traders are looking for no change in the headline figure, but a moderate 0.2% rise in the so-called “core” rate, which excludes food and energy prices. Also out this morning is the report on housing starts and building permits for August, with economists expecting a decrease in housing starts to an annual rate of 1.35 million, which would be the lowest number in twelve years. In early trade, December e-mini S&P 500 futures are trading at 1540.00, up 7.00

Crude Oil: October Crude Oil futures continue to hover above $82 a barrel in early morning trade, as yesterday’s surprisingly aggressive Federal Reserve rate cut is expected to help stimulate the U.S. economy and keep energy consumption strong. Traders also are looking for another decline in Crude Oil inventories last week in today’s EIA energy stocks report – current estimates are for a decline of between 1.5 and 2 million barrels. In early trade, October Crude Oil is trading at $82.14, up $0.63.

Ten-year Note futures: Medium- and long-term Treasury futures are moderately lower in early morning trade, as traders start to sell longer-term government debt after yesterday’s Fed rate cut generates concern that inflation will start to heat up. One need only look at the continued weakness in the U.S. Dollar and soaring Gold and Crude Oil prices to see the market pricing in accelerating inflation expectations. Cash yields on the Ten-year Note rose by 5 basis points to 4.52% this morning in London. In early morning trade, December Ten-year Notes were trading at 109-225, down 0-050.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, September 19, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: CPI for August (Consensus 0.0%. Core 0.2%)
7:30 AM: Housing Starts for August (Consensus 1345K)
7:30 AM: Building Permits for August (Consensus 1350k)
9:30 AM: EIA weekly Energy Stocks Report – week ending 9/14

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Fed Rate Cut May Add More Fuel to Energy Markets

$82 a barrel and climbing! That’s the story in the Crude Oil futures market of late, with the soon-to-expire lead month October contract trading at or near all-time high prices this morning. Oil prices have risen 11% so far this month alone, despite the U.S housing slump and concerns that U.S. economic growth rates would start to sag. With the Fed lowering rates by 50 basis points yesterday and the market anticipating further cuts into the 1st quarter of 2008, energy prices look poised to continue their climb, especially if the Fed’s “jumpstart” helps stimulate further increases in Oil demand. This all comes at a time when the market is looking at relatively tight Oil supplies, as the NYMEX WTI futures market is trading in a backwardation. This means that traders are willing to pay a premium for near-term delivery. The October/December 2007 Crude Oil spread is currently at a $2.60 October premium, which encourages those holding Oil to sell into the spot market as opposed to storing Oil for later use. So it should come as no surprise that traders are looking for another decline in U.S. Crude Oil inventories last week. In today’s EIA energy stocks report, analysts are looking for a decline of between 1.5 and 2 million barrels of Crude for the week ending September 14th. This would be the 10th decline in the past 11 weeks. Gasoline inventories are also expected to fall, with estimates calling for a 1.3 million barrel decline. Distillates – which include Heating Oil – are expected to show a gain of 1 million barrels. However, continued refinery outages are expected to produce a decline in refinery utilization to 90%, down 0.5% from the previous week. If that is not enough to send Oil bulls into a frenzy, a weather disturbance near the eastern coast of Florida has the potential to strengthen as it moves into the warm waters of the Gulf of Mexico. In fact, it has been reported that Shell has evacuated about 300 workers from the Gulf as a precaution, due to the tropical disturbance. Should a major storm develop, it could be a long rest of the week for Oil bears!

Looking at the daily chart for November Crude, we notice prices continuing to hang around contract highs. November Crude becomes the lead month tomorrow, and prices are still about $1.30 below that of the expiring October contracts. Prices are well above the major moving averages, but the 14-day RSI has reached overbought territory with a reading of 85.83. Spread trading will be active this morning as traders still in the October contract switch their positions over to November before the October contract goes off the board at 1:30 PM Chicago time today. Resistance for November Crude is seen at $81.50, with support found at $77.30. In early trade, November Crude Oil is trading at $80.76, up $0.53.

Mike Zarembski, Senior Commodity Analyst

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Your European Vacation Just Got a Bit More Expensive!

Euro Currency: December Euro Currency futures climbed to a new all-time high this morning, as traders continue to sell the U.S. Dollar against the major currencies ahead of Federal Reserve Chairman Ben Bernanke’s appearance today before Congress. He is expected to comment on the risks to economic growth due to the U.S housing crisis. In early trade, December Euro futures are trading at 1.4053, up 0.0074.

Treasury futures: The Treasury yield curve continues to grow steeper, with the Two-year/Ten-year Note spread widening as much as 57 basis points – the widest spread since spring of 2005. The moves in the yield curve can be traced to expectations that recent Fed interest rate cuts and a slumping U.S. Dollar will raise inflation prospects. The longer end of the yield curve is normally more sensitive to changes in inflation expectations. Current cash market yields are 4.56% for the Ten-year Note and 4% for the Two-year Note in morning trade in London. In early trade, December Two-year Note futures are trading at 109-115, down 0-075, and the December Two-year Notes are trading at 103-1475, down 0-0050.

Crude Oil: Oil futures continue to post gains, as U.S. Crude stockpiles continue to fall. In yesterday’s EIA energy stocks report, Oil inventories fell by a larger than expected 3.8 million barrels last week. In addition, supplies in Cushing, Oklahoma – the delivery point for the NYMEX WTI Oil contract – fell by 1.7 million barrels to 18.3 million barrels. Traders continue to bid up prices in anticipation of increasing demand and the possibility of tight supplies going into the winter. In early trade, November Crude Oil is trading at $80.68, up $0.45.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, September 20, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims – week ending 9/15 (Consensus 320k)
9:00 AM: Leading Indicators for August (Consensus 0.0%)
11:00 AM: Philadelphia Fed (Consensus 2.5)

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El Peso Mexicano subió contra el dólar de Estados Unidos

(The Mexican Peso Gains Against the U.S. Dollar)
Mexican Peso: December Peso futures are trading near two-month highs in early trade, after Banco de Mexico kept interest rates steady at 7.25% of Friday, but maintained a “restrictive bias” which is leading traders to believe that the Bank will raise rates later this year due to rising inflation concerns. The interest rate differential between Mexico and the U.S. has risen to 2.5%-the highest since April of last year. In early trade December Mexican Peso futures were trading at 90775, up 75.

Crude Oil: Oil futures were moderately lower to start Sunday night trading, as workers returned to Oil facilities in the Gulf of Mexico after tropical storm threats have passed. In addition, a senior Iranian official said that current market fundamentals would not support Oil prices above $80 per barrel, as the current market backwardation will cut demand. In overnight trade, November Crude Oil was trading at $81.34, up $0.28.

Wheat: Chicago Wheat futures start the week where it left off on Friday with a sharp rally, as continued dry weather in Australia has traders looking for a further decline in Wheat production. Wheat futures in Australia hit a record A$492 per metric ton today, as weather forecasts now call for continued dry weather for the next 10 to 14 days. In overnight trade, December Wheat was trading at $8.90, up 16 cents.


Mike Zarembski Senior Commodity Analyst

Economic Data Scheduled for Monday, September 24, 2007
(All times in U.S. Central Time)

U.S.
None

Great Britain
None

Canada
None

European Union
4:00 AM: Industrial New Orders for July (MoM) (Prior 4.4%)


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Oil Futures Unstable Above $80

Oil futures slid to one-week lows this afternoon, falling below the $80 per barrel level as production resumed in the Gulf of Mexico after a storm threatened to move in. Traders also believe the recent run at new all-time highs was overdone, especially with concerns about the health of the U.S. economy given the turmoil surrounding the U.S. housing market. Traders noted a rash of sell-stops were triggered once the November contract fell through psychological support at $80 per barrel. Despite today’s sharp decline, prices may rebound tomorrow, especially if the weekly EIA energy stocks report shows a larger-than-expected drawdown in U.S. crude inventories last week. Current estimates are for Oil stocks to have declined by 2.2 million barrels last week. $77.30 is seen as the next support point for November Oil, with resistance found at $80.55. November Crude Oil closed at $79.53, down $1.42.

Mike Zarembski, Senior Commodity Analyst

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Oil’s Well for Crude Bulls Again

Energy futures: November Crude Oil rebounded above the $80 per barrel level in the early going as traders gear up for another decline in U.S. Crude inventories. This morning’s weekly EIA energy stocks report is expected to show Oil supplies fell by between 1.8 and 2.2 million barrels last week. Traders will also be watching the inventory figures for Cushing, Oklahoma – the delivery point for NYMEX Crude Oil futures. Recent inventory declines and solid demand are responsible for the continued backwardation of the WTI Oil market – wherein near month contracts trade at a premium to deferred month contracts. Backwardation signals that users are willing to pay a premium for immediate supplies. Gasoline inventories are expected to show a moderate increase of between 100,000 and 300,000 barrels. Distillates – which include Heating Oil – are expected to show a 1 million barrel gain. In early trade, November Crude Oil is trading at $80.11, up $0.58.

Coffee: Profit-taking selling hit the December Arabica Coffee futures market in early trade, after an 8-month high was reached yesterday. Dry weather in the main Coffee growing regions of Brazil has been chief among the reasons for the recent price rise. However, origin sellers came out on yesterday’s rally, leading weak bulls to start to book profits on their long positions. Brazil’s Coffee exports have started to increase, with the Green Coffee Exporters Council reporting exports totaling 1.214 million bags so far this month, up from 915,873 bags last month. In early trade, December Coffee was trading at 129.95, down 3.15.

Dollar Index: Short covering buying emerged in December Dollar Index futures, as bears sought to book profits ahead of this morning’s release of U.S. durable goods orders for August. The consensus is for a decline of 3.5% last month, as buyers of big-ticket items held back their purchases due to uncertainly in the U.S. economy. In early trade, the December Dollar Index was trading at 78.450, up 0.255,

Mike Zarembski, Senior Commodity Analyst

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Crude Bull Market is “Well Oiled”

November Crude Oil futures surged to contract highs this afternoon, rising by over $2 per barrel as a weaker U.S Dollar and solid near-term demand has Oil bulls flexing their muscles. The continued drawdown of oil inventories in Cushing, Oklahoma – the delivery point for the NYMEX Oil contract – to 21-month lows is supporting near-term futures prices. The weaker U.S. Dollar is sparking inflation fears and benefiting commodity prices, including those in Crude Oil. Oil futures also found support from a surging Heating Oil market, with traders fearing that below-average refinery rates will prevent an adequate buildup of Heating Oil supplies as the winter season approaches. The next resistance point for November Crude is seen at the all-time highs of $83.90, with support found at the 20-day moving average, currently at $78.11. November Crude Oil closed at $82.89, up $2.59.

Cotton futures climbed to 2½-month highs this afternoon, as speculative buyers added to existing long positions. The sharp rally in the grain complex and a general rise in commodity prices due to a weak U.S. Dollar were also seen as supportive for Cotton futures. December Cotton traded as high as 6750 before a late session profit-taking selling spree caused prices to close well below the day’s highs. The battle for acreage next season is keeping the December 2008 Cotton contract active, with new contract highs being made at 7550. Cotton must compete with Wheat, Corn, and Soybeans for production on flexible acreage. The next resistance point for December Cotton is seen at 6800, with support found at the recent lows of 6430. December Cotton closed at 6662, up 67.

Mike Zarembski, Senior Commodity Analyst

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Commodity Prices Tumble as Stocks Come Back in Vogue

Precious Metals: Sharp declines are being seen in the precious metals complex this morning, as a rally in the U.S. Dollar and lower oil prices are slowing the voracious investor appetite for Gold and its brethren. Aggressive speculator selling was seen in Tokyo, with the Tokyo Commodity Exchange (TOCOM) Platinum and Gold contracts showing hefty losses at the close of trading. In early New York trade, December Gold is trading at $738.20, down $15.90, and January Platinum is trading at $1361.00, down $40.20.

Crude Oil: NYMEX light sweet Crude Oil futures continue their sell-off after Friday’s technical reversal, falling below the $80 per barrel mark with traders contemplating lower Oil demand from refineries as profit margins erode. The price of refined products such as Gasoline and Heating Oil have not kept pace with the rising price of Crude, which has cut the margins refiners were getting for processing Oil into energy products. In addition, a stronger greenback the past two days may start to crimp demand for commodities priced in Dollars from foreign buyers. In early trade, November Crude Oil is trading at $79.19, down $0.99.

Dow Jones Index futures: After a record-setting day on Monday, Dow futures continue to climb as traders move back into equities, believing that the worst of the subprime mortgage crisis may be over. The early morning rally comes despite expectations that this morning’s release of the National Association of Realtors' index will show a drop in August in the number of signed contracts to buy previously owned homes. In early trade, December mini-Dow futures are trading at 14182, up 25.

Mike Zarembski, Senior Commodity Analyst

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Crude Above $80 as Inventories Expected to Decline

Crude Oil: Traders were “bargain hunting” in the Crude Oil market after an attempt to move front month November Crude below $79 per barrel was met with fresh buying interest. Prices continue to hover just above $80 per barrel in early trade, with traders gearing up for this morning’s release of the weekly EIA energy stocks report. Current estimates are for a moderate decline in Oil inventories, with traders looking for a decline of between 300,000 and 600,000 barrels last week. Refinery utilization is expected to show a moderate increase of 0.4% to stand at 87.3%. The slight rise in utilization is expected to have resulted in an increase in Oil-derived products, with Gasoline inventories expected to have increased by 500,000 barrels and distillates by 700,000 barrels last week. In early trade, November Crude Oil is trading at $80.54, up $0.22.

Wheat: Grain traders were in a selling mood yesterday, sending Wheat futures down the 30-cent limit all the way through the December 2008 contract. In overnight trade, lead month December Wheat continued to tumble, at one point falling by an additional 30 cents before moderate buying emerged to keep prices above $9.00 by the end of the overnight session. Traders pointed to a stronger U.S. Dollar as reason for the sell-off, as well as disappointment over the fact that the U.S. did not receive any business from Egypt’s latest 80,000 metric ton Wheat tender. However, the Australian Wheat crop continues to be decimated, as high winds and a prolonged lack of rainfall are leading some analysts to further lower their estimates for this season’s production. At the end of the overnight session, December Wheat was trading at $9.00, down 22 ½ cents.

Natural Gas: After rallying to near 6-week highs yesterday, November Natural Gas futures are showing moderate weakness this morning, as traders assess the possibility of a tropical storm forming near Key West, Florida, that has the potential to reach the Texas coast by the end of the week. In early trade, November Natural Gas is trading at $7.357, down $0.057.

Mike Zarembski, Senior Commodity Analyst

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Gas Glut

Natural Gas futures ended the week on a down note as traders returned their focus to near-record Gas storage levels as the winter heating season approaches. Gas traders bid up prices earlier in the week as two tropical disturbances had the potential to reach the U.S. Gulf Coast. That threat has dissipated, turning Gas bulls into sellers as the week comes to an end. Total Gas in storage is nearing record highs for this time of year, with 3.253 trillion cubic feet available. A late session sell-off kept the November contract from holding above the 20-day moving average of $7.077, which is a negative to technical traders. $7.000 is support for November Natural Gas, with resistance found at the recent highs of $7.505. November Natural Gas closed at 7.070, down 0.207.

Gold futures rebounded sharply this afternoon, after an initial sell-off following the U.S. non-farm payrolls report was met with fresh buying. The comeback of the Euro against the U.S. Dollar was the catalyst for Gold’s recovery, with speculators taking advantage of the early sell-off to add to existing long positions. A larger-than-expected rise in average hourly earnings last month sparked some fears of wage inflation, which may help sway the Fed from lowering interest rates at its next meeting at the end of October. The next resistance point for December Gold is seen at $752.80, with support found at the 20-day moving average of $733.30. December Gold closed at $747.20, up $3.40.

Mike Zarembski, Senior Commodity Analyst

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Bulls Lack Energy as Crude Rally Stalls

Energy futures were not immune from a commodity wide sell-off this afternoon, as a rebound in the U.S. Dollar and diminishing storm threats in the Gulf combined to pressure the Oil complex. November Crude Oil fell below $79 at its worst levels of the session, and November Gasoline moved below psychological support at the $2 level. The rebound in the greenback over the past several sessions has triggered a sell-off in the commodity sector in general, with the CRB index down over 4 points in late morning trade. However, traders report lighter than average trade, with U.S. banks and government offices closed for the Columbus Day holiday. Technical traders have noted a potential head and shoulders top forming on the November Crude chart, with “neckline” support seen at $78.44. Should the “neckline” hold, the next resistance point is found at the recent highs of $81.74. Meanwhile, traders await the next EIA energy stocks report, due out Thursday at 9:30 AM Chicago time. November Crude Oil closed at $79.02, down $2.20.

Wheat futures took a tumble this morning, with the Soft Red Winter Wheat contracts traded in Chicago falling by the 30-cent limit as traders reacted to weekend rainfall in the parched Wheat growing areas of Australia. In addition, traders are looking towards next year’s crop, with expectations that producers will plant heavily this fall to take advantage of the favorable price being quoted for new-crop Wheat futures. Bullish Wheat traders will note that volume was light due to the Columbus Day holiday, which may have exaggerated the sell-off in many of the commody markets this morning, including Wheat. The December contract closed below the 20-day moving average for the first time since July, which may signal further selling by momentum traders. The next support point for December Wheat is seen at the September 14th lows at $8.28, with resistance found at $8.88. December Wheat closed at $8.60, down 30 cents.

Mike Zarembski, Senior Commodity Analyst

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Can a Currency Be Too Strong?

Euro Currency: December Euro Currency futures fell to 3-week lows in early trade, as European finance ministers attempt to talk down the Euro out of concerns that the currency has gotten too strong against the Dollar and the Japanese Yen. This has caused speculators long the Euro to start booking some profits. In early trade, December Euro Currency futures are trading at 1.4052, down 0.0106.

Cocoa: New York Cocoa prices are supportive this morning, defying bearish fundamentals of a rise in Ghana’s Cocoa production forecast and a sharply higher U.S. Dollar against the British Pound. In addition, the Cocoa harvest in the Ivory Coast has begun, which may spur some origin hedge selling on any rally attempts. In early trade, December Cocoa was trading at $1835, up $19.

Crude Oil: The sell-off continues in the Crude Oil market, as traders expect a build of U.S. Oil inventories last week. According to a Bloomberg survey of analysts, U.S. Oil stock rose by 1.5 million barrels last week, as refinery usage declined due to seasonal maintenance. As a reminder, this week’s EIA energy stocks report will be out on Thursday at 9:30 AM – instead of Wednesday – due to the Columbus Day holiday on Monday. In early trade, November Crude Oil is trading at $78.57, down $0.59.

Mike Zarembski, Senior Commodity Analyst

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Calm Before the Winter Storm?

Oil futures continue to cling to the $80 per barrel level, despite an expected increase in U.S. Crude inventories last week. Despite being several dollars off all-time highs, Crude prices are still up over 15% the past two months, as a sell-off in the U.S. Dollar has made commodities priced in Dollars more attractive to foreign buyers. In addition, there is still a “weather” premium built into Oil futures, as the peak hurricane season nears an end. So why do Oil prices continue to hover at such lofty levels? One reason is the fear that Heating Oil stocks will remain tight as we near the start of the winter heating season. Traders expect Distillate stocks – which include Heating Oil – to have fallen by 750,000 barrels last week, as refinery rates continue to remain below average. With Heating Oil stocks well below last year’s totals, the Energy Department announced that it expects home Heating Oil prices to rise by 16% this year. If true, it may be a long cold winter for energy bears!

Looking at the daily chart for November Heating Oil, we notice prices holding above both the 50- and 100-day moving averages. However, it appears that a trading range may be forming, with the 50-day moving average at 2.1300 acting as solid support and the 20-day moving average near the 2.2200 area providing resistance. The 14-day RSI backs up this assumption, with a neutral reading of 44.84. In early trade, November Heating Oil is trading at 2.1820, down 0.0020.

Mike Zarembski, Senior Commodity Analyst

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Bubblin’ Crude

Crude Oil rose to a new all-time high today, topping the $86 mark for the first time ever. The Turkish government and the Iraqi Kurds have been butting heads of late, and the repercussions of this cross-border spat is being felt in the Crude market. With the Kurdish rebel bases located near major pipeline systems, fears of a supply disruption in Crude Oil are running high. Of course, the market is constantly on the lookout for supply threats around the globe, so it’s hard to tell if this latest dustup has already been priced into the Crude market as a risk premium during the recent climb. The Crude Oil inventory report comes out on October 17th.

Over in the beverage market, bulls are not drinking Coffee. Dropping below the 20-day moving average (which was support earlier last week), java is most certainly a bear drink today. Although Coffee did manage to stay above psychological support at 130, it could slip back to the 120 area should it fill the gap that was created last month before the 20-day mark. The only area where we could see some other support is around the 127 mark, right above the gap-up.

Mike Tosaw, Director of Education

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Golden Age

Gold – Gold continued to move higher, aided by a jolt in the energy sector. The spike in Crude Oil to record levels has benefited the precious metals sector, signaling inflationary times ahead. Traders – mainly outside of the U.S. – have been allocating funds to physical commodities due to the weakness in the Dollar, which has diminished returns on other investment products. With prices in other commodities such as grains looking a bit toppy, commodity bulls have allocated larger portions of their funds to the metals, especially Gold, which has seen a recent upswing in demand. December Gold broke through the key 61.8 percent Fibonacci retracement last month, signaling a possible test of 790.00. Gold technicals remain bullish overall, but the market is beginning to look overbought, as gauged by the RSI and slow stochastic indicators. Support can be found at 735.00 and Fib support at 717.20, while resistance comes in at 775.00 and contract highs of 791.00.

RBOB – Gasoline futures jumped to a new record high. Geopolitical tensions dominated headlines throughout the trading day, as Turkey maintained its stance that a military operation in northern Iraq’s Kurdish region is a possibility. This would likely interrupt both petroleum supply lines and U.S. military supply lines, drawing out the current conflict and adding additional war premium to petroleum prices. Prices have retraced a bit after making gains overnight on some profit-taking. Yesterday's close signals a breakout over previous highs, but the market may be tempered by an overbought reading on the RSI. The slow stochastics are closing in on overbought levels as well, which could signal a small turnaround or consolidation. Momentum remains very strong, coming in at +.1300. Support can be found at 2.10 and 2.00, while resistance would likely come in at 2.20 and 2.25.

Copper – Copper is trading slightly lower this morning due to lackluster starts in London and Shanghai. Copper has traded off the weakness in the Dollar and the prospect of higher U.S. inflation, with everything quiet on the labor front. Prices have been further aided by tight supplies of the base metal and soaring transportation costs. Non-commercial net longs have increased their position almost threefold over the past week, which marks the largest net long position in over eighteen months. After closing above the 3.70 resistance mark earlier this month, December Copper has broken down a bit, and a close below 3.58 could spark some long liquidation. The 9-day MA is in danger of crossing below the 18-day MA, which would be a bearish technical signal in the mid-term. Momentum remains strong at +.27 and the RSI is a neutral 49 percent. Support comes in at 3.50 and 3.42, while resistance can be found at 3.70 and 3.78.

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Crude Concerns

Crude Oil prices continued to rise today on mounting tension in the Middle East. The November contract managed to creep above the $88 mark for a brief spell before retracing back into the $87 range. With Crude continuing to make new highs, there is likely to be debate among traders as to how long the ride can possibly last.

Just as it was yesterday, much of today's movement was based on what is happening in Northern Iraq. The Kurds are located by the Ceyhan pipeline, which carries oil to a tanker-loading terminal in the Mediterranean. This pipeline has been struggling to carry its usual load ever since the U.S. invasion of Iraq in 2003. The current dispute between Turkey and the Iraqi Kurds may be more reason to believe that prices are going to continue to rise.


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Techs save the day

E-mini NASDAQ – Stocks rebounded mid-session, as investors flocked to the tech sector as a safe haven of perceived strong earnings going forward, especially with the Christmas shopping season nigh. After the close, tech heavyweights Apple and Texas Instruments both posted earnings that topped street estimates, with Apple blowing away estimates of $0.86 a share with a $1.01 post. Banking shares managed to rebound somewhat on news that Bear Stearns has forged a strategic alliance with a Chinese bank to get a stronger foothold in the lucrative Chinese investment banking sector. The FDIC warned that the subprime squeeze will get worse before it gets better, with the number of resetting ARM mortgages expected to peak in the second quarter of next year. There are now rumblings that the credit card and auto loan industries will be the next to feel the pinch, as home mortgages are generally a priority over other debt for consumers. Unlike the broader market, the NASDAQ mainly looks technically sound, not backing down from recent highs and trading above the major moving averages this morning. Momentum remains strong at a healthy +92.00 and the RSI is neutral at 44 percent. Support comes in at 2125.00 and 2075.00, while resistance can be found at 2175.00 and 2200.00

Crude Oil – Crude Oil dropped for the second consecutive session as traders took profits. Turkey has reiterated plans to invade the Iraqi Kurdish region, with the Turkish prime minister recently commenting that no foreign power (read: the U.S.) will dictate what the nation does in its own security interests. What remains to be seen is the scope of the conflict. In addition to Turkey and Iraq, heavily Kurdish regions exist in Iran, Syria, and Armenia, which could also be drawn into a conflict. On the fundamental front, Crude Oil inventory data has been bearish recently, and many traders are looking for another build in Wednesday EIA report. A slowing economy could weaken demand, and traders still have Chinese industrial production on tap later this week. December Crude Oil is showing overbought readings on both the RSI and slow stochastic indicators, which suggests that the market will either labor going higher or may break down a bit. Momentum is very strong at a robust +5.76 coming into trading and the indicator is showing very slight bullish divergence from RSI. Support can be found at 84.75 and 82.45, while contract highs at 88.49 may act as resistance.

Bonds – The treasury markets took a pause yesterday to cool off after December Bonds gained almost three points over the prior three trading sessions. There was some profit-taking yesterday, and many traders were reluctant to add to their positions ahead of the FOMC meeting next week. Bond traders may also be reluctant after several failed rallies over the past year. The FDIC warning over subprime debt helped he market avert a broader sell-off, but Bonds have not felt their classic “flight to quality” effect recently due to the weaker Dollar. Bond technicals could also be blamed for the pause yesterday, as the market is extremely overbought on the RSI and slow stochastics, with the stochastics close to crossing over to the downside. Yesterday's indecision led to a spinning top pattern, which suggests some negative short-term bias. Support comes in at 112-10 and 111-13, while resistance can be found at 113-16 and 114-08.

Commodity Analyst, Rob Kurzatkowski

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The Loonie Takes Flight

Canadian Dollar: December Canadian Dollar futures rose to new intraday highs as traders began accumulating currencies in commodity-exporting nations. Canadian retail sales came in above analyst expectations, which helped stabilize prices above the 1.0325 mark. The strong retail number was led by auto sales, suggesting that confidence in the economy is very strong, as consumers tend not to purchase big ticket items in times of uncertainty. The Loonie did begin to drift away slowly from intraday highs as traders took some profits off the table, fearing being stuck in long positions at all-time highs. During the late-2005 to mid-2006 commodity bull run, traders began to accumulate commodity related currencies such as the Canadian and Australian Dollars to synthetically trade the commodity markets as a whole, while avoiding the violent price swings in commodities like Crude Oil and Copper. Technically, the daily December Canadian chart appears to indicate some consolidation or possibly a small correction ahead. The RSI recently peaked on October 15th, but the market continued to trek higher, which is typically seen as bearish. Since the beginning of the month, momentum has slowly drifted lower, even as prices have risen to record highs. Support comes in at 1.0175 and 1.0100, while resistance can be found at 1.0400 and 1.0435.

RBOB: While the Crude Oil market has been grabbing headlines, Gasoline prices have quietly risen to all-time highs. Whether RBOB prices are able to sustain these high levels remains to be seen. Refinery capacity has been underutilized compared to prior years, Heating Oil demand figures to get a seasonal rise and any type of military action by Turkey in Iraq will probably disrupt supply. On the other hand, Gasoline demand tends to diminish once the weather begins to cool and the seasonal trend is for lower inventories. Traders will probably be keeping an eye on the finished products numbers more so than Crude inventories. A sharp rise in distillate inventories would likely cause a sell-off, provided nothing changes on the geopolitical front. Mastercard reported that Gasoline demand is down 1.0 percent for the week, which can partially be attributed to the rising cost of fuel. December RBOB seems to have found some support in the 2.11-2.12 area. Momentum is beginning to show bullish divergence from RSI and price trend, which suggests short-term upside bias. The last three days of selling were partially driven by the overbought conditions on the RSI and slow stochastics. In addition to 2.10, support comes in at 2.07 and the 38.2 percent retracement of 2.04, while resistance can be found at 2.14 and contract highs of 2.19.

Wheat: Wheat closed limit-down in the December contract, as traders adjust for what is typically a weak export season. The thinking that Russia may hike export taxes more than previously stated spilled over to Monday's session, but traders lost faith in the news yesterday, which pulled the rug out from underneath the market. The lack of news has caused traders to get antsy and liquidate positions. Wheat also suffered a small technical setback, with the market unable to breach the 18-day moving average to the upside. The market is lower overnight, and December Wheat is trading below the 50-day moving average as of the 6:00 AM CST eCBOT halt. This would probably be viewed as a weak technical signal longer-term, as the contract has not traded below the average since mid-May. After confirming a head and shoulders top, the market did bounce a bit, but a close below recent lows could trigger an extended sell-off. Momentum has been weak and has outpaced both price and RSI to the downside. Support comes in at 815.50 and 760, while resistance can be found at 878 and 910.

Rob Kurzatkowski, Commodity Analyst

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Treasury Safety Net

Bonds: Bonds rallied toward early-September highs on Merrill Lynch’s subprime write-downs and a home sales report that showed the housing market reeling. The Merrill news sent stocks lower on the open after the company reported a staggering write-down of $7.9 billion, with just under $21 billion of mortgage-based debt outstanding. Existing home sales dropped an eye-popping 8 percent, almost double consensus estimates. Certain key higher-priced real estate areas – namely the Northeast and Southern California – were hit especially hard due to the inability of purchasers to get approval for jumbo loans. Fed Governor Kroszner, speaking before the House Financial Services Committee, stated that mortgage reform should not hurt the mortgage securitization sector. This is setting up an investor versus homeowner showdown in which neither side, or the overall economy, will benefit. Laws enacted to protect consumers would, in all likelihood, lead to a devaluation in mortgage-backed debt resulting in further write-offs of bad debts and, ultimately, more difficulty for homeowners seeking financing. On the other hand, leaving borrowers without a safety net could cause more damage over the long haul, given the fact that the number of loans resetting will not peak until the second quarter of next year, at which time a record number of foreclosures is possible. Government debt could act as a safe haven for investors, provided inflation remains low. The market came close to its September 10th highs, but traders were reluctant to push prices higher ahead of the FOMC policy meeting next week. Fed Fund futures have priced in a 100 percent chance of a rate cut, leaning toward a quarter point. Technically, December Bonds look bullish on the daily chart, but the market is very overbought at the moment. The overbought conditions and Fed uncertainty may be setting the stage for some consolidation or possibly a small retreat. Last week’s breakout from a descending triangle is measuring a move to 116-00. Momentum remains strong, coming in at +3-06. Support can now be found at 113-00 and 112-10, while resistance comes in at 114-08.

Crude Oil: Petroleum traders got a shot in the arm today from the weekly inventory numbers. Crude Oil imports slowed by over a million barrels a day over the last week, and ending stocks were down over 5 million barrels versus estimates of a million barrel rise. Distillates also surprised, as Gasoline inventories fell by almost 2 million barrels versus estimates of a 1 million barrel rise, and Heating Oil and Diesel showed a draw of 1.85 million barrels. Turkey was said to have hit Kurdish targets along the Iraqi border, pushing the market higher prior to the EIA and DOE releases. Fundamentally, Crude is trading well above where supply and demand would dictate, and the recent Turkish crisis has combined with commodity and hedge funds putting fresh money into the market to push prices toward the $90 mark. For now, any new developments – positive or negative – in regard to the Iranian nuclear program and/or Turkey-Kurd crisis could affect prices violently. December Crude made new intraday highs overnight, reaching 88.99. Momentum showed some bullish divergence from the RSI and price over the past three days, suggesting upside technical bias. December Crude is at overbought levels, which could hamper rallies. Support comes in at 84.85 and 82.50, while resistance may be found at 90.00.

Copper: Copper suffered another day of losses yesterday on the poor global economic outlook. The disappointing housing data kept prices from rallying with the rest of the precious metals market. Copper has followed Crude Oil and Gold higher this morning, as the U.S. Dollar continues to flounder and equities recover. China did increase its own output of the base metal by 24 percent on the year and all is quiet on the labor front, which could hold back price advances. After confirming a double top, the market has broken down, but has yet to reach the measured move of 20 cents from the breakout. Momentum continues to lag behind both price and RSI, suggesting that more downside may lie ahead. Support comes in at 341.00 and 339.00, while resistance can be found at 357.50 and 361.50.

Rob Kurzatkowski, Commodity Analyst

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Oil's Perfect Storm

Crude Oil: Crude Oil continues to climb this morning and is currently trading above the $90 mark. In recent days, the market has had a number of factors going for it – a weak Dollar, falling inventories, traders accumulating commodities, geopolitical conflict and a cryptic oil cartel. The greenback continues to slide ahead of the FOMC meeting next week, with traders now thinking that a half-point rate cut may be in order. The soft Dollar has caused traders to load up on commodities as an inflation hedge. Crude was drifting lower prior to the EIA's inventory report, but the lower supplies gave Oil bulls the jolt they needed. OPEC has pledged to increase exports by 500,000 barrels, but the cartel has not indicated that it would further increase output, saying the market was “well supplied.” There are also indications from tanker tracking companies that the 500,000 increase is going to be more in the 50,000 range. In addition to the ongoing conflict over the Iranian nuclear program and the Turkey-Kurd situation, there were reports that Israeli warplanes were shot at, but not hit, over Lebanon. All of these factors are “what if” forces driving the market higher, but not actual economics like the supply report. Hedge and commodity funds seem to be pushing prices much higher than supply and demand would dictate, so a withdrawal of money from the market by these funds could trigger a sell-off at any point. December Crude continues to look bullish on the daily chart, but the market is very overbought. Momentum continues to outpace RSI to the upside, which is bullish over the near-term. Support comes in at 88.50 and 84.75, while resistance may be seen at 92.00 and 95.00.

S&P: Stocks finished nearly unchanged in a wild day of trading yesterday. Prior to the open, durable goods orders and weekly jobless claims both came in worse than expected and the market immediately sold off. New home sales were better than expected, but the prior two months were revised down by 60,000 and 69,000, respectively, negating any positive that could be drawn from the report. The market then began to brush aside the economic data and focus on corporate earnings, which have been solid. As we approach Wednesday's FOMC rate decision, the market figures to trade in a choppy, erratic manner reminiscent of yesterday's action. The only report released today is the Michigan consumer sentiment figure at 8:45 AM CST, which is expected to come in at 82.3, up slightly from last month's 82.0. Technically, the ESZ07 is trading in a sideways consolidation pattern between 1495 and 1530, without a clear direction in the near-term. The market is still well above the weekly uptrend line, and it would take a sell-off into the low 1400's for the market to break down longer-term. Momentum is showing bearish divergence from the RSI, which points to a negative bias in the near future. Critical support and resistance are 1495 and 1550, with a close beyond either level likely to determine market direction over the medium-term. In addition to these key levels, minor support and resistance come in at 1508 and 1542, respectively.

Gold: Precious metals continue to climb on the tumbling greenback and skyrocketing Oil prices. Gold has benefited from climbing commodity prices and inflation-averse investors. Lower rates likely mean more USD downside and possibly more upside for the precious metals market. December Gold is trading above recent highs of 776.90, which would be considered a technical breakout if the market is able to hold these levels. Momentum is beginning to show some bearish divergence from the RSI. Given the sharp climb in prices in the early going, a close below 776.90 would probably be considered bearish by traders and could spark some profit-taking by Gold traders who have been faked out by the market before. Gold is overbought on both the RSI and slow stochastics, suggesting possible profit-taking in the near-term. Support comes in at 765.00 and 750.00, while resistance can be found at 783.00 and 800.00.

Rob Kurzatkowski, Commodity Analyst

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Supply Concerns Keep Crude on the Move

Crude Oil – Crude Oil continues to climb this morning on news that Mexican production in the Gulf of Mexico is expected to drop by 600,000 barrels a day due to a storm. Friday, gunmen kidnapped oil workers in oil-rich Nigeria – the second attack in less than a week. Traders are genuinely concerned about supply for the first time in a long time due to the sharp drop in weekly Crude Oil inventories and a suggestion that OPEC isn't making good on its pledge to increase output by 500,000 barrels a day beginning in November. Geopolitical tensions remain unchanged, with Turkey continuing to battle Kurdish rebels and Iran thumbing their nose at the rest of the world with regards to the country's controversial nuclear program. Crude Oil continues to follow through on the bullish flag pattern confirmed on Thursday. The market is giving overbought readings on the RSI and stochastic indicators, but this has done little to slow the market given all of the outside fundamental factors. Momentum is climbing and showing bullish divergence from RSI, suggesting this rally may not be short-lived. Support comes in at 88.50 and 85.00, while resistance may be found at 95.00 and 97.50.

S&P – Index futures are higher again this morning on expectations that corporate earnings will remain strong. The focus has been the booming tech sector and petroleum companies, who figure to benefit from rising Crude Oil prices. Traders are looking to the Fed to slash interest rates on Wednesday, with the focus on how much – not if – the central bank will lower rates. The market shrugged off very disappointing economic data last week with the thinking that earnings will remain strong through early next year, at which time the interest rate cuts should make their way through the economy. The December e-mini S&P is trading just below the key psychological 1550.00 mark, and a solid close above the level could bring more buyers into the market. A close above1550.00 would also push the market above all major moving averages for the first time in over two weeks. Momentum is showing bearish divergence from RSI, which suggests that the recent rally may begin to fade. Support comes in at 1525.00 and 1500.00, while resistance can be found at 1550.00 and 1573.50.

Bonds – Bond futures are slightly lower in quiet trading this morning, as traders await Wednesday's Fed decision. Bond traders have been optimistic about the upcoming FOMC meeting, with many now expecting a half point cut. The reason for this optimism is that the FOMC has been seen as very consumer conscious, and housing has clearly been on the Board's mind. This type of thinking could be setting fixed income traders up for a letdown, with the central bank likely sticking to quarter point cuts to stave off inflation. A half point cut may be too much for Bond traders as well, as the Dollar would likely plummet, which would decrease demand for USD-denominated investments, including treasuries. December Bonds failed to advance beyond early September highs and the market remains overbought, even after a third consecutive negative session. Momentum has been flat to lower and has been moving in lockstep with the RSI indicator. The market has found some support in early trading at the 9-day moving average. Support comes in at 112-10 and 111-13, while resistance comes in at 113-20 and 114-05.

Rob Kurzatkowski, Commodity Analyst

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Oil Sets Another Record

Oil was the hot topic again today, closing at new record highs above $93 a barrel. The higher prices were triggered in part by poor weather conditions in Mexico, where Petroleos Mexicanos – one of the largest Crude suppliers to the U.S. – halted its production of 600,000 barrels a day due to an impending storm. Although expected to be clear by week’s end, weather-related events tend to dictate their own schedules on the marketplace.

Other news affecting the price of Crude today came from the familiar quarters of the Middle East, where Turkey and the Iraqi Kurds continue their geopolitical bob-and-weave. With the Kurds still threatened by the imposing Turkish military, the Iraqi foreign minister has warned of serious consequences if the Turks were to begin a ground attack.

The chart shows an obvious uptrend since mid-August. With prices moving as much as they have since then, Oil bulls may be getting ready to take a break if this news cools off for a while. Today's closing price is still well above the 15- and 25-day moving averages. Oil is very hot right now, but for how long?

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FOMC Decision – Trick or Treat?

Crude Oil – Today figures to be a volatile day for the Crude Oil market, as traders await weekly petroleum inventories figures and the Fed rate decision. Crude inventories are expected to show a weekly gain of 600,000 barrels, but Distillates and Gasoline are expected to show a draw of 1.1 million and 300,000 barrels, respectively. Two conflicting reports by tanker tracking companies regarding OPEC making good on its promise to increase exports by half a million barrels a day starting November 1 has led to some confusion among traders. The Fed has stuck with its forecast of moderate growth next year, which is favorable for petroleum demand, and may lead to inaction later this year to stave off inflationary pressures. December Crude Oil had a weak close, finishing near the lows of the day after trading below $90 late in the session. The market was able to find some support this morning around the 9-day moving average. Momentum is still slightly outpacing RSI, which sets a moderately bullish tone short-term. Support comes in at 88.50 and 85.00, while resistance can be found at contract highs of 93.70 and 95.00.

E-mini S&P – Index futures are trading higher this morning ahead of the Fed rate decision. Today is a report-heavy day for the stock market, and traders will have plenty of data to digest. GDP – expected to show an annual growth rate of 3.2 percent – is released at 7:30 AM CST, followed by Chicago PMI, Construction Spending and the weekly petroleum inventories report. Weakness in the figures, especially GDP and Construction Spending, figures to be bullish for stocks, as it would likely force the Fed to lower rates even further at its December policy meeting. U.S. stocks have done well on overseas exchanges in early trading, with many investors viewing the shares as a great value because of the weak Dollar. Technically, the December E-mini remains in a holding pattern, waiting for direction. The market backed off of its initial test of the 1550 resistance area, and a solid close above this mark would be needed to turn the technicals bullish. A close below the 1525 mark could be viewed as bearish near-term. Support comes in at 1525 and 1500, while resistance can be found at 1550 and 1570.

Silver – Precious metals took a hit yesterday on weaker energy prices and profit-taking. Nothing has fundamentally changed for the sector, although the Wall Street Journal’s resident Fed watcher did cast some doubt over tomorrow’s expected rate cut, saying that the housing sector has not slipped enough to cause the central bank to act. Writer Greg Ip’s statement caused some jitters in the equity markets and offered some support to a battered greenback, sending metal prices lower. An increasing number of traders are beginning to come to the conclusion that the Fed will not act this time around to leave the door open for a rate cut at the end of the year. If the Fed does act, traders believe the policy statement will likely have a very hawkish tone, which would likely bolster the Dollar and send metal traders into retreat mode. There was widespread profit-taking in commodities and Silver traders were no exception, especially with the market at overbought levels. Technicals will likely take a back seat to fundamentals today as traders await word from the Fed. Longer-term, the December Silver chart remains bullish and is measuring a possible move toward the $16-16.50 area. The initial rejection at the 14.55 resistance area is a negative sign shorter-term. Momentum remains strong despite the market finishing lower, and the indicator is showing bullish divergence from RSI. Support comes in at 13.80 and 13.50, while resistance can be found at 14.55 and 15.05.

Rob Kurzatkowski, Commodity Analyst

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Gold Sparkles

Gold – The Gold market topped the $800 mark intraday on strong Crude Oil and a weak Dollar, which cannot seem to find a bottom. With the greenback plummeting against all of the majors, overseas and institutional traders stayed away from Dollar-based assets and went back into accumulation mode on the commodities side. The FOMC statement mentioned inflationary pressures remaining in the market, but also noted that inflation should be held in check by slowing economic activity. The ever-cryptic central bank did leave the door open for future rate cuts, but seemed to lean toward a pause in its December meeting. With plenty of fresh cash on hand, commodity funds have been instrumental in driving prices higher than even the most bullish traders had expected. Gold remains bullish on the daily chart, but the market is overbought at the moment, which could trigger some profit-taking. The market briefly traded above the $800 mark both yesterday and this morning, but immediately backed off of this key psychological resistance area. Momentum is begging to flatten out, suggesting the possibility of profit-taking going into the weekend. Support comes in at 775 and 760, while resistance can be found at 810 and 825.

Dow – Stock index futures rallied sharply on the Fed rate decision and stronger-than-expected GDP and Construction Spending. The solid GDP figure suggests that corporate earnings will remain strong through the end of the year, although the enthusiasm was somewhat tempered by a dismal Chicago PMI Index reading below 50, showing contraction in the sector. Futures are lower this morning ahead of the PCE Inflation report at 7:30 AM CST, which is expected to show inflation at 0.2 percent for the month. The FOMC statement opened the door for further rate cuts, but at the same time tempered this by saying inflationary pressures remain. This is why the market is keenly watching the PCE figure, which is the Fed's favorite inflation gauge. The December Mini-Dow failed to move beyond its key 14,000 resistance mark yesterday, which disappointed technicians. Momentum is showing bearish divergence from RSI, suggesting a near-term downward bias. Yesterday's close above the 18-day moving average is near-term bullish and could mean that a near-term low is in place. Support comes in at 13,750 and 13,610, while resistance can be found at 14,000 and 14,090.

Crude Oil – Crude Oil was bolstered in early trading by a stronger-than-expected GDP figure and another unexpected drawdown in inventories. Crude inventories for the week ending October 26th fell 3.894 million barrels versus estimates of a 600,000 barrel build. The 4-week average of Crude Oil imports is roughly half a million barrels short of the 2005-06 average, while domestic production is in line with seasonal norms. U.S. Crude Oil stocks, which have been above the normal ranges since May, have actually dipped back into the average range, so there is by no means a shortage of supply. The FOMC policy statement was a mixed bag for Crude Oil traders. The Board suggested that the economy will continue to cool through the early part of next year, which suggests that petroleum demand will fall. On the other hand, the Fed acknowledged that it is keeping an eye on the climbing Oil prices, maintaining a close watch for inflationary pressures making their way into the economy. December Crude is off the charts – literally. Even after closing at record highs, the RSI indicator is not giving overbought readings, leaving the door open for more upside. Momentum is screaming higher and is outpacing RSI, which is bullish near-term. Today’s range of 6.36 marked the largest intraday range for Crude in recent memory, sending volatility indicators through the roof and giving no technical indication of topping out. Support comes in at 92.25 and 90.00, while resistance can be found at 97.50 and 100.00.

Rob Kurzatkowski, Commodity Analyst

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Early Indecision

10-Year Notes – Treasuries got a lift last week from weaker economic data, a Fed rate cut and subprime woes that began to seep from brokerage and investment banking into commercial banking as well. The "flight-to-quality" effect may be short-lived in 5- and 10-Year Treasury Notes, however, as both domestic and overseas funds have poured into these offerings, which may curb further advances. A weak Dollar could also curb overseas demand for U.S. investments, likely leading traders to shift funds into physical commodities. With the departure of Citigroup's Charles Prince, two major banking executives in as many weeks have become casualties of the recent mortgage downturn. With more disclosures likely in the coming weeks and months, treasury prices may find further support, even if the Fed opts not to lower rates at its December meeting. Last week's decision to cut rates by a quarter point seemed forced on the Fed to keep the markets happy, and the one dissenting vote makes future cuts no sure thing. December Notes broke out to new highs, but the market is trying to test the newly established 111-00 support area in early trading. Short-term direction may be difficult to predict given the conflicting technicals, with slow stochastics showing overbought levels, but momentum continuing to show bullish divergence from RSI. Support comes in at 110-25 and 110-00, while resistance can be found at 111-25 and 112-07.

Crude Oil – Crude Oil is slightly lower overnight as tensions ease between Turkey and Kurdish rebels. The Kurdistan Worker's Party freed eight Turkish soldiers captured last month and Turkish Prime Minister Erdogen is meeting with President Bush to discuss the conflict. The Dollar is weaker this morning, which has kept the losses modest. The slumping greenback has helped catapult Crude Oil and commodities in general, due to lower cost and inflation concerns. The drop in supply over the last few weeks has opened some eyes, but reserves remain within the 4-year average. Crude Oil remains strong technically, and the chart has not shown any indication of a reversal unfolding. The market remains overbought, which could slow upward momentum. Support comes in at 93.70 and 90.00, while the market may run into resistance at 96.00 and 100.00.

E-mini S&P – Stocks will start the week in negative territory on continued subprime concerns. The Citigroup board is bringing former Treasury Secretary Robert Rubin in to help right the ship and send a strong message to investors. It could also be interpreted as a message that troubles in the subprime sector are here to stay for some time. Large commercial banks like Citi could be hit especially hard in the second quarter of next year when ARM loans peak, as borrowers delay or renege on payments for auto and credit card loans. The December e-mini S&P broke down last week, despite closing above the 1550 resistance area on Wednesday. Momentum is beginning to show positive divergence from RSI, suggesting some short-term upward bias. The ESZ07 is currently trading below the 9-, 18-, and 50-day moving averages and further weakness could bring a downward crossover of the 18- and 50-day averages, which would be bearish longer-term. Support comes in at 1500 and 1460, while resistance can be found at 1525 and 1550.

Rob Kurzatkowski, Commodity Analyst

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Soybeans Break Through Double Top On Way To New High

Soybeans cruised to a new high today, breaking through a double top en route. In late September, a new high was established at 1012, and that level has been tested for about the last week and a half. Today, Soybeans managed the breakthrough with a close of 1031 for the December contract.

Since this price has remained fairly stable for the last few trading sessions, the moving averages have not been seriously violated. The 15-day moving average had acted as a support level in the sideways trade over the last few days, before the movement away to the upside today. The 25-day moving average, meanwhile, has lagged over the last 10 days, but is now on its way up. Since the fast stochastics were above 80, this indicated a violation of the reversal indicator.

Elsewhere, Crude Oil continued its march to $100, spiking briefly above $97 today before closing with another new high at 96.82. Oil traders will be keeping an eye on inventory numbers tomorrow, with the EIA release set for 10:30 AM Eastern time. With tensions in the Middle East continuing to fester, Crude figures to be a closely watched market over the next several weeks.

Mike Tosaw, Director of Education

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Dollar Drops, Crude Pops

Crude Oil – December Crude Oil passed the $98 mark in overnight trading on a weaker Dollar and expectations that inventories will once again drop. A Chinese official stated that the government favors stronger currencies and that the Dollar has lost its status in the world, which suggests that the nation will likely further diversify away from the greenback. Today's petroleum inventories report is expected to show a drawdown of 1.6 million barrels for the week because of disruptions to Mexican imports. Last week's report showed that Oil reserves were at their lowest levels since 2005, and further drawdowns could push prices above the $100 mark. Despite the high prices, Crude Oil demand is expected to increase by about 1 percent in the U.S., and the IEA is expecting China's demand to double by 2030. December Crude remains bullish on the daily chart, despite being technically overbought. Momentum is showing bullish divergence from RSI, which suggests upward bias near-term. Stochastics remain overbought, but there has been no bearish crossover. Support comes in at 95.00 and 91.50, while the market may find resistance at 100.00 and 101.50.

Gold – Gold is having another stellar trading session this morning, as it continues to march toward all-time highs. Strong energy prices and the weak greenback helped further propel the market in early trading. Due to uncertainty in the financial markets, Gold ETF's have seen an inflow of funds, which figures to bolster physical demand for the metal. There is some talk now of Gold ETF's becoming a safe haven for investors going forward if the market does not perform, similar to the way REITs became a safe haven following the bursting of the tech bubble. The December Gold chart remains bullish, but the market did reject advances to the 850 mark in the early going. Gold is very overbought on the 9-day RSI, giving a 91 percent reading this morning, which hints at possible profit-taking in the near future. Gold is now firmly trading above the all-time high settlement price of 825.50 and traders are beginning to wonder what the next upside target will be. Support comes in at 814.20 and 800, while resistance may come in at all-time highs of 850.00.

Silver – Silver prices, like Gold, have rallied sharply overnight, but the market has given back half of the early gains. Silver has been flying under the radar for many traders because of the booming Oil and Gold prices, but many market observers are now hinting that Silver may outperform Gold in 2008. The slumping Dollar and rapidly rising energy costs have really driven up prices, but either of these factors reversing course would likely spark a wave of profit-taking. December Silver is bullish on the daily chart, but the intraday price action has been bearish. Further intraday price declines would set up a bearish pattern on the chart and possibly bring about a near-term correction. December Silver is registering a very overbought 93 percent reading on the RSI this morning, which suggests prices may have to correct or move sideways in the near-term before any further advances. Support comes in at 15.200 and 14.550, while resistance can be found at 16.00 and 16.27.

Rob Kurzatkowski, Commodity Analyst

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Dollar Sinks as China Bails

Plenty of developments around the markets today. Crude Oil inventories dropped by a lower-than-expected 800,000 barrels, meaning this wouldn't be the day for the flag to be planted atop the $100 peak. U.S. stock markets plunged on continued bad news related to the credit crunch.

But the continuing story to focus on is the U.S. Dollar, which managed to hit another all-time low today as China proclaimed its lack of confidence in the currency. With the large amount of money that China has tied up in the Dollar, the country's decision to back off is a factor that cannot be ignored – and the market certainly paid attention. China plans to shift up to 1.43 trillion of currency reserves out of the Dollar and into stronger currencies.

On this news, investors started shifting money into Gold. Though prices for the day finished basically flat, at one point the December Comex contract was as high as 848. Tomorrow, traders will be watching the initial claims numbers to see how the employment picture is stacking up this week.

Mike Tosaw, Director of Education

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Wheat Makes a New 2-Month Low

December Wheat futures (WZ7) hit a new 2-month low today with a closing price of 762. This is part of a downtrend that started at the end of September when the high was established at 961. Since then, there has been a classic trend to the downside. There was a little bit of congestion at the 800 mark last week which could have acted as a support line. However, after being penetrated to the upside briefly, it wound up acting as a general point of resistance. On the chart you will notice that the sellers came in yesterday when the 810 mark came onto their screens at the open. At that point, the bears took control and never gave it up.

Looking at the moving averages, we see that the prices are below both the 15- and 25-day MAs. Although not terribly far below, it still shows that the market is moving fairly quickly. What is interesting is that the fast stochastic indicator is approaching the low end of the spectrum. If that is an indication of an upcoming reversal, it will happen without the support of the chart. The nearest level of support is in August at around the 725 mark. With almost 40 points of wiggle room, the bulls will have to do a little dancing on air to make a turnaround from this level.

In other news, Crude Oil couldn’t quite make it over the $100 mark today, closing at 95.31 after getting as high as 97.69. With the relationship of Oil to the Dollar, it will be interesting to see how the Fed reacts to spiraling prices in the petroleum sector.

Mike Tosaw, Director of Education

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Profit-Taking Tarnishes Gold

Gold: Gold futures are sharply lower this morning on profit-taking and lower energy prices. After climbing to record high closes last week, traders are looking to take some profits off the table in this technically overbought market. Metal traders have been talking about $800 Gold for some time, but now that this figure has been eclipsed, there is widespread indecision on where we go from here. Longer-term fundamentals remain bullish – the Dollar is weaker, energy prices are still near historical highs, physical demand is strong in India and China, and inflationary pressures remain high in the U.S. December Gold comes in at a very overbought 89 percent on the RSI, which has heavily influenced the selling pressure this morning. Momentum has turned somewhat lower this morning, but remains strong at +54.7. Friday's spinning top pattern, coupled with two candlesticks with long upper wicks, also sets a bearish technical tone for the day, as it indicates bulls did not have control of the market, even as the market made new record high closes. Support now comes in at 808.70 and 780.00, while resistance can be found at 848.00.

Dow: Stocks tumbled last week on the continuing subprime mortgage concerns and earnings warnings. Retail sales showed the weakest October figures since 1995, which could be a prelude to a slower-than-expected holiday shopping season. Wachovia and E-Trade have joined the subprime fray, with both companies issuing warnings on Friday. Surprisingly, bank shares are leading the charge this morning, as value investors have stepped in to buy shares in the beleaguered sector. On a sour note, Deutsche Bank released a report suggesting that subprime losses are expected to reach the $300 to $400 billion mark globally, far outstripping prior forecasts. Technology stocks have dipped this morning due to several downgrades in the sector and worries that the Christmas shopping season may be slower than anticipated. Friday's tumble sent the market toward the 13,000 support area and dragged the RSI below 25 percent, which could partially account for the bounce we are seeing in the early going. Momentum has begun to show bullish divergence from the RSI, suggesting short-term strength. Support comes in at 12,815 and 12,650, while resistance can be found at 13,250 and 13,500.

Crude Oil: Crude Oil futures are lower this morning on weaker U.S. economic growth forecasts and the possibility of OPEC production increases. There is speculation that Saudi Arabia – the only OPEC nation not pumping at capacity – may increase output by as many as 500,000 barrels a day. Fed Chairman Ben Bernanke's slower growth forecast for the U.S. has weighed on the market and prevented further advances. Several North Sea facilities that were shut last week have restarted production. Some traders have been disappointed that Crude prices did not test the $100 mark last week, which has eroded some confidence in the market. Three consecutive small body candlesticks on the daily chart show that traders have been indecisive, with bulls unable to control the trading sessions. The market is currently trading below the 9-day moving average, and a close below the average could signal short-term weakness. The stochastics and TRIX indicators crossed to the downside this morning, also suggesting short-term technical weakness. Support comes in at 93.70 and 90.00, while resistance can be found at 97.10 and 98.50.

Rob Kurzatkowski, Commodity Analyst

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Crude Marks Veteran’s Day With a Parade of Bears

Crude Oil may still hit $100, but it wasn't happening today, as the Dollar Index took a stand against the world's currencies. Since Crude and the Dollar have been tightly correlated, today's decline in Oil prices was not surprising. The December contract (CLZ7) was trading at 93.72 at the time of this writing. With all of the upside surge in recent weeks, today shows once again that anything is possible in any market at any time.

Looking at the chart, we can finally see something besides a straight line upward – notice how we are heading back to both the 15- and 25-day moving averages, almost touching the 15-day average today. Even if this (or the 25-day average) acts as support, we still have some downside wiggle room before either average will be hit. Another interesting study on the chart is the fast stochastic, which suggests a possible reversal in trend that would keep the markets waiting quite a while for $100. But if this is a pullback, $100 Oil in the near-term is still a very real possibility.

There was little economic news to be had on Veteran’s Day, but later this week traders will be watching for pending home sales, retail sales, PPI, and initial claims. As the week progresses, Crude Oil will likely play a big part in how almost all the markets are moving.

Mike Tosaw, Director of Education

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Crude Falls with the Dollar

As the value of the U.S. dollar has been heading lower of late, Crude Oil prices have been going higher. But today, these two got together for a drop. The December Crude contract (CLZ7) closed the day at $91.41, while the December Dollar Index contract (DXZ7) is trading at 75.79. Although the Dollar is slightly above its all-time lows, it can still be considered to be in a decided downtrend.

In the news today, the Paris-based International Energy Association cut its estimate for fourth quarter global Oil demand by more than 500,000 barrels, inspiring bears to pull prices down to 90.13 at one point. Oil bottomed out at around 1:00 PM Central, at which point the bulls came in to give the market a slight pullback.

What is interesting about the chart today is that the low was right at the 25-day moving average, which turned out to be the spring for the late day pullback. Another level of support that should not be overlooked is October's $89 level. Below that, the next level of support is around $85 set a week earlier in October.

Tomorrow, Oil traders will be watching for Crude inventories, due out at 9:30 AM Central time. Other announcements include retail sales, PPI, and business inventories.

Mike Tosaw, Director of Education

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Profit-Taking Continues to Take Its Toll

Crude Oil: Crude Oil futures are higher ahead of the weekly inventory data release on expectations of a drop in inventories and a weaker U.S. Dollar. Inventories of Crude Oil are expected to fall by 750,000 barrels, which would mark the fourth consecutive week of declines. The market sold off sharply yesterday on heavy profit-taking, even though Saudi Arabia contradicted earlier reports by indicating that it would not ramp up production. Despite the Saudi statement, indications are that OPEC nations do not want petroleum prices at these levels, fearing that it could stifle demand. Things have been very quiet on the geopolitical front in recent days, the lack of market-driving news stories likely influencing some traders to take profits. The Dollar is weaker against the major currencies this morning, making physical commodities more attractive. December Crude closed below the 18-day moving average, which suggests that a near-term high may be in place. The market came down to test the $90 mark, but bounced before reaching this psychological and technical support area. Momentum has drifted lower and is at the lowest levels since prices were at $80. Support comes in at 90.00 and 88.50, while resistance can be found at 93.70 and 95.00.

Gold: Gold prices have rebounded sharply this morning on strength in energy prices and a weaker U.S. Dollar. Prices fell for three consecutive days on heavy profit-taking and weakness in commodities in general. Gold has been driven by the currency markets recently, and a slumping greenback could bring bulls back into the market. Continued worries in the U.S. mortgage and housing markets could also result in a “flight to quality” effect in the Gold market. Despite the solid fundamentals, Gold may been susceptible to further profit-taking, having rallied sharply in recent weeks. Traders will focus on today's PPI figures, which are expected to show an increase in core PPI of 0.2 percent. More inflationary figures could give the market a lift. December Gold held above the 18-day moving average, which is a positive sign for bulls. Momentum has swung higher at a steeper pace than RSI, which suggests short-term technical strength. Support comes in at 785.00 and 775.00, while resistance can be found at 810.00 and 825.00.

S&P: Stocks had a stellar showing yesterday on strong earnings from Wal-Mart and suggestions that the recent wave of subprime write-offs may be slowing. Goldman Sachs said it does not plan to write off a significant number of bad loans, bucking the current trend and offering investors some encouragement. Retail sales are expected to show a decline today, but the market will likely focus on profitability of retailers and not the raw sales figures. Nonetheless, weaker sales figures could indicate slower economic growth, as consumers find themselves in a credit crunch amid rocketing energy costs. Traders will also have to digest today's PPI release, which could show that producer prices climbed due to higher energy costs. The December e-mini S&P closed just below resistance at 1485.00 and the market was unable to push above the 9-day moving average in early trading this morning. Momentum continues to outpace RSI, but to a lesser degree, which suggest that the market may have run out of steam in the short-term after rallying over 40 points yesterday. Support comes in at 1460.00 and 1435.00, while resistance can be found at 1485.00 and the key psychological 1500.00 area.

Rob Kurzatkowski, Commodity Analyst

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Gold and Oil Take a Turn to the Upside

December Gold (GCZ7) went on a run with the bulls today, gaining 25 points for a close back over the $800 level. Meanwhile in the Crude Oil market, the January contract (CLF8) set another new record, closing at $98.38. Both of these contracts had a big day to the upside while the Dollar set another new record low.

Looking at the charts, Gold had a bit of a reversal in relation to the past three days in the red, closing above the $800 level for the first time in several days. The 800 mark is becoming a weak level of psychological resistance at best, and a consolidation pattern may be forming around that number. The true measure of this rally will be revealed when and if Gold manages to top the 840 level like it did earlier this month.

Oil kept traders on the edge of their seats again today with a new record high of 98.62, as the $100 level again emerges as a reachable target. As usual, tomorrow’s inventory number at 9:30 AM Central time will be a closely watched event, and may be the catalyst to send prices to that $100 level.

In the news, housing starts came in 3% higher than October, while building permits took a bit of a slide. This is mixed information, but for the sake of the housing market, any good news is welcome. However, the big news on the day was the FOMC minutes, in which the Fed noted the potential for a slowing economy over the next year. The Fed also indicated that its October decision to cut rates was a “close call."

Mike Tosaw, Director of Education

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Energy Bulls Giving Thanks

Crude Oil – Crude Oil futures rallied to touch all-time highs yesterday and set a new high for the January contract. The rally was fueled in large part by a rapidly declining U.S. Dollar and an expected drop in Heating Oil inventories. In addition to the uncertainty plaguing the U.S. economy in the wake of the credit crunch, talk of OPEC nations and China diversifying away from the Dollar has put a lot of downside pressure on the greenback. The release of the FOMC minutes showed that the October rate cut passed by only a slim margin, but traders seemed to think the central bank will continue to lower rates to stave off economic contraction that would likely lead to further declines in the value of the Dollar. Chairman Bernanke seems to prioritize economic growth over keeping inflation in check, unlike his predecessors Greenspan and Volcker. Today's weekly inventory figures are expected to show a build of roughly 1 million barrels of Crude Oil, but a surprise drop could push prices beyond the $100 mark, especially with the market hunting for bullish news. January Crude had a technical breakout above the prior contract high of 97.63, but did so on lighter volume. Crude made a new all-time high of 99.29 in overnight trading before retreating below 98.50, as traders were reluctant to continue buying ahead of the inventories data. Momentum has shifted lower, while RSI climbed slightly, suggesting a slight bearish bias. Support comes in at 97.63 and 93.06, while resistance may be found at 100.00 and 105.00.

Heating Oil – January Heating Oil made new contract highs in overnight trading on speculation that inventories are going to show a decline of 400,000 barrels for the week. This winter is expected to be much milder that prior years, but much of the country will be dealing with below average temperatures for the next couple of weeks. The rising cost of Crude Oil and the seasonal decline in inventories have pushed prices higher. Last week, DOE data showed that Heating Oil inventories were at 30 days of supply after the market was oversupplied for much of the year. A drop below 30 days of supply could spark further rallies in both the Crude Oil and finished products markets. Like Crude, January Heating Oil rallied to a new contract high close yesterday and made new all-time highs in overnight trading. While this can be viewed as a breakout, traders remain cautious because of the low volume figures ahead of the Thanksgiving holiday. Momentum has fallen in early trading, but there is no divergence from the RSI indicator. The market did break sharply after making new highs, which could put some downward pressure on the market if inventories are in line with forecasts. Support comes in at 2.6700 and 2.5900, while resistance may be found at 2.7500 and 2.8000.

S&P – Stock index futures are lower this morning on the strength of the energy markets and lukewarm forecasts for the Christmas shopping season. Stocks managed to rally late in the day to post gains after the release of the FOMC minutes. The minutes showed the Fed lowered growth expectations for 2008, which led traders to believe that rate cuts could lie ahead. But yesterday's euphoria has worn off and rapidly rising energy prices have weighed on the market. If petroleum prices continue to climb, the Fed may be forced into inaction or even change its bias toward a rate hike early next year, which would not only slow down the economy but also kill demand for petroleum. Traders will focus on the Michigan Consumer Sentiment figure more than usual ahead of the holiday shopping season, and Wall Street seems concerned that rising prices at the pump and tighter lending standards may keep consumers away from the stores. December e-mini S&P futures continue to trend lower and are currently trading below the major moving averages. The 9-day MA has acted as resistance over the last seven trading sessions, and the market may need a close above the average to get some upside momentum. The momentum indicator continues to show bearish divergence from RSI, painting a negative technical picture for the market. Support comes in at 1425.00 and 1400.00, while resistance can be found at 1465.00 and 1496.00.

Rob Kurzatkowski, Commodity Analyst

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Stocks Jump on Strong Black Friday Sales

NASDAQ – Stock index futures are higher in overnight trading on stronger-than-expected sales numbers to kick off the holiday shopping season. Forecasts were calling for “Black Friday” sales to be below last year's $9.5 billion mark, but consumers came out in full force and initial estimates put Friday's sales figures in the neighborhood of $10 billion. Analysts were expecting the rising cost of fuel and tighter credit standards to keep customers away from the cash registers. But deeply discounted electronics turned out to be the main driving factor, with big name retailers like Best Buy and Circuit City rolling out specials and zero percent financing. These are risky moves for retailers in the recent credit climate, as they cut into profit margins. Tech and electronics companies figure to get a boost from the initial figures, and online retailers such as eBay and Amazon are expected to show strong sales on what has become known as "Cyber Monday.” The December e-mini NASDAQ is trading above the 9-day moving average in the early going, and a close above the average could signal some short-term bullishness. Tempering this is the fact that momentum is staying flat, while prices and the RSI indicator are climbing, which can be seen as bearish near-term. The market has been trapped in a triangle/wedge pattern on the chart, showing indecision among traders. Price action indicates that the market is moving higher this morning with some restraint, initially backing off when approaching 2050.00. Support comes in at 2014.00 and 2000.00, while resistance can be found at 2060.00 and 2100.00.

Crude Oil – Crude Oil futures are higher this morning, but the market was reluctant to push above contract highs in the early going. Prices fell after last week's inventory figures, which were bullish on the surface, showing a large drawdown, but the report also showed a large build in the key Cushing, Oklahoma port – the delivery point for NYMEX Crude. Funds and large traders took some profits off the table ahead of the Thanksgiving holiday, which drove prices lower following new highs. Strong sales to kick off the holiday shopping season along with a weaker dollar are both bullish factors for the market. January Crude futures were reluctant to make a push to new contract highs in early trading and prices are now below 98.50. Momentum is showing bearish divergence from the RSI, suggesting that traders' enthusiasm may be wearing a little thin after the recent run-up. It also suggests that more fundamental news may be needed to drive prices higher. Support comes in at 96.15 and 95.00, while resistance can be found at contract highs of 99.29 and 100.00.

Gold – Gold futures are higher this morning on a weaker Dollar and higher Crude Oil prices. Unlike Crude, which has backed off considerably from overnight highs, the Gold market appears resilient due to the slumping greenback. Traders are not convinced that the strong weekend sales figures are going to boost the slumping economy, which may lead to another Fed rate cut in December and, more than likely, a weaker U.S. currency. With energy prices near all-time highs, the Crude Oil market may labor to move higher, as the high costs may cut demand. This may be a chance for the Gold market to detach itself from energy prices and, once again, become the main inflation hedge for investors. December Gold has rebounded solidly after flirting with the first Fibonacci support area – in theory a market could rally to prior highs or make new highs after bouncing off of this key support area. December Gold closed above the 50-day moving average and resistance at 819.40 on Friday, which is considered bullish medium-term. In contrast to these bullish indicators, momentum is beginning to show some bearish divergence from the RSI and prices, suggesting that the market may consolidate or correct. Support comes in at 820.00 and 807.00, while resistance can now be found at 837.50 and 849.50.

Rob Kurzatkowski, Commodity Analyst

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What a Difference a Day Makes

Dow – Dow futures surged 183 points yesterday, fueled by news that Citigroup will receive $7.5 billion in cash from foreign investors. Congress may pass a law as early as today to mandate improved fuel economy standards for U.S. automakers and encourage domestic production, hoping to keep over 17,000 jobs in the country. Yesterday's momentum seemed to disappear on news that Wells Fargo and Freddie Mac plan to cut jobs due to the slowing economy. Durable goods orders are reported at 7:30 AM CST and are expected to show no change. Also on tap today is the existing home sales figure at 9:00 AM Central, which is expected to see a drop in the annual pace to 5.0 million homes. The Fed Beige Book is also set to be released at 1:00 PM Central, and traders will scrutinize the report to get an idea of what the central bank has in mind for future rate adjustments. December Mini Dow futures closed just below the 9-day moving average and the market is currently trading above the average this morning. A close above the 9-day MA may signal some short-term strength in the market. Momentum is showing bearish divergence from the RSI, suggesting that yesterday's sharp rally was a “dead cat bounce.” The market did manage to hold above support at 12,750, but price action seemed to indicate that short covering helped lift the market higher. Additional support comes in at 12,500, while resistance can be found at 13,050 and 13,250.

Crude Oil – Crude Oil futures are lower for the third consecutive trading session on a stronger Dollar and expectations that the weekly inventory number will show a build of around 500,000 barrels. New reports suggest that OPEC plans to ramp up production to the tune of 750,000 barrels a day in response to rising prices and fears of a downturn in demand. Qatar's energy minister downplayed the report and stated that he was unaware of the proposal. Several OPEC member states – namely Saudi Arabia and Nigeria – have made comments recently that they fear that the rising price of Oil may curb demand, making recent word of increased production very plausible. January Crude Oil closed below the 18-day moving average, suggesting that a near-term high may be in place. Further price declines could bring about a downward cross-over of the 9- and 18-day averages, which could be considered bearish short- to medium-term. Momentum is climbing slightly this morning, but has been outpaced by the RSI indicator. Support comes in at 93.50 and 91.85, while resistance can be found at 96.15 and 97.65.

Wheat – Wheat futures are slightly lower in overnight trading on a weaker Dollar. The market had a good bounce yesterday, aided by news that Morocco is buying 316,000 of Soft Red Wheat (CBOT), suggesting that world stocks of the grain remain tight. The USDA also reported that crop conditions for winter Wheat were the poorest since 1999, but traders are waiting to see if the southern Great Plains region will get some much needed moisture, which could improve the condition of the winter crop. An extended rally in the Dollar could put some downside pressure on the market. March Wheat futures closed above the 50-day moving average for the first time in almost a month, which could add to the recent momentum the market has seen. The 9-day moving average crossed above the 18-day this past Friday, which is a bullish signal medium-term. The market has been trapped between 825 and 860 over the past three trading sessions, suggesting some indecision among traders. Momentum is outpacing RSI to the upside, which could be seen as slightly bullish near-term. Support comes in at 825 and 815, while resistance can be found at 860 and 874.50.

Rob Kurzatkowski, Commodity Analyst

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Sour Crude

Crude Oil – Crude Oil futures are slightly lower this morning, despite comments by Algeria and Qatar that OPEC does not need to increase output. The nations stated that the market remains well-supplied and suggested that increases to supply could lead to a glut. The public comments indicate that there is indecision among OPEC members, but a minority of analysts believes the cartel will push forward with a production increase of 500,000 to 700,000 barrels a day. Oil declined almost nine and a half dollars last week on expectations that the U.S. economy will slow in the early part of next year, coupled with stronger-than-expected GDP figures for the 3rd quarter that could lead the Fed to bypass another rate cut. January Crude is trading just above the 50-day moving average and a close below the average could be a bearish signal longer-term. Adding to the bearish picture is the 9-day moving average, which is about to cross the 18-day average to the downside. The market is swiftly approaching oversold territory, which could lead to some short covering and consolidation or, possibly, a bounce. Momentum has gone into the negative in the late part of last week for the first time since early September. Support now comes in at 87.23 and 83.82, while resistance can be found at 90.00 and 93.06.

S&P – Stock index futures are trading higher overnight, supported by a stronger financial sector. Shares in Citigroup and Bank of America are leading the way due to some easing in recent subprime/mortgage fears. Equity traders are expecting the Fed to lower interest rates later this month, and there is a possible bailout in the works for the adjustable rate program. Lower Crude Oil prices could give the stock market a lift, making less of an impact on corporate bottom lines and improving holiday sales as consumers find themselves with more expendable income. The December e-mini S&P broke out above resistance at 1475 on Friday, which may lead to some follow-through buying. The 9- and 18-day moving averages are close to confirming a bullish crossover barring a sharp turnaround. Momentum has moved over 100 points, but remains negative. Support now comes in at 1475.00 and 1454.00, while resistance can be found at 1500.00 and 1525.00.

Gold – The Gold market has followed Crude Oil lower in early trading on a stronger Dollar and sale by the European Central Bank. The ECB sold 42 metric tons of the precious metal, which will more than likely overwhelm lackluster demand for the metal. Jewelry demand in the U.S. and Europe has been lukewarm, at best, which could lead to an oversupplied market. Commodity traders are at odds with equity traders in their Fed rate policy expectations, with commodity traders looking for the central bank to pause and stock traders looking for yet another quarter point cut. February Gold is very close to confirming a double top formation, which measures a possible move of almost $100 to the downside. Like Crude, the Gold market has held the 50-day moving average thus far, but further advances by the USD could pressure prices lower. Momentum is showing extreme bearish divergence from the RSI, which gives the market a bearish short-term technical bias. Support can be found at 780.00 and 765.00, while resistance can be found at 800.00 and 813.80.

Rob Kurzatkowski, Commodity Analyst

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OPEC Indecision

Crude Oil – Crude futures are slightly lower this morning, with traders reluctant to make a move before the December 5th OPEC meeting. There is a great deal of indecision among analysts on what the next move by the cartel will be due to conflicting statements and infighting. Yesterday's drop in the USD contributed to a late rally after trading lower for much of the day. Today figures to be another choppy, indecisive trading session ahead of the OPEC meeting and next week's FOMC policy statement. January Crude managed to hold above the 50-day, after flirting with the moving average in early trading. The 9 and 18-day averages did cross over to the downside, which can be seen as bearish in the intermediate term. Momentum is showing some bullish divergence from the RSI, which suggests a slight upward bias in the near-term. Support comes in at 87.85 and 85.00, while resistance can be found at 90.00 and 93.05.

Bonds – Bond futures continue to trend higher on continued financial worries. There are worries that the Bank of Scotland may be the newest victim of the recent credit trap. Also, there are concerns that consumers with good credit may be impacted by the subprime crisis. The recent move higher, despite a rebound in the stock market, suggests that fixed income traders are betting on a rate cut next week and not next month from the Fed. Yields are currently at the lowest levels in over 3 years. March Bonds seem to be breaking out of recent congestion in the early going today, and the next major test for the market may be the 109-00 mark. Momentum is showing bullish divergence from the RSI, suggesting bullishness in the near-term. Support comes in at 117-25 and 117-00, while resistance can be found at 118-30 and 119-14.

Wheat – March Wheat edged lower for the second consecutive day in a very choppy trading session. The bullish news that Argentina and Russian may have tight export supplies and the poor growing weather across the southern plains in the US was tempered by lackluster export data, which may be attributed to the slight rebound in the USD. New crop futures finished lower for the first time in a week, and spreads between old crop and new crop may widen as farmers try to capitalize on higher grain prices. The International Grain Council projected that the 2008-2009 Wheat stocks will rise after three consecutive years of output lagging behind demand. March Wheat (old crop) rejected advances above the $9 mark last week. This could be a bearish signal for the market, although March futures seem to have found solid support in the 860 area. The market is currently overbought, after making a solid run since mid-November, which suggests a negative to sideways bias for the market. Support comes in at 860 and 825, while resistance can be found at 900 and 950.

Rob Kurzatkowski, Commodity Analyst

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OPEC Leaves Production Unchanged

Crude Oil – Crude Oil futures are up over a 1.50 in early trading and closing in on the $90 mark on news that OPEC will leave production unchanged, a decision was heavily influenced by global economic uncertainty in 2008. Believing that the market is already well-supplied, the cartel was concerned that increased production could create a glut and drive prices lower. Today's weekly inventory numbers are expected to show a decline in Crude Oil of 700,000 barrels for the week ending November 30th, while gasoline inventories are expected to rise 700,000 barrels and distillates are forecast to drop 400,000 barrels. January Crude has held the 50-day moving average, signaling that the market has found some technical support in the near-term. The pattern on the daily chart suggests that this is a consolidation period before more declines. Tempering this view, the momentum indicator is beginning to outpace RSI, which is bullish in the near-term. The RSI came in oversold, which could offer further technical support. Support comes in at 87.15 and 84.00, while resistance can be found at 90.00 and 93.00.

NASDAQ – Stock index futures are higher in spite of the OPEC news this morning, after declining the two previous trading sessions. The rebound is led by chip manufacturers, as the DRAMexchange Index posted five consecutive gains. Higher chip prices will likely lead to improved profits for semiconductor makers, and traders have begun value-buying in the tech sector. The market is still looking for the Fed to cut interest rates next week to bolster the economy, helping to offset the likelihood that energy prices will climb due to the OPEC decision. The December e-mini NASDAQ bounced off of support at 2050 and the market is holding above both the 9- and 18-day moving averages. The two moving averages had a bullish crossover yesterday – despite the declining market – which could offer some near-term strength. Momentum is showing bearish divergence from the RSI, possibly offsetting the bullish MA crossover. Support comes in at 2050 and 2000, while resistance can be found at 2100 and 2130.

Gold – Gold futures are higher for the third consecutive trading session, aided by higher energy prices. Climbing energy costs and a good chance of another Fed rate cut next week could create an inflationary scenario for the U.S. economy, leading to higher demand for commodities – specifically precious metals. The USD has rebounded slightly in recent days on news that policy makers in the U.S. and Europe will step up their efforts to prevent subprime losses from spreading. Extended rallies in the greenback could put some downward price pressure on the precious metals market. February Gold rebounded before reaching the $780 mark, which would have been the trigger line to confirm a double top reversal. This was also in the area of the 50-day moving average. The market has been reluctant to move above the 9- and 18-day moving averages in the early going, and momentum is beginning to lag behind RSI – two bearish near-term signals. Support comes in at 800 and 780, while resistance can be found at 815 and 835.

Rob Kurzatkowski, Commodity Analyst

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Dollar Reversal?

RBOB – Gasoline futures fell in reaction to larger-than-expected inventories and a strengthening U.S. Dollar. While the market found early support in OPEC's decision to keep output unchanged, Gasoline inventories rose by 4 million barrels, surpassing analysts' estimates of only a 700,000 barrel rise. OPEC's decision, while bullish on the surface, can actually be viewed as a bearish statement on the U.S. and European economies, and their potential impact on demand for petroleum products. The Dollar has rebounded from recent lows and many are now seeing at least some stabilization in the battered currency. January RBOB futures fell below the 50-day moving average and early price action indicated a confirmation of a bear flag pattern on the daily chart, barring a sharp reversal. While these technical indicators are bearish, the market is very oversold short-term, which could lend some price support to the market. Support now comes in at 2.17 and 2.13, while resistance can be found at 2.25 and 2.2850.

Soybeans – Bean futures are lower in overnight trading as a result of falling energy prices and a strengthening greenback. Demand for biofuels may be curbed by the recent decline in Crude Oil. The rising Dollar may slow exports – particularly to China – and could lead to a larger-than-expected carryout as a result. Poor growing weather in South America may give the market some support and help to counterbalance the bearish factors. After closing above the $11 mark in late November, this area has offered fairly stout resistance of late. The 9- and 18-day moving averages are close to crossing over to the downside, which could be considered bearish in the near term. On a positive note, the momentum indicator continues to stay in positive territory and is outpacing RSI. Support comes in at 1080 and 1068, while resistance can be found at 1105 and contract highs of 1114.

Dollar Index – The Dollar has rebounded strongly after making lows on November 23rd, and today's rally marks the fourth consecutive positive trading session. The greenback has been aided by a recovery from recent lows in the stock market and economic uncertainty in Europe. There is now talk that the U.S. government will be offering some relief to the beleaguered housing and subprime sectors, which has given the market a lift. Speculation that the Bank of Canada and Bank of England may both cut interest rates has also made the Dollar more attractive to investors. The March Dollar Index is trading above resistance at 76.10 in early trading, and a solid close above this area – which would also signal a close above the downtrend line – could bring more longs into the market. The market is swiftly approaching near-term overbought levels due to the recent run-up, which could slow some of the momentum it has recently built. Momentum is lagging behind the RSI, which suggests that consolidation may lie ahead. Support can now be found at 75.70 and 75.15, while resistance comes in at 76.45 and 76.75.

Rob Kurzatkowski, Commodity Analyst

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Stocks Rally on Subprime Bailout Plan

S&P – Stocks rallied on news that the White House is planning to offer relief to subprime and ARM borrowers. The plan would allow borrowers to refinance or freeze the rate of their loans. Freezing rates could decrease or at least stabilize foreclosure rates, which have been steadily climbing. Financial companies’ shares jumped on the news, as it could lead to strengthening balance sheets for companies with mortgage portfolios. Fixed income markets have priced in a 25 basis point rate cut by the Fed next week while some analysts are calling for a 50 basis point cut, which seems unlikely. The market is flat this morning as traders focus on the Non-Farm Payrolls number, which is expected to show the economy added only 70,000 jobs for the month, down from 160,000 in October. The unemployment rate is expected to rise to 4.8 from 4.7 percent the prior month. December e-mini S&P futures broke out above resistance between 1495 and 1500, and the market closed just below the 50-day moving average. A solid close above the average could bring in more buyers and force shorts to cover. Momentum has moved sharply higher in recent trading sessions and is outpacing RSI, which is now hovering near overbought levels. Support comes in at 1485 and 1465, while resistance can be found at 1525 and 1551.

Crude Oil – Crude Oil jumped above the $90 mark on President Bush's mortgage-aid plan. The plan, along with a Fed rate cut next week, could help the U.S. economy move at a much brisker pace than previously expected and increasing petroleum demand. Wednesday's inventory numbers failed to spark a rally because of the dim economic forecast, and the market continues along in a “no news is good news” mode because of the outlook. The mortgage relief plan and renewed tensions between the U.S. and Iran could change the negative bias the market has seen recently. February Crude rallied above the 50-day moving average and the $90 resistance mark, suggesting that the market has found some stability. Momentum is outpacing the RSI, which points to a bullish short-term bias. The RSI itself is oversold, which could have contributed to yesterday's rally. Support comes in at 88.45 and 86.85, while resistance can be found at 93.05 and 95.00.

Copper – Copper also benefited from the proposed mortgage bailout plan, with the market trading almost 7 cents higher overnight. A rebound in the housing sector could help demand, which has been sagging of late. A recovery in the U.S. economy could also help drive economic activity in China, whose main export partner is the U.S. The two nations are the largest users of Copper. March futures have found support near the $3 mark after falling from the $3.75 area since early October. The 9- and 18-day moving averages are close to crossing over to the upside, which would be a bullish indicator. Resistance at 3.21 will be a key test for the market and a close above this area could trigger a bullish reversal from the downtrend. Momentum is outpacing RSI, suggesting a bullish bias. Support comes in at 3.0300 and 2.9770, while resistance can be found at 3.1460 and 3.2100.

Rob Kurzatkowski, Commodity Analyst

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Stocks Keep Charging Back

S&P – Stock index futures are higher in overnight trading, driven by financial stocks. UBS – the EU's largest bank – is following Citigroup's lead and accepting foreign capital infusions from Singapore and the Middle East to deal with mortgage related writedowns. U.S. banks rallied on the news, as it appears that virtually every large bank is going to have at least some losses related to the lending sector. Traders now look as though they are willing to accept the losses as long as they are not worse than expectations. The market is also upbeat over the possibility that the Fed will cut rates tomorrow and the U.S. Dollar seems to finally have found some stability of late, though the Dollar Index is slightly lower this morning. The only economic data on tap today is the pending home sales figure, which is expected to show a 1.0 percent decline. December e-mini S&P's closed right on the 50-day moving average on Friday and are trading above the key average this morning. Friday's price action did produce a spinning top candlestick, which suggests a short-term negative bias. Countering this, the momentum indicator is showing bullish divergence from the RSI, suggesting a positive short-term bias. Support comes in at 1485 and 1460, while resistance can be found at 1525 and 1540.

Crude Oil – The Oil market is slightly lower this morning in very choppy trading. Like stock investors, Oil traders are looking forward to tomorrow's rate decision by the Fed because of the lack of news. While the market seems to consider a rate cut a foregone conclusion, traders will focus on the language the central bank uses to describe its economic forecast in the release. The market largely discounted lower-than-expected Crude inventory numbers last week due to higher product numbers and slowing economic growth expectations for the U.S. and U.K. The market did rally sharply on Thursday after the release, but this can at least partially be attributed to short covering and buying by small speculators. The daily January Crude Oil chart remains bearish, with the market unable to hold Thursday's move above the 50-day moving average. The sharp rally did negate what would have been a downside breakout in the market based on early trading. Momentum is showing bearish divergence from the RSI, which suggests a negative near-term bias. Support can be found at 86.00 and 84.00, while resistance comes in at 90.00 and 93.05.

Soybeans – January Soybeans continue to make new contract highs, bolstered by strong demand and lower carryout forecasts. South American growing conditions remain in focus, with dry spells in Argentina likely interfering with Soybean pod formation. Infarma lowered its crop production estimates for 2008 as a result of the poor growing weather, but it should be noted that Chinese crop estimates have been slightly raised. The strong demand for old crop Beans is likely to lead to an even smaller carryout than previously expected for the current crop year, which has really driven the January and March contracts. January Beans had a breakout on the daily chart on Friday, which could be solidified by a solid showing today. The market is swiftly approaching overbought levels on the RSI and Slow Stochastic indicators, which could inhibit upside movement. Support comes in at 1103.75 and 1090, while resistance can be found at 1125 and 1140.

Rob Kurzatkowski, Commodity Analyst

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Fed Day

S&P – Stock index futures continued their recent rally this morning ahead of the Fed announcement. The mortgage and banking sectors are still riding the wave of enthusiasm sparked by President Bush's mortgage bailout plan and capital infusions from outside investors. Many traders are looking for a quarter point rate cut and a positive statement from the FOMC, but not too positive, as it could close the door on further cuts. Also, any mention of inflation in the statement could have a negative impact on the market. Technically, the December e-mini S&P is coming in very overbought due to the recent rally. Momentum studies continue to outpace the RSI, which may help offset the negative bias. The market managed to hold yesterday's rally above the 50-day moving average, which sets a positive tone for the market longer-term. Support comes in at 1490 and 1465, while resistance can be found at 1525 and 1550.

Crude Oil – The Oil market has rebounded in early trading after starting off the week on a sour note. Petroleum traders have struggled to justify current prices levels, as inventories remain strong enough to meet the winter demand and the health of the U.S. economy remains a huge question mark. A quarter point rate cut and a positive statement from the Fed today may aid prices in the near term, but many traders remain skeptical on the longer-term price outlook for petroleum prices. The January Crude chart remains bearish, as the market continues to trade sideways after the price collapse, signaling the possibility of further downside. Momentum has rebounded slightly, but remains negative and is being outpaced by the RSI, which may be seen as bearish near-term. Support comes in at 86.85 and 84.05, while resistance can be found at 90.70 and 93.00.

Gold – Gold is trading lower this morning on a stronger U.S. Dollar and profit-taking, as precious metal prices have detached themselves from energy prices over the past couple of weeks. Gold has become a safe haven for traders who are pessimistic about the economy and have lost faith in the energy sector. The Fed rate cut has been priced in by currency traders, so it may not have a large impact on the Dollar. A bleak policy statement could trigger a sell-off in the greenback and support Gold prices. Since almost confirming a double top reversal on the daily chart, February Gold prices have rebounded over $30. Momentum has shifted gears and is now approaching positive territory after spending the past two weeks on the negative side. Support can now be found at 795 and 785, while resistance comes in at 825 and 835.

Rob Kurzatkowski, Commodity Analyst

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Oil Heads For Higher Ground on Fed Day

Crude Oil (CLF8) took a run above 90 with the bulls for a period today before settling back at 89.22 – still ahead 1.5% on the day. You can make a case either way as to whether the 25 basis point Fed rate cut had anything to do with the rally, but the bottom line is that Crude is back in positive territory.

The chart suggests that we're in a bit of a consolidation over the last few days. Since the beginning of the month, Crude has been bouncing between 85 and 91, and the market remains below both moving averages. If this is a move to the downside for the longer term, the next level of support is at 84, followed by stronger support at 78. To the upside, the market never managed to get above the 100 level a few weeks ago, marking the 99 area as resistance on that end.

Of course, the biggest news of the day was indeed the Fed rate cut. S&P futures reacted negatively with a close to the downside of 40 points (1478), setting up an interesting ride for the rest of the week with retail sales, initial claims, CPI, and PPI all still on tap.

Mike Tosaw, Director of Education

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Fed Disappoints Equity Traders

Dow – The Dow Jones Industrials fell by almost 300 points after the Fed lowered rates by a quarter point. While the rate decision was in line with consensus estimates, traders were disappointed by the language in the policy statement. Inflation is still very much on the minds of the central bank’s policymakers, indicating that the Fed may be hesitant to cut rates at its next meeting. Fed Fund futures were pricing in a 1/3 chance of a 50 basis point cut, making for a large contingent of disappointed traders when the announcement came down. Financial stocks were hit especially hard due to the recent belief that the Fed would help bail out the battered lending sector by injecting liquidity, which may not be the case after all. Traders sometimes forget that the availability of cheap money has contributed to the current mortgage crisis in a major way. The December Mini Dow fell below the 50-day moving average after three consecutive closes above the key average. This also created a bearish engulfing candlestick pattern, which suggests a possible reversal of the recent uptrend. Momentum has swung sharply lower, but remains in positive territory. The RSI also moved sharply lower and the very overbought levels coming into may have helped contribute to the sell-off. Support comes in at 13,400 and 13,200, which may be a litmus test for the market, as price stabilization at this level could provide longer-term technical support. Resistance can be found at 13,650 and 13,800.

Crude Oil – Like equities, the petroleum market was disappointed by both the quarter point rate cut and the language in the policy statement. Crude Oil traders view the cut as too little, too late for the slumping economy. Today's EIA inventory numbers are expected to show a drawdown of 750,000 barrels, but products are expected to make another strong showing, with gasoline and distillate stocks forecast to rise 1 million and 500,000 barrels, respectively. If the products figure holds up to estimates, the Crude figure itself is likely to have very little impact on trading. The $90 mark has acted as a barrier to rallies since the beginning of the month, with the exception of last Thursday. Because of the sell-off leading up to recent consolidation, the bias on the daily chart seems to remain to the downside. Momentum has edged higher, but remains negative for the moment. The RSI indicator has recovered from oversold levels, which could negate some of the short covering support the market has seen recently. Support comes in at 86.85 and 84.00, while resistance can be found at 90.50 and 93.00.

Soybeans – The USDA report yesterday confirmed many traders' suspicions that carryout will be lower than prior estimates, but not to the extent that the report showed. The report estimated August 31st inventories will drop to 185 million bushels, sharply lower than median analyst estimates of 197 million bushels. Continued poor growing weather in Argentina and parts of Brazil, along with higher South American Corn acreage – which could also steal away Bean acres – also helped support prices. January Soybeans are approaching overbought levels once again, which could stall further rallies. Momentum is beginning to lag behind the RSI, which suggests consolidation or a possible sell-off near-term. Support comes in at 1110 and 1080, while resistance may be found at 1150 and 1165.

Rob Kurzatkowski, Commodity Analyst

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Oil Takes a Climb

Crude Oil continued its bull run today with an extension of yesterday’s rally. The high of the day was almost $95 (94.85) on the December contract (CLF8) with the low at $89.26 – more than a 5% range. The big news of the day didn’t hurt the Oil bulls, of course – U.S. inventories came in lower for the fourth straight week.

On the chart, we can expand on our discussion from yesterday, as we closed above both of the moving averages. In addition, the slow stochastic places Crude squarely in the middle – with no indication of an overbought or oversold marketplace. Therefore, we have a new picture to look at when it comes to the Crude chart. With the price sitting above both moving averages, these lines may act as support, possibly paving the way for the breakthrough to 100. However, Oil bears may see the beginning of a head and shoulders pattern that started at the beginning of November.

Tomorrow's economic calendar includes retail sales, PPI, initial claims, and business inventories.

Mike Tosaw, Director of Education

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Indecision Caps a Wild Week

S&P – Stock index futures are lower ahead of this morning's CPI release at 7:30 AM CST, which is expected to show consumer prices climbing at a brisk 0.6 percent pace. Given the Fed's new plan to inject liquidity into financial institutions directly and a somewhat hawkish policy statement, the higher inflation numbers may force the central bank to sit on its hands when it convenes next month. The spike in Crude Oil prices over the past few days may also weigh on the market. Industrial production – which will be released at 8:15 AM CST – is expected to show a modest 0.2 percent gain in production, up from a 0.5 percent decline last month. Given the uncertainty in the economy, traders may key on this figure more than usual, and a weaker-than-expected figure may suppress any chance of a rally. The December e-mini S&P has been unable to mount a rally beyond the 9-day moving average after failing to hold the 50-day moving average earlier this week. Momentum is showing bullish divergence from the RSI, which suggests that the market has a slight upside bias in the near-term. Support can be found at 1465 and 1440, while resistance comes in at 1495 and 1525.

Crude Oil – Crude Oil is little changed this morning, as petroleum traders also await the CPI figures. Like equity investors, Crude Oil traders are skeptical of the Fed's new plan to collaborate with European and Canadian central banks to offer liquidity to financial institutions. This lack of faith led to a sell-off late in the day yesterday, with traders showing little confidence that the Fed's plans will be able to turn around the slumping economy. If inflation pressures kick up, investors may again flock to physical commodities, making Crude Oil an attractive investment. Of course, this could be tempered by sagging economic conditions, as it could lead to lower demand. The January Crude chart has turned around over the past few days, with the market sustaining rallies beyond the $90 mark. Yesterday's weak close was an indication that traders may be treading lightly and not trusting that this is a true breakout to the upside. Momentum is currently near the zero line and is being slightly outpaced by the RSI indicator. Support comes in at 90.70 and 88.00, while resistance can be found at 95.00 and 96.25.

Gold – The Gold market is lower this morning on a stronger U.S. Dollar. Precious metals traders are moving cautiously ahead of this morning's CPI release and price action indicates that traders may be looking for tamer inflation figures. While sharply higher inflation numbers typically drive the Gold market, the relatively benign estimates for the CPI figure could cause the Dollar to rally, as the Fed would be less likely to slash rates going forward. The new plan by the Fed to deal with the banking sector directly may be viewed as a move to provide more liquidity and, at the same time, not cause the greenback to freefall as it has in the wake past rate cuts. February Gold is trading below the key psychological $800 support mark, but the critical support area the market must maintain is $785. A move below this figure could trigger a triple top reversal, which could spark an extended sell-off. It is difficult to tell if the daily chart has been building a triple top reversal or a wedge consolidation pattern, which could lead to more upside. This confusion may cause technicians to take a “wait and see” approach. Despite the second consecutive day of declines, the momentum indicator has moved higher and is outpacing the RSI, suggesting a short-term bullish bias. In addition to 785, support can be found at 755, while resistance comes in at 813 and recent highs of 822.80.

Rob Kurzatkowski, Commodity Analyst

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Heating Oil Cools Down

Heating Oil – Heating Oil futures followed Crude Oil lower on the strengthening U.S. Dollar and economic uncertainty after a disappointing U.S. housing report. Turkey withdrew troops from northern Iraq after a brief incursion, which also helped spark the late sell-off. Weather models are forecasting warmer-than-average temperatures over the next month, which should keep demand for Heating Oil soft, but inventories at the lower range of seasonal averages have been more than enough to offset the weak demand. Today's inventory figures are expected to show a drawdown of 400,000 barrels of distillates. January Heating Oil has found support at the 2.54 mark in early trading, but the market has fallen below both the 9- and 18-day moving averages, which suggests a negative near-term bias. The close below the 18-day may be more significant, as it could indicate that a near-term high is in place. Momentum is beginning to fall at a brisker pace than the RSI, offering further evidence of a negative predisposition. Support comes in at 2.5100 and 2.4450, while resistance can be found at 2.5915 and 2.6700.

Wheat – Wheat futures dropped a day after climbing to record highs on a rebounding greenback and falling energy prices. Global stocks remain at the lowest levels in over thirty years, but recent rains across the winter Wheat-growing regions may improve crop conditions, a possibility which helped trigger a late sell-off. The rebound in the U.S. Dollar also adversely affected the grain markets, as did the drop in the petroleum sector, which led to widespread weakness in commodity prices. Early weather models are suggesting another dry year across much of the summer growing region in 2008, which may offset some the high planting projections. Much of the selling pressure seen over the past two days can be attributed to profit-taking and the generally overbought conditions in the market. March Wheat failed to establish support at 960, leading to a short-term negative technical bias. Momentum has moved lower over the last two trading sessions, but remains robust. Support comes in at 940 and 911, while resistance can be found at 980 and contract highs of 1009.50.

Ten-Year Notes – Fixed income futures got a boost from the weak housing figures, as traders hoped the data would force the Fed's hand in lowering rates. The rebound the market has seen over the past three trading sessions may be a bit of an aberration, as further rate cuts would be needed to support higher prices. The treasury markets have not experienced the “flight to quality” effect that we have seen in the past due to overseas investors' reluctance to acquire debt instruments until the Dollar shows more stability. There is also no indication that the Fed will abandon its new plan to inject liquidity into the banking sector directly, instead of via the broader market. Steep declines in the equity markets and commodity weakness may bring buyers back to the market. March Notes saw a reversal pattern develop as a result of Monday's trade, but what remains to be seen is whether this is a longer-term recovery. Despite the market trading higher for the third straight day, momentum is falling, suggesting a negative near-term outlook. Support comes in at 112-04.50 and 111-23.50, while resistance can be found at 113-05.50 and 113-29.

Rob Kurzatkowski, Commodity Analyst

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"Eventful" Few Days For Crude

Crude Oil – Oil futures are up for the third consecutive trading session on renewed Middle East tensions. Turkey has mounted a new offensive in northern Iraq against Kurdish rebels, which threatens to disrupt supplies. The Turkish government has indicated that the attacks against rebels will continue, but the military also stated that they will only attack rebel bases. While the offensive itself is not likely to result in damage to pipelines, traders fear that PKK rebels may launch terrorist-style attacks on key supply lines to retaliate against perceived American and Iraqi government complicity. Elsewhere, criminal gangs siphoning off a Nigerian Oil pipeline triggered an explosion that killed 40 and disrupted supplies from the Oil-rich nation, which pumps 2.5 million barrels a day. After a relatively calm month on the geopolitical front, these renewed tensions – along with the belief that OPEC has not yet made good on its promise to increase output as of November 1 – have traders thinking that U.S. supplies will be lower than seasonal norms. Tomorrow's inventory release – a day later than usual due to the Christmas holiday – is expected to show a drop for the sixth consecutive week. The February Crude chart is beginning to look more bullish, but traders may be cautious due to recent false breakouts and light volume, which has caused choppy trading conditions. Traders may be looking for a close above recent highs of 94.72 to validate an upside breakout and a late-day sell-off could scare away bulls. The momentum indicator has turned positive for the first time in two weeks, when it and the market turned higher before falling back. The indicator is showing bullish divergence from the RSI, suggesting a positive near-term bias. Support comes in at 92.35 and 89.15, while resistance can be found at 95.20 and 96.60.

S&P – Stock index futures are flat in early trading on news that retail sales leading up to the Christmas holiday have improved, but by less than many had expected. The retail sector is now gearing up for the post-holiday/New Year season, which starts today. Gift card use has increased significantly over the past several years, and retail giants like Best Buy and Wal-Mart are banking on their use, along with deep discounts, to help drive sales going into 2008. Many big box stores are expected to discount products more deeply than in previous years to clear away inventory, a recent trend that has made the post-holiday season almost as vital as the pre-holiday period. Other than retailers, it looks to be a quiet news day for the market with no economic releases and no early stories hitting the wires. The March e-mini S&P closed above the key 1500 on Monday, which may be considered an upside breakout. Traders may take the signal with a grain of salt, however, given the light volume and the perceived “Santa Claus rally” on Monday. More confirmation may be needed to attract bulls and stop out bears. Support comes in at 1485 and 1475, while resistance can be found at 1515 and 1530.

Soybean Oil – Bean Oil continues to rally on strong demand and rising spot prices in China, with the March contract making a push toward new highs. The strength in petroleum prices and a weaker Dollar could further support Bean Oil prices. China's appetite has not waned in spite of the stabilization of the greenback in recent weeks, with domestic output lower than expected and the government's plan to stockpile oilseeds. The March chart shows Bean Oil breaking out of recent congestion. Momentum is showing bearish divergence from both price and RSI, which could indicate the possibility that this may be a false breakout. The market is in overbought conditions on the RSI and stochastic indicators, signaling that the market may be susceptible to selling pressure. Support comes in at 47.33 and 46.45, while resistance may be found at 48.25 and 48.60.

Rob Kurzatkowski, Commodity Analyst

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New Year, Same Old Worries

Crude Oil – Oil futures are higher in early trading on continued geopolitical tensions and expectations that U.S. inventories will show yet another decline. Nigerian militants launched attacks against several police stations and tourist destinations in Port Harcourt, sparking fears of deadly exchanges between the military and criminal gangs in the Oil-rich city. The news comes on the heels of the Bhutto assassination, which threatens to destabilize nuclear-armed Pakistan. Crude Oil inventories are forecast to drop by nearly 2 million barrels, which would mark the seventh consecutive weekly decline. Meanwhile, a severe cold front is set to hit the Northeast, which is expected to boost Heating Oil demand. Despite the bullish news, the market may be susceptible to selling pressure due to the slumping economy and technically overbought conditions. The 9-day RSI is giving a reading north of 90 this morning and the stochastics remain in overbought territory. Momentum is beginning to flatten after jumping sharply over the past few trading sessions. Support can be found at 94.65 and 93.00, while resistance comes in at 97.92, 98.12 and 99.29.

Gold – Gold opens up the New Year on a strong positive note, buoyed by higher energy prices and a weaker U.S. Dollar. Monday's sell-off can largely be attributed to profit-taking before year end and a reaction to technically overbought levels. Economic uncertainty and inflation fears are likely to drive the market in the near-term. With the stock market showing chinks in the armor and treasuries trading at relatively high levels, Gold ETFs are likely to continue seeing a cash influx, which would drive physical demand for the metal. Traditional commodity funds are also likely to power the market, with traders once again talking about the possibility of prices reaching $1,000 an ounce. The market is still a long way from this mark and a series of major events – such as economic meltdowns in the U.S. and Europe – would likely need to occur for the market to make the ascent to four-digit prices. The 9-day RSI has fallen back from the low 90's, but February Gold remains at overbought levels. While these overbought levels may not lead to a sell-off, the market may consolidate and labor in moving higher. Momentum remains strong and is outpacing the RSI, suggesting a positive bias. Support comes in at 825 and 810, while resistance can be found at 855 and 880.

S&P – Stocks try to ring in the New Year on a positive note, with shares rising in European trading. This morning's release of construction spending data and the ISM Index are both forecast to show weakness, spurring the pre-market rally. Traders are betting that weakness in the figures – set to be released at 9:00 AM CST – will force the Fed's hand in lowering rates. The December FOMC minutes will be released at 1:00 PM CST and will give investors more insight into the central bank's mindset. The early part of the year figures to be volatile due to the uncertainties facing the economy, which could result in more funds being shifted to the sidelines by traders not willing to stomach the difficult trading conditions. The March e-mini S&P has held support in the 1475-1480 area, but a violation of this level could bring about a test of the 1450 area in the near-term. Momentum is showing slight upside divergence from the RSI, which sets a mildly bullish tone for the remainder of the week. Support comes in at 1471 and 1445.75, while resistance can be found at 1511 and 1530.

Rob Kurzatkowski, Commodity Analyst

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Crude Briefly Flirts with the Century Mark

Crude Oil – Oil futures started off the New Year with a bang, with prices eclipsing the intraday $100 mark for the first time. Geopolitical tensions rocked the market early and the ISM manufacturing report showed an inflationary prices paid component, which was the driving force after the NYMEX floor open. Supply concerns were very much on the minds of traders, and are likely to spill over into today’s trading as well. Looking at the newswires, several major financial publications reported that global petroleum supplies have reached a peak, meaning the world has used half of the petroleum on the planet. The stories only acted to spur on an already emotional trading session. Commodities were higher in general on inflation worries, with Feeder Cattle, Sugar and Coffee the only markets to take a pass on the rally. Today’s trading figures to be very volatile with the release of the EIA petroleum inventory numbers, which are expected to show a decline of 1.8 million barrels for the week. The enthusiasm over the cold blast hitting much of the eastern portion of the country may dissipate given the warmer forecast for the winter as a whole. The slowdown indicated in the ISM manufacturing number may give some traders cause for a retreat, as it showed a larger-than-expected drop in manufacturing activity, but at the same time showed inflationary pressure. This could lead to a pause in the Fed’s recent wave of rate cuts. February Crude had a technical breakout, closing above previous contract highs of 98.12, and traders will look for the market to establish further closes above this area to confirm the breakout. The market remains very overbought, registering 92.67 percent on the RSI. Support comes in at 97.18 and 94.73, while resistance may be found at 100.94 and 102.25.

Soybeans – The grain markets jumped sharply on news that the Chinese government will be imposing hefty duties on exports of grains in an effort to bolster domestic reserves. The protectionist move will likely lead to even stronger U.S. export demand and pressure already tight global stocks. Adding to supply squeeze, the recent upswing in petroleum prices is expected to spur more bio-fuel demand. On the weather front, the La Nina patterns strengthened, opening the door for hot, dry conditions across the Midwest this crop year. The Bean market may be susceptible to profit-taking pressure in the near-term after rallying sharply over the past few trading sessions. The March Bean chart remains bullish with yesterday’s breakout above previous contract highs. The RSI is registering an overbought reading, opening the door for profit-taking. Momentum continues to outpace RSI, leading to a positive short-term bias. Support comes in at 1225.50 and 1202.50, while resistance can be found at 1267.25 and 1285.75.

Orange Juice – Freezing temperatures across Florida’s citrus-growing region sparked yesterday’s OJ rally. Traders will be closely monitoring the length of time that temperatures remain below the freezing point. Six hours is generally viewed as the breaking point, with frosts lasting longer generally causing significant damage. Even if the weather fears evaporate over the next day or so, the market may benefit from the overall bullish sentiment in physical commodities. On the other hand, traders may be tempted to simply dump Juice contracts if the weather warms, preferring to jump into one a booming market like energies or precious metals. March FCOJ was unable to hold early day rallies and, as a result, formed a spinning top formation on the daily chart. Momentum continues to outpace RSI, suggesting that the short-term bias is moderately bullish. Support comes in at 145.05 and 141.30, while resistance can be found at 152.25 and 155.75.

Rob Kurzatkowski, Commodity Analyst

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Oil Hits $100 Again, But Not For Long

As usual these days, the big story in the markets was Crude Oil. Today, the price was briefly over $100 on the February contract (CLG8), as the high was put in around mid-day at $100.09. This level held for but a few minutes before the bears came in to bring things back to double digits. After that, the price was event below $99 for a short time, and at the time of this writing, the price was lingering at $99.17. The biggest news event on the Oil front was inventories, which were down 4 million barrels to 289.6 million for last week.

On the chart, we are now trading well above both moving averages following a cross of the averages last month. Since then, the bias has continued on into uncharted territory to the upside, with little apparent resistance past today’s high. Buyers of new highs are really beginning to pay attention. On the downside, the nearest level of support is around the $90 level set in mid-December. According to the stochastic indicator, Crude is approaching overbought levels.

Mike Tosaw, Director of Education

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Small Caps Feel the Heat

Russell – Stocks tumbled hard Friday on a Non-Farm Payrolls number that surprised even the most pessimistic of investors. Not only did the economy only add 18,000 jobs for the month of December – far short of consensus estimates of 70,000 – but the unemployment rate jumped from 4.7 to 5.0 percent when the market was expecting no higher than 4.8 percent. These numbers underscore the economic pressures that the stock market has been feeling as of late. Corporate earnings have been fairly solid to date with the exception of companies with considerable subprime exposure, but forward guidance has been revised down, indicating that 2008 may be a tough year for corporate America. The Russell 2000 underperformed versus the major indexes in 2007 and the New Year may bring more bad news for the small cap sector. This is not surprising given that the Russell has outshined the broader market since the second half of 2004. With the lending market feeling the crunch of the subprime fallout, smaller cap stocks may find loans harder to come by than larger, more established institutions. This could result in many of our nation's smaller companies not being able to weather the storm in the event of a prolonged economic downturn or recession. The cash Russell 2000 index formed an ominous double top formation on the monthly chart, suggesting that the market may see significantly more downside during the year. The pattern measures a move to the second Fibonacci retracement support of 590. The March e-mini Russell suffered a near-term setback, falling below support at 735.00. The 9-day RSI has fallen into oversold territory, which could lend some support to the market in the near-term. Support comes in at 715.20, 703.10 and 684.20, while resistance can be found at 746.10, 765.10 and 777.10.

Gold – Gold futures are slightly lower this morning on a stronger U.S. Dollar and a decline in Oil prices. Both this morning's early selling and Friday's lackluster trading seem to have been driven by profit-taking. The fact that the market stayed in the red on Friday highlights the fact that buying pressure over recent weeks may have caused the market to become a bit strained. Fundamentals remain overwhelmingly bullish for the precious metals market, so the action or lack thereof over the past two sessions may be signaling consolidation before the market makes another push to historic highs. The daily February Gold chart remains very bullish and may be forming a bull flag if the market remains passive today. The RSI and stochastic indicators are signaling very overbought conditions, which is likely driving the profit-taking. The overbought readings may make it difficult for the market to break new highs in the near-term without cooling off first. Support comes in at 857.90, 850.00 and 843.10, while resistance may be found at 872.60, 879.60 and 887.50.

Crude Oil – Oil futures are lower for the third consecutive trading session on unseasonably warm weather across much of the eastern half of the country. Here in Chicago, temps are expected to reach highs in the low 60s – golf weather. This warming pattern is expected to reach the Northeast, which is likely to curb Heating Oil demand significantly. Oil traders have been locking in profits over the past two sessions due to overbought technicals and a lack of meaningful news on the geopolitical front. The slowing state of the U.S. economy has traders in a lull over the past three sessions, but has yet to cause any heavy selling pressure. Thursday's price action formed a spinning top reversal pattern, which may be contributing to some of the technical selling we have seen. The market has honored the $97 mark as support both Friday and in the early going today, but a sharp move below this level could bring more selling pressure. The 9-day RSI is falling back from overbought levels and is now being outpaced by the momentum indicator. Support comes in at 96.87, 95.83 and 94.56, while resistance may be found at 99.18, 100.45 and 101.49.

Rob Kurzatkowski, Commodity Analyst

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The Barrel Has a Leak

After scraping the $100 mark a couple of times last week, Oil has since been running scared from the bulls. Today the February Crude contract (CLG8) closed almost 2.5% to the downside, and traders who put in buy stop orders at the 100 mark are feeling the pain. At this point, we can see that is not where buyers came in to flood the market.

On the chart, prices dipped briefly below the 15-day moving average today, before rallying slightly to close above that price by day’s end. The 25-day moving average is also still well below the current price and stochastics are finally starting to decrease. Although stochastics never hit the 80 mark (overbought indicator), the $100 mark has acted as strong resistance since last week. As a result, Oil finds itself at a very interesting crossroads right now. If this is just a pullback from the higher trend, then the area around 94 acts as slight support before support gets stronger around 90. Meanwhile, bears have the big 100 mark as resistance based on the last few days.

Tomorrow, we look forward to pending home sales and consumer credit numbers.

Mike Tosaw, Director of Education

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Energy Traders Eye Inventory Figures

Crude Oil – Oil futures are higher ahead of this morning's EIA inventory report, which is expected to show a drop of 2 million barrels for the week. After falling sharply over the past two months, inventories are expected to be at their lowest levels in three years. Militants in the Oil-rich nation of Nigeria have threatened attacks, adding to the already strong buying interest. It appears that the extremist group may be targeting the nation's Oil supply according to communications from the group's leader. The drop in U.S. inventories over the past two months has offset slower demand amidst the glacial economic pace of late. February Crude remains bullish on the daily chart, but the market may be at a turning point. Rallies above the $98 mark could spur buying activity, while sell-offs below support at $95 could trigger stops and increase the speed of the correction. Momentum continues to outpace the RSI, which is bullish in the near-term. Support comes in at 95.21, 94.09 and 92.93, while resistance may be found at 97.49, 98.65 and 99.77.

S&P – Stocks are looking to recover this morning after suffering yet another setback yesterday. The e-mini S&P has only been able to close in positive territory once this year, and even that was a meager gain of just 0.25. Yesterday's pending home sales figures were much worse than expected – coming in at -2.6 percent versus expectations of -0.6 – hinting that the housing slump may be far from over. The market was looking for a weak figure to force the Fed's hand in lowering rates, but the size of the decline irked many traders. Rumors that Countrywide may be declaring bankruptcy – vehemently denied by the company – sent the markets tumbling late in the day and underscored the uncertainties that remain in the credit markets. Consumer credit came in much higher than expected, which puts the Fed in an interesting predicament. Consumers are racking up debt at breakneck speed, which, along with inflationary commodity prices, gives the central bank a disincentive to lower rates. On the other hand, economic figures are increasingly ominous, indicating a need for lower rates. Fed fund futures point to a 31 percent chance of a quarter point rate cut and a 68 percent chance of a half point cut. March e-mini S&P futures closed below support at 1420, suggesting the market may see continued selling pressure in the near-term. The RSI and stochastic indicators are somewhat supportive for the market, currently showing oversold conditions. Support comes in at 1380.75, 1364.50 and 1336.00, while resistance may be found at 1425.50, 1454.00 and 1470.50.

Bonds – Bond futures are slightly higher this morning, supported by uncertainty in the equity markets. Due to the poor performance of stocks in recent weeks, fixed income products and commodities have seen strong capital inflows in a flight-to-quality scenario. Bonds may see selling pressure in the coming weeks if commodity prices remain strong, due to inflation concerns. Something will have to give, as these markets typically have an inverse price relationship and the correlation seen over the past several weeks has been atypical. March Bonds are overbought on the daily chart, but momentum remains strong nonetheless, signaling the possibility of more upside. Prices are approaching late November highs, which may bring consolidation or a small correction. Yesterday's price action formed a spinning top candlestick, signaling a possible short-term reversal. Support comes in at 117-22, 117-02 and 116-16, while resistance may be found at 118-28, 119-14 and 120-02.

Rob Kurzatkowski, Commodity Analyst

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OPEC Comments Keep Crude Market in Check

Crude Oil – Oil futures pulled back in trading yesterday despite a very bullish inventory figure – a draw of 6.8 million barrels that easily eclipsed consensus estimates of a 2 million barrel draw. However, Gasoline inventories saw their strongest build in over a year with a jump of 5.22 million barrels, offsetting the news in Oil. The state of the U.S. economy was very much on the minds of traders, with the latest blow coming from Goldman Sachs in a recession prediction for 2008. Stocks did manage to do an about face late in the day to post the best gains of the year thus far, but this was largely due to value buying and short covering amid oversold conditions. Each subsequent economic release seems to show conditions deteriorating to the point that even the most bearish of analysts are left scratching their heads. Commodities were mixed on the day, but indications point to another stellar year on concerns of highly inflationary conditions worldwide, not just in the U.S. OPEC's statements this morning indicate that the cartel is worried that a U.S. slowdown could easily spill over to the world stage. All of these factors are leading to a growing sentiment in the market that the threat of lower fuel consumption globally may influence traders to diversify away from petroleum and move to more traditional inflation hedges, such as precious metals and food-related commodities. Nonetheless, Crude Oil does still appeal to many traders who believe that tight global inventories will be able to support these lofty price levels and possibly even push prices above $100 a barrel. February Crude has drifted below 95.00 this morning and a close below this area could lead to a test of the 90.00 mark. Momentum remains strong in the face of the recent decline, but the divergence between the indicator and RSI is now rather insignificant. The market is flirting with the 18-day moving average and a close below the average would be a bearish signal in the near- to mid-term. Support comes in at 94.74, 93.80 and 92.19, while resistance can be found at 97.28, 98.90 and 99.83.

Dow – Stock index futures are coming in lower after posting the best gains of the New Year yesterday. The late buying was influenced by comments from Berkshire Hathaway that the company sees corporate earnings holding up in 2008, despite the tough economic conditions. Capital One slashed its growth forecast, becoming the latest victim of the credit crunch. The market will be keeping a close eye on today's initial jobless claims figure after last week's bombshell non-farm number. Scheduled for release at 7:30 AM CST, Initial Claims are forecast to rise to 340,000 – up from 336,000 the prior week – but it would not be surprising to the figure come in closer to 350,000. A slightly higher figure may actually be just what traders are looking for, with the belief that it could lead to expansionary policy from the Fed. Wholesale inventories at 9:00 AM CST are expected to show a 0.4 percent increase in November after a flat October figure. Yesterday's rally did little to improve the March Mini Dow chart, which remains very bearish over the longer-term. A close above 12845 may be considered bullish in the near-term and could bring about a test of 13250, but the market has a lot of work to do in order to change the longer-term technical outlook. Adding to the positive short-term technicals, momentum is showing strong divergence from the RSI, suggesting further short covering and bargain hunting may be seen over the next few trading sessions. Support comes in at 12599, 12452 and 12355, while resistance can be found at 12843, 12940 and 13086.

Gold – Gold is trading lower this morning on heavy profit-taking due to technically overbought conditions and lack of new buying interest. Lower energy prices and OPEC's somewhat grim outlook on the state of the global economy point toward tamer inflation, which has also influenced trading. Fundamentally, nothing has changed, suggesting that this could be the start of a healthy correction. The weak close after sharp rallies early in the day formed a spinning top candlestick, which is not necessarily bearish in and of itself but could signal a near-term reversal if the market is not able to recover from early losses. Closes below 870 and 859.40 may offer confirmation of the near-term reversal. The 9-day RSI and slow stochastics remain at very overbought levels, adding to the downside pressure. Momentum remains very strong, suggesting that a reversal may be short-lived. Support comes in at 872.20, 862.70 and 851.60, while resistance may be found at 892.80, 903.90 and 913.40.

Rob Kurzatkowski, Commodity Analyst

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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

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Demand Uncertainty Keeps Crude Prices in Check

Crude Oil – Oil futures fell yesterday on a poor economic showing and Saudi comments regarding increased production. Retail sales showed a decline of 0.4 percent versus expectations of zero growth for the month of December. But a much more troubling figure for Crude bulls was a report by the Commerce Department showing that purchases at service stations were down by 1.7 percent. It certainly appears that consumers are beginning to feel the pressure from all sides, with a bleak employment picture, record-high fuel costs and the credit crunch leading to tighter lending standards. All of these factors point toward a decrease in spending power for the American consumer, which is especially troubling considering the fact that the economic growth seen after the "dot com bust" was driven by consumers spending at or above their means and a robust housing sector – both of which have crashed and burned. A slowdown in corporate growth would also likely lead to slower petroleum usage and may cause the International Energy Administration to cut their demand forecast for 2008. Saudi Oil Minister Ali al-Naimi commented that it may be time for OPEC to increase production. While this defies logic – potentially leading to a price collapse in the near term – a production increase could aid the global economy and lead to stronger future demand. This long-range move would probably provide an opening to central banks around the world to implement expansionary policies due to a lowered threat of inflation, softening the blow of a downturn. Today's EIA inventories numbers are expected to show a build of around 1 million barrels of Crude Oil, a 1.55 million barrel build in distillates and a 2.5 million barrel build in gasoline stocks. The March Crude Oil chart negated a short-term reversal pattern to close below the 50-day moving average, which could be seen a bearish longer-term signal. The chart also appears to show the formation of a bearish consolidation pattern, which could spark sell-offs toward $86 in the near-term if validated. One positive technical factor is the bullish divergence between the momentum and RSI indicators, but the divergence is only very slight. Support comes in at 90.22, 88.94 and 87.02, while resistance can be found at 93.42, 95.33 and 96.62.

S&P – Stock indexes suffered heavy losses due to the poor showing on the economic front and the inability of Citigroup to reassure investors. The banking giant reported a loss of $8.83 billion and slashed its dividend by 41 percent. The dividend cut may be the far more troubling of the two figures, as it could be a harbinger of more write-downs related to CDO's and other mortgage-backed investments. Merrill Lynch, State Street and Bank of America all hinted at further losses due to subprime investments as well. The decline was not as bad as it could have been, as the poor retail sales figures and tame PPI data did somewhat buffer the slide in equities, fostering a perception among traders that the data could be the tipping point toward a half point cut by the Fed. Today is a report-heavy day, starting with the release of CPI data at 7:30 AM CST, which is forecast to rise 0.2 percent for both the aggregate and core figures. Industrial production released at 9:00 AM CST is expected to drop 0.2 percent, with a capacity utilization of 81.2 percent. Perhaps the most anticipated report of the day is the Beige Book at 1:00 PM CST, which will give traders some insight into the mindset of the Fed and provide a clearer picture of what economic datasets may influence the central bank more than others. The March e-mini S&P broke out of a bearish triangle pattern on the daily chart, suggesting the futures may test the 1350-1355 area. The market failed to establish support around the 1400 mark, which may cause traders to be wary near key psychological support areas in the near future. Support comes in at 1363.75, 1349 and 1319.75, while resistance can be found at 1407.50, 1437 and 1451.50.

Wheat – Wheat futures got a shot in the arm from freezing temperatures across the eastern portion of the Midwest. New crop futures have surged relative to the old crop due to a decrease in acres sown and strong early tenders. Farmers may have sown Wheat at a lesser depth than in prior years in an effort to get higher yields and speed up emergence – a risky strategy that further exposes the crop to the elements, such as this latest frost. July Wheat made new contract highs, giving confirmation to Monday's breakout above 830. Due to slumping prices prior to the USDA report, the RSI still has room to run before the market encounters overbought conditions. This has really been a dynamic week of trading, with the July contract looking as though it was going to take out support and then breaking out to new highs. Support comes in at 824, 796 and 775, while resistance can be found at 873, 894 and 922.

Rob Kurzatkowski, Commodity Analyst

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Oil Continues to Move Lower

The February Crude contract (CLG8) closed lower today, off by about 1%. Just days ago, Oil was flirting with the $100/barrel mark intraday, but that turned out to be quite the point of mental resistance for bulls as prices quickly retreated and haven't been back.

Today's inventory report showed a larger-than-expected build in Crude stocks, and the greater supply numbers invited bears to the party – at least 1% of them. The Dollar didn't help matters for Crude, showing some strength today with a gain of nearly 1% in the index (DXH8).

On the chart, Crude Oil is below both moving averages. It won’t take a lot to bring things back, but this level signifies that things are heading down fairly quickly. It also appears that 90 is a level of support based on the mid-December numbers seen here.

Tomorrow brings initial claims, housing starts, and an announcement from the Philadelphia Fed.

Mike Tosaw, Director of Education

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Market slides after with Bernanke's comments

S&P – Stock index futures are pointing higher on plans that President Bush will unveil a new stimulus package today. In testimony before the Finance Committee yesterday, Fed Chairman Ben Bernanke urged the President and Congress to take measures to get consumer spending and the housing market back on track. This caused the market to slide yesterday, but the fact that both Bush and Congress responded gave investors hope that new legislation may aid an economic rebound. GE and IBM raised their overseas growth forecasts, suggesting that large multinationals may be able to cope with a domestic downturn and use the slumping Dollar to their advantage. Leading indicators and consumer confidence figures will be released at 9:00 AM CST. Leading indicators are expected to show a -0.1 reading, but the figure may surprise to the downside given the grim results in recent economic releases for December. Consumer confidence is expected to slide to 74.5 percent, down from 75.5 the prior period. The confidence figure may also surprise to the downside due to all of the bad press the economy has received recently. Yesterday’s sharp slide gave confirmation to Wednesday’s bearish breakout on the March e-mini S&P chart and may be an indication of more downside in the near future. Even with the chart rally pre-market, the index would have to climb another 40 points before technical indicators would turn positive in the short term, and the market would have to rally over 100 points for a longer-term shift. Momentum is showing bearish divergence from the RSI, indicating today’s rally may be a "dead cat bounce." Support comes in at 1319.50, 1299 and 1264.25, while resistance can be found at 1374.50, 1409.50 and 1430.

Crude Oil – The Oil market has rebounded in tandem with stocks this morning in hopes that a stimulus package may help boost demand. The market is also aided by OPEC backing off of recent comments that output may be increased. Nonetheless, fundamental factors outside of geopolitical events remain bearish in the near term. Consumers are showing their shaky outlook on the economy at the pumps, with retail gasoline sales falling in December. This could lead to larger builds in gasoline stocks and the lower refinery utilization points to possible builds in supplies in the coming weeks. Weather maps for the next 90 days point to higher-than-normal temperatures across much of the nation, including the Northeast, which mainly uses Heating Oil instead of Natural Gas. The March Crude chart shows further consolidation, pointing to a bearish bias. Momentum is being outpaced by the RSI, suggesting a bearish near term bias. How the market behaves if and when it reaches the key 87.00 support area will likely determine the longer-term market direction. Support comes in at 88.85, 88.12 and 87.15, while resistance can be found at 90.55, 91.52 and 92.25.

Gold – Gold futures are holding their heads above water this morning, despite weakness in other precious metal prices and the rally in equities. Fresh buying activity remains strong, but has been overpowered by profit-taking in recent trading sessions. Physical demand remains strong, which has stopped a larger correction. The CPI report showed inflation growing at a much quicker pace than previously thought, which could keep demand strong. Fed fund futures are now pretty much factoring a half point rate cut later this month when the FOMC meets, and there is an increased likelihood of a three quarter point cut, which could lead to an extended slide in the Dollar. The recent reversal pattern on the daily chart suggests the market may test the first Fibonacci retracement, which coincides with early November highs of 855.00. Momentum is outpacing RSI, indicating that the weakness over the past few sessions has been a healthy correction. Support comes in at 873.30, 866.10 and 857.00, while resistance can be found at 889.60, 898.70 and 905.90.

Rob Kurzatkowski, Commodity Analyst

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Panic Rocks Equities

S&P – e-mini S&P futures are down almost sixty points this morning, following sharp declines in European and Asian markets over the past two trading sessions. The fire sale began yesterday with the thinking that the U.S. economy now has a 50-50 chance of slipping into recession. Investors became especially pessimistic after listening to Fed Chairman Ben Bernanke’s testimony before a Congressional panel last week, urging the President and Congress to act swiftly to aid consumer spending and the housing market. The market was less than satisfied with the stimulus package unveiled on Friday, viewing it as too little, too late. The very idea that the economy would need this sort of kick-start has really irked traders overseas. This week figures to be extremely volatile due to the panic kicking off the week and the high volume of earnings releases. This will be a very light week of economic reports, which may give traders a bit of a reprieve. The March e-mini chart is a disaster after gapping sharply lower. Momentum has fallen to an overwhelmingly bearish -208 in the early going. The RSI is now giving extremely oversold readings, which may slow the sell-off if it can attract bargain hunters. Support now comes in at 1250 and 1225, while resistance can be found at the top of the gap of 1319.

Crude Oil – Oil futures are sharply lower on panic selling in the equity markets. The sharp declines seen in Europe and Asia are extremely troubling to energy bulls, as they signal a greater chance of a global slowdown. The increasing demand in developing nations has contributed greatly to the strength in energy prices. A curbing of this demand, along with easing in other commodity prices, could lead to much slower inflation that previously forecast, making Crude Oil much less attractive as an inflation hedge. The U.S. Dollar is still spiraling out of control, which may give some near-term price support to the market, or at least act as a buffer to sell-offs. March futures are well off of overnight lows at the moment and it appears that declines below 86.00 have attracted some buying interest. Barring a sharp turnaround, today’s sell-off could signal a downside breakout to the consolidation pattern formed over the past three trading sessions. Momentum has moved lower at a slower pace than prices, suggesting the possibility of some short-term strength. Support comes in at 85.40 and 82.60, while resistance can be found at 89.00 and 91.60.

Gold – Gold futures are sharply lower this morning, but are well off of session lows that tested the $850 mark. The inflation picture seems a bit tamer at the moment due to the possible slowdown globally, making precious metals and other commodities somewhat less attractive to speculators. The recent wave of profit-taking has contributed to the initial price weakness seen in the session. Even with inflation pressures easing, Gold may hold its own in the near term due to the lack of opportunity in other investments. February Gold attracted strong buying interest after the market retreated to the 850 mark. The February contract is trading below the 18-day moving average at the moment and a close below the average could signal that a near-term high may be in place. A recovery above the average would likely form a bullish hammer and may violate a downside breakout on the chart. Momentum is outpacing the RSI, suggesting a slightly bullish technical bias in the near-term. Support can be found at 850 and 835, while resistance may be found at 870 and 890.

Rob Kurzatkowski, Commodity Analyst

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Stock Enthusiasm Carrying Over

S&P – Stock index futures are pointing to a higher open, sparked by yesterday’s late bargain hunting rally. Some of the panic the market has seen over recent sessions has dissipated for the time being and investors are hoping the recent actions by the Fed will help the battered financial sector recover from the subprime crisis. Yesterday’s swift turnaround was fueled by traders trying to capitalize on some suddenly cheap stocks and the technically oversold conditions. Today figures to be another volatile day for the market, although the ranges in the indexes will likely be smaller than we have seen over the past two sessions. Initial claims – scheduled for release at 7:30 CST – are forecast to show 320,000 jobless claims for the week, a rise of 19,000 over last week. Existing home sales may continue their slide after a surprising jump in November. The report at 9:00 AM CST is expected to show home sales at 4.95 million versus the November figure of 5.00 million. Given the fact that the Fed has acted as swiftly as it did, traders may not focus on today’s economic releases as intently as usual. The market may begin to move away from its “bad news is good news” approach due to the sharp rate cuts. The March e-mini S&P has improved significantly on the daily chart, but the contract would probably need to take out resistance areas at 1390 and 1420 to swing over to the bulls' favor. A recovery from technically oversold conditions on the RSI could leave the door open for further selling pressure if the market is unable to gain upside traction. Momentum has stayed relatively flat, even as the market has made tremendous recoveries over the past two sessions, indicating that the near-term bias remains in favor of the bears. Support comes in at 1320 and 1270, while resistance can be found at 1390 and 1420.

Crude Oil – Spurred by the recovery in the equity markets, Crude Oil futures are higher today after falling in five of the last six trading sessions. The move higher has been tempered by the fact that today’s EIA inventory figures are expected to show a build of roughly 1.75 million barrels of Crude Oil and expectations that gasoline inventories will rise for the eleventh straight week. Energy traders would like to see more signs of life in the U.S. economy before swinging the bias back to the bulls. Recent events on the economic front and the lack of geopolitical confrontations have sucked the air out of the Oil market. The March contract is still trading near the key support area around 86.50, and a solid close below this level could bring a new flood of selling pressure. If the market is unable to make a push above the $90 mark over the next few sessions, it would probably further embolden energy bears and force many remaining bulls out of the market. Momentum has remained flat this morning, suggesting bias remains to the downside in the near term. Support comes in at 86.50 and 85.00, while resistance can be found at 90.00 and 91.90.

Cotton – Cotton futures have rebounded in early electronic trading after the market made a limit move lower. A slowdown in the global economy may decrease import demand from China, which has been a real driver for the market. Overbought levels on both technical indicators and the COT report helped spark the sell-off, which began last Friday. Cotton was also sucked into the wave of commodity selling due to the poor state of the U.S. economy. Speculation that farmers will begin planting more Wheat to try and capitalize on the historically high prices could act as support for the Cotton market over the longer term, but traders may not be ready to accept prices above the 70.00 mark until more concrete data is released by the USDA. The inability of the March contract to hold above last July’s highs was discouraging for technicians and may have contributed to the selling pressure over the past few sessions. It is critical for prices to hold above the 66.00 mark, as a solid close below this level could signal the beginning of a downtrend. Momentum has stayed in positive territory and the RSI has come down significantly from overbought levels. Support comes in at 66.00 and 63.25, while resistance can be found at 70.00 and 72.50.

Rob Kurzatkowski, Commodity Analyst

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Stocks, Oil Await Big Ben's Decision

Dow – Stock index futures are flat to slightly lower in pre-open trading, as traders nervously await the FOMC rate decision this afternoon. The market is expecting the central bank to lower rates an additional 50 basis points. If the committee leaves rates unchanged or only cuts a quarter point, it could embolden bears and lead to selling pressure in late afternoon trading. Traders will have to digest the 4th quarter GDP and chain deflator data at 7:30 AM CST, expected to show economic growth for the quarter falling to 1.2 percent and the chain deflator rising to 2.6 percent. Traders may focus on the deflator figure, as a surprise jump in inflation may prohibit aggressive rate cut policies by the Fed going forward. There are a number of high-profile companies reporting earnings today – including Amazon, Kraft, Kellogg and Starbucks – which could result in high volatility, and the market may not find direction until well after the FOMC releases its policy statement. March Dow futures rallied yesterday to test nearby resistance at 12,500, but the market has initially rejected these advances. Rallies beyond 12,500 and more importantly the key 13,000 mark could turn the tide in the bulls' favor. Momentum remains in negative territory but has recovered substantially and now shows some bullish divergence from the RSI, which is somewhat encouraging for bulls in the near term. Support comes in at 12372, 12273 and 12207, while resistance can be found at 12537, 12603 and 12702.

Crude Oil – The petroleum market is little changed this morning ahead of weekly inventory figures and key economic data. Consensus estimates show a rise of 2.3 million barrels of Crude Oil, but it would not at all be surprising to see the figure come in closer to 2.7 million barrels. Gasoline is also expected to show a build of 1.9 million barrels, while distillates are forecast to show a draw of 1.6 million barrels for the week. The market has reluctantly rallied over the past week despite a plethora of bullish factors, such as the declining U.S. Dollar and strong commodity prices. Funds seemed to be diversifying away from the petroleum sector and into more underperforming commodities. This is not only due to skepticism over future demand, but also because asset allocations were too heavily geared toward energies. Judging from the price action over the past two weeks, it seems that Oil traders may have more conservative estimates on the size of the Fed rate cut. It looks as though OPEC will probably leave output levels unchanged due to its current precarious position – a rise in output could create a supply glut which might lead to a price collapse, wile a cut in output would send prices higher in the short term, but could quash future demand. March Crude has rallied to an area offering stout resistance between 92.00 and 95.00. Advances beyond the $95 mark could spark buying interest, while declines below 91.50 could indicate range-bound or bearish conditions. Momentum has moved incrementally higher despite the market trading higher for the fifth consecutive session, which suggests a neutral to bearish bias for the near term. Support comes in at 90.50, 89.37 and 88.41, while resistance can be found at 92.60, 93.55 and 94.69.

Rob Kurzatkowski, Commodity Analyst


Gold Loses Luster on Profit-Taking

Gold – The Gold market is lower once again this morning after shedding over 15 dollars on Friday. The non-farm payroll figure released on Friday was very Gold-friendly, but a large European hedge fund is rumored to have sold off a large portion of its position in reaction to how the market behaved after the number. The market seems to be experiencing some follow-through profit-taking early in the session on a firmer Dollar and weaker energy prices. Several South African mines are now running at 90 percent of normal power use – up from 80 percent for much of last week – which seems to be weighing on the market. Longer-term fundamentals remain bullish, with the Fed focused on preventing a recession rather than trying to keep inflation in check. The Dollar Index is trading near support and a violation of the 74.75 level could fuel further declines, which would likely support precious metal prices. Friday's sell-off did little chart damage and the market has held support at 900 so far this morning. Momentum has slipped below the +50 mark, showing a somewhat weakening trend. Support comes in at 900.40, 887.30 and 866.60, while resistance can be found at 934.20, 954.90 and 968.

Crude Oil – The Oil market is lower this morning after dropping almost three dollars on Friday. OPEC's decision to keep output unchanged came as no surprise to traders, but the payroll data hints that the U.S. economy is either in recession or dangerously close to heading down that road. Inventories have climbed back to seasonal averages and the demand picture continues to worsen, both of which have been disappointing for bulls. Last Wednesday's inventory data showed Crude Oil and Gasoline inventories rising, despite lower refinery use. Consumers decreased the amount of money spent at service stations for the month of December and inventory data suggests that consumer spending on motor fuel will likely fall again in January. Outside markets have added to the petroleum market's woes, with metals prices falling and the U.S. Dollar holding up in the face of terrible economic data. Friday's sell-off hints at a new test of support near the $86 mark and it will be interesting to see if Oil bears can finally push prices below this critical psychological and technical level. Support comes in at 87.57, 86.19 and 83.91, while resistance can be found at 91.23, 93.50 and 94.89.

S&P – Stock index futures are little changed in overnight trading after rising sharply on Friday. The market was strong despite the payroll data, aided by Microsoft's bid for Yahoo and the 50.7 ISM number beating analyst estimates of 48.4 – a figure below 50 shows contraction in the economy. Earlier this morning, car and truck sales showed a decline from December's sales. The market is now focused on the only major economic release today – Factory Orders – which is expected to show an increase for the first time in five months. Friday's close above the 1390 mark can be seen as bullish for the market near term, but a close above 1425 may be needed to swing chart bias toward the bulls. Momentum is quickly approaching the zero line and is outpacing the RSI indicator, both of which can be seen as bullish. Support comes in at 1379.75, 1362.25 and 1353.25, while resistance can be found at 1406.25, 1415.50 and 1432.75.

Rob Kurzatkowski, Commodity Analyst

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Oil Makes a Slight Move to the Upside

With stocks taking a turn to “Bear Street” today, the Oil market stayed on the other side of town with the bulls. The price of the March Crude contract (CLH8) as of this writing is 89.90, marking the first day the bulls have come out on top over the last three sessions.

On the chart, we see that Crude closed below both moving averages, indicating a fairly rapid downward slide. After spending much of the day above the $90 mark, that level ultimately appeared to act as a point of resistance, similar to the behavior we noticed around the $100 mark a few weeks back.

If $90 is indeed a resistance point, the next level of support is around the 78 level. Keep in mind that if you are bearish right now, the next point of strong resistance is around the 95 level, which still represents an almost 5% movement in the underlying.

Mike Tosaw, Director of Education

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Crude Gives Back

Crude Oil – Oil futures are slightly lower this morning after jumping more than three dollars on Friday. Several OPEC ministers have hinted at a production cut at the March meeting to head off the possibility of a worldwide glut. Venezuelan President Hugo Chavez is set to lose a key legal battle with ExxonMobil over one of the country's nationalized Oil fields and has threatened to cut supplies to the U.S. in retaliation. Royal Dutch Shell indicated that the company may not be able to honor all of its Nigerian export contracts due to political instability and sabotage. The geopolitical news comes on the heels of the largest weekly increase in Crude Oil inventories in nearly four years, showing that the U.S. is well-supplied at the moment and giving the threat of an OPEC production cut more credence. The Dollar is weaker this morning, which could act as price support for the market. Rallies on Thursday and Friday can also partially be attributed to bears' inability to drive prices below key support between 86.00 and 87.00 in the March contract. The market has rejected an initial push toward recent highs of 92.71 this morning. A breakout above this high would validate a double bottom formation on the daily chart. Momentum is outpacing the RSI indicator, suggesting a positive near-term bias. Support comes in at 89.19, 86.60 and 85.21, while resistance can be found at 93.17, 94.56 and 97.15.

S&P – S&P futures are slightly higher this morning after the index gave back 10 points on Friday. Motorola is said to be in talks with Nortel Networks to combine their cell phone infrastructures. Elsewhere, Yahoo's board is expected to reject Microsoft's recent bid as too low, and the Redmond, Washington giant is likely to counter by taking its case directly to Yahoo's shareholders. Higher Oil prices may weigh on the market today and volume will probably be light ahead of the flurry of economic data the market will have to digest later this week. Equities have seen some capital inflows of late, with optimistic traders beginning to believe that the market is slowly bottoming out. The March e-mini S&P chart gives evidence of a lack of a consensus opinion on market direction. After rejecting the 1400 mark, March futures have held the 1320 area, indicating the market is not yet set to make new lows. Momentum is outpacing the RSI indicator, which suggests that the near-term bias remains to the upside. Support comes in at 1319.50, 1309.00 and 1296.75, while resistance can be found at 1342.25, 1354.50 and 1365.00.

Rob Kurzatkowski, Commodity Analyst

Inventories, Chavez Lift Oil Markets

Crude Oil – April Crude Oil is higher in overnight trading, boosted by lower-than-expected inventories and a positive GDP reading from Japan. Yesterday's build of 1.1 million barrels was much lower than the 2.7 million barrel increase the market was expecting. Meanwhile, the economy of Japan – the world's third largest petroleum consumer – grew at a pace of 3.7 percent in the fourth quarter of last year, which doubled the consensus estimate. The solid GDP figure suggests that a U.S. recession may not spill over to the global economy. Oil traders are once again worried about the possibility of tight supplies, setting a bullish tone for the market. Venezuelan president Hugo Chavez is following through on his plans to cut off Oil sales to ExxonMobil, which could have a small impact on U.S. supplies. The move may backfire on the heavy handed leader, as Exxon will have an easier time finding alternative suppliers than Venezuela will have finding alternate buyers for the hard-to-refine heavy Oil the country produces. The U.S. is one of the few countries with the ability to refine this heavy variety of Crude, and the communist government needs money to fund its social programs, which may cause the government to step back from this policy. April Crude appears to be breaking out of a bullish flag formation on the daily chart, realized after the contract confirmed a double bottom. This sets a bullish technical tone for the market, with the possibility of rallies to the $98 mark. Momentum is outpacing both RSI and price, which is also bullish in the near term. Support comes in at 92.32, 91.23 and 90.39, while resistance can be found at 94.25, 95.09 and 96.18.

S&P – Stock index futures are pointing higher this morning on the good news out of Japan. The strong Japanese GDP data should be supportive for large multinationals that do business in the Pacific Rim region. Positive comments from several economists stating that the U.S. may avoid a recession combined with value buying to lift the equity markets over the past three sessions. Despite the upbeat comments, rocky times may still lie ahead. Today's release of initial jobless claims is expected to show very meager improvement, with the consensus forecast calling for a drop to 350,000 from 356,000 last week. The labor market has been battered over the past few months and improvements to the poor data we have seen recently may be needed for stocks to maintain their recent recovery. The March e-mini S&P chart remains an enigma, showing much indecision among traders and a lack of short-term direction. The daily chart, however, does appear to be forming a wedge formation. The formation – which can take weeks to build in many cases – may be a harbinger of rough times ahead, as a downside breakout could send the market into the low 1200's or possibly even the 1100's. Bulls are looking for the March contract to take out recent highs near 1400 before sentiment can swing in their favor. A close above 1430 could signal a reversal of the recent downtrend. Momentum is outpacing the RSI indicator, suggesting that the near-term bias remains to the upside. More importantly, the 20-day momentum indicator is close to breaking through the zero line, which can be seen as a medium-term buy signal. Support comes in at 1348.00, 1332.25 and 1321.00, while resistance can be found at 1375.00, 1386.25 and 1402.00.

Rob Kurzatkowski, Commodity Analyst

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Consumers Brace for Higher Fuel Costs

RBOB Gasoline – Energy futures are slightly lower this morning on yet another rejection of the century mark in Crude Oil. Gasoline prices jumped due to a flurry of bullish news: the Alon refinery explosion, expectations that OPEC will trim production, continuing uncertainty over the Venezuelan supply and broadly higher commodity prices, which suggest a highly inflationary environment. Falah Alamri – the chairman of OPEC's Board of Governors, who is also head of Iraq's State Oil Marketing Organization – stated that it is too early for the cartel to discuss cuts in output and indicated that the petroleum organization will meet in Vienna to discuss administrative issues. This dovish statement tempers some of the more hawkish statements of late from member states, but may be taken with a grain of salt, given the Iraqi government's ties to the U.S. The fire at the Alon facility, which refines 70,000 barrels of Oil daily, may be much more significant news for consumers. The refinery is expected to be offline for two months, which may overlap with scheduled maintenance at other refineries, squeezing supplies of motor fuel. April RBOB broke out to new highs on the daily chart, signaling a possible technical breakout. Prices have moved back from the 2.7223 breakout point in the early going due to technically overbought levels. Momentum continues to outpace the RSI indicator, suggesting a positive near-term bias. Support comes in at 2.6579, 2.5821 and 2.5387, while resistance can be found at 2.7771, 2.8205 and 2.8963.

S&P – Stock index futures are lower this morning ahead of consumer price data. Stocks fell into the red yesterday after spending much of the day positive in reaction to rising energy costs and worries in the telecommunications sector. Today's early release of MBA mortgage data suggests that the housing and mortgage markets are continuing to spiral out of control. The overall MBA market index fell 22.6 percent, while the purchase and refinancing indexes fell 11.5 percent and 27.9 percent, respectively. This could be an indication that consumers are expecting more rate cuts from the Fed in upcoming meetings and may be holding off on new purchases and refinancing options as a result. Today's CPI report is expected to show an overall reading of 0.3 percent and a core reading of 0.2 percent. Higher-than-expected price readings would put downward pressure on the market, possibly forcing the Fed to stall further rate cuts. Housing starts and building permits are expected to come in at 1,015,000 and 1,040.000, respectively, indicating further weakness in housing. The report that most traders will be looking forward to is the FOMC minutes released later this afternoon, which will give investors the chance to go through the thought process of the Fed at that January 30th meeting, and will give more insight into what economic data the central bank will use in future meetings to set interest rate policy. The March e-mini S&P is trapped in a triangle/wedge formation on the daily chart and is close to breaking through the lower boundary, which would indicate further declines. Tempering this grim view, the momentum indicator is outpacing both price and RSI, suggesting a positive near-term bias. Support comes in at 1344.00, 1332.25 and 1319.50, while resistance can be found at 1368.50, 1381.50 and 1393.00.

Platinum – Platinum futures have shed almost 80 dollars in early trading on heavy profit-taking and worries that all-time record prices may trim demand. Jewelry demand for the noble metal is expected to plummet in the neighborhood of 30-40 percent not only because of high prices, but indications that economies worldwide are slowing – jewelers account for roughly a quarter of all platinum demand. More importantly, auto manufacturers – which account for just under two-thirds of global demand – have begun substituting Palladium for use in catalytic converters. The supply squeeze may spurn innovation in the industry, as manufacturers look for Platinum and Palladium substitutes. Much of the selling pressure can be attributed to profit-taking due to technically overbought levels. The RSI and stochastic indicators had readings in the mid-to-high 90's, which threw up red flags for traders. If the April contract is not able to recover, traders may view the chart setup similar to a key reversal. While not a true textbook key reversal, the pattern can be viewed as very bearish and hints toward a trend reversal, at least in the near term. Support comes in at 2081.50, 2009.80 and 1963.60, while resistance can be found at 2199.30, 2245.60 and 2317.20.

Rob Kurzatkowski, Commodity Analyst

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Hedgers Nudge Gold to New Highs

Gold – April Gold futures posted a new record high this morning, as traders flock to precious metals as an inflation hedge. In addition to rising petroleum prices, the recent cold blast hitting much of the country has stirred the Natural Gas market from its slumber. Higher energy costs and a CPI report showing a higher-than-expected reading have more than offset the detrimental impact of yesterday's Platinum sell-off on the Gold market. The late-session buying in Platinum helped avert major chart damage, which should be supportive for the overall precious metals market. The daily April Gold chart shows the market breaking out of a wedge formation and penetrating resistance created by previous contract high close of 932.80. The measured move from the wedge formation suggests that the market may be ready to test the $1000 mark. Momentum continues to outpace both price and RSI, confirming a strengthening trend. Support comes in at 919.50, 901.30 and 886.40, while resistance can be found at 952.60, 967.50 and 985.70.

Crude Oil – April Crude Oil futures are trading below the $100 mark this morning ahead of the weekly petroleum inventory report, which is expected to show a weekly build of over two million barrels. The report itself is expected to be bearish for the Oil market, but may force OPEC's hand in lowering output. Today's activity figures to be choppy due to the report and the likelihood that some traders may be tempted to take profits after the contract jumped 13 dollars over the past nine sessions. Oil is a market that trades on perception, and the perception is that OPEC will slash production, even if an official word at the cartel's March 5th meeting is still up in the air. The actual supply and demand fundamentals for the market are actually quite bearish, with inventories building and domestic gasoline demand falling in December and appearing to drop in January and February as well. The Alon refinery outage is only expected to affect one percent of gasoline supply and will probably contribute to rising inventory levels. The spinning top pattern on the daily chart hints at consolidation or a small reversal. The RSI indicator is still overbought at the moment, suggesting the market may be sluggish in any further advance. On the other hand, momentum is screaming higher, outpacing both price and RSI, indicating a bullish near-term bias. Support comes in at 98.17, 96.65 and 95.30, while resistance can be found at 101.04, 102.39 and 103.91.

Rob Kurzatkowski, Commodity Analyst

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Gold Rises on Dollar Slump

Gold – Gold is higher in early trading, but is off of overnight highs after prices failed to test record intraday highs. The precious metal has a host of positive factors going for it at the moment, including rising energy costs and a slumping U.S. dollar. The greenback figures to stay soft due to the lackluster economic showing of late, as well as the increasing likelihood that the Fed will continue to trim rates. The central bank is in an awkward position at the moment as a result of the commodity price boom that is coinciding with an economic slowdown – commodity prices typically fall during periods of slow or negative growth in the economy, making it easy for central banks to simply trim rates to spur economic expansion. Expanding economies in China and other developing nations have increased demand for raw materials and decimated stockpiles. Last week's inflationary CPI report points toward the ideal scenario for Gold traders – high inflation and slow growth. Tomorrow's PPI numbers are likely to show producer prices increasing at an even higher pace than those of consumers, adding further price support for the yellow metal. The daily chart for April Gold remains bullish, but the last three candlesticks show a fair amount of indecision among traders. The chart appears to be forming a bullish flag pattern, which may lead to further price advances. Momentum is showing some bearish divergence from the RSI indicator, pointing to further consolidation or possibly even a pullback in prices. Support comes in at 939.60, 931.40 and 924.70, while resistance can be found at 954.50, 961.20 and 969.40.

Crude Oil – Crude Oil futures are little changed this morning, but geopolitical tensions figure to loom large this week. Turkey's incursion into the Kurdish region of Iraq has not disrupted Oil flow from the nation, but there are worries that an extended ground offensive may eventually affect supplies. Meanwhile, the U.S. is considering new sanctions against Iran over its nuclear program. The Oil-rich nation threatened to strike back at countries supporting the new sanctions, which may mean decreased exports from OPEC's second largest producer. Traders will continue to monitor these political events this week, but most of the market focus will be on next week's OPEC meeting. There really is no consensus among traders on what the cartel plans to do, with compelling arguments on both sides. On one hand, current production quotas may lead to supply excesses and steep price declines, but a decrease in production may be the straw that breaks the global economy's back, leading to economic contraction. The April Crude chart shows a spinning top candlestick after breaking through the $100 mark followed by a sharply lower session, suggesting the possibility of further declines from the century mark. Adding to this bearish sentiment, the momentum indicator is diverging from both price and RSI. Support comes in at 97.52, 96.24 and 95.31, while resistance can be found at 99.73, 100.66 and 101.94.

S&P – Stock index futures are higher this morning on bullish spillover from Friday's session. The market was able to finish last week on a positive note on speculation that troubled bond insurer Ambac Financial will be bailed out by several large banks. This good news could be met by some skepticism given that many of the banks involved in the bailout talks are have trouble of their own. Adding to the positive market sentiment, pharmaceutical giant Genentech gained FDA-accelerated approval for its breast cancer drug Avastin – a surprising move given the fact that sector analysts gave the drug less than a 50 percent chance of gaining such approval. Today's only major economic release is existing home sales data, which is expected to show sales declining 0.09 million average annual rate. The March e-mini S&P chart shows that market continuing to trade within the boundaries of the wedge pattern that has been forming since the beginning of the year. The congestion on the chart has gotten tighter and tighter, suggesting the market will be forced to determine a longer-term direction in the near future. Momentum is outpacing the RSI indicator, hinting toward a positive short-term bias. Support comes in at 1335.75, 1316.00 and 1305.25, while resistance can be found at 1366.50, 1377.25 and 1396.75.

Rob Kurzatkowski, Commodity Analyst

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Record Commodities

Crude Oil – Oil extended its gains yesterday to all-time highs near the $103 mark, but the market is slightly lower this morning as traders begin to lock in profits ahead of the weekend. A weak U.S. Dollar and inflationary figures in the CPI, PPI and Chain Deflator reports were the main driving factors in the market this week. Crude Oil supply and demand fundamentals remain bearish, but the market has been driven by heavy commodity and hedge fund buying on expectations that the Fed will continue to lower rates and let inflation run wild, decimating the value of the already weakened greenback. News that the largest U.S. pension fund, CALPERS, will be diverting roughly $7 billion to buy commodities set a bullish tone for commodities in general, and is a prime example of a large institutional investor pulling money out of stocks and bonds – which tend to perform poorly in inflationary times – and diverting those funds toward raw materials. It's hard not to mention geopolitical tension when talking about the energy markets, but it has been a relatively quiet week on that front. Traders held their breath after Turkish troops crossed the Iraqi boarder, but supplies have not been disrupted thus far. There has been an eerie calm after an election commission confirmed Nigerian election results, but no major violent actions by militants. The April Crude chart remains bullish – if a bit top heavy – at the moment, suggesting the possibility of a profit-taking correction or consolidation. Momentum continues to outpace the RSI, hinting at further strength in the near term. Support comes in at 100.01, 97.43 and 95.95, while resistance can be found at 104.07, 105.55 and 108.13.

Gold – Like Oil, Gold set all-time highs yesterday on the tumbling greenback and inflation concerns. April futures are almost 5 dollars higher as of this report, mainly on expectations that the U.S. economy will continue to struggle. Gold traders seem to have shrugged off the bearish news earlier this week that the IMF will be selling a portion of its reserves of the precious metal. Precious metals and energies – rather than the traditional treasury market – have become the safe havens for traders diversifying their portfolios, as many begin to fear that government debt instruments may not be worth the paper they are printed on in light of the record low exchange rate of the Dollar. The April Gold chart looks a bit top heavy and the RSI indicator is now showing overbought levels, but the market may not consolidate or correct until the $1,000 mark is tested. Support comes in at 957.00, 946.50 and 937.50, while resistance can be found at 976.50, 985.50 and 996.00.

Soybeans – Bean futures continue to rally on the falling greenback and expectations that global production may not meet demand. The weak exchange rate of the greenback has benefited the grain markets greatly over the past year and indications are that this trend will continue. China has not come close to meeting their domestic demand and been forced to import Beans, Bean Oil and Corn from the U.S. The record high prices of diesel fuel has also benefited the Soybean market, as it would likely increase demand for Bean Oil. Biodiesel can be produced from many different sources, including animal fats, but Bean Oil heated to the proper temperature on the delivery truck can begin the reaction process much more quickly and is considered the ideal choice for manufacturers. The July Bean chart remains bullish, but extremely overbought, which may make the market susceptible to profit-taking. Momentum continues to scream higher, outpacing the RSI indicator and indicating continued strength. Support comes in at 1495.75, 1467.75 and 1452.25, while resistance can be found at 1539.25, 1554.75 and 1582.75.

Rob Kurzatkowski, Commodity Analyst

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Commodities a Mixed Bag

Gold – Gold futures continue to soar thanks to a falling U.S. Dollar and the broad sell-off in the Asian equity markets. The $1,000 mark is now within reach for the April contract, sparking speculative buying that has added to the “flight to quality” effect in the market. All three major U.S. inflation gauges – CPI, PPI and the Chain Deflator – are indicating that both consumer and producer prices are rising at a brisker pace than previously believed, and the inflationary scenario is likely to continue in light of soaring commodity costs and expectations of further Fed rate cuts. Despite the bullish news for precious metals, Gold may remain vulnerable to profit-taking pressure in the near term due to technically overbought conditions and some traders rethinking strategy when and if spot prices reach $1,000. The April Gold chart remains bullish, with the market closing at new record highs each of the past three sessions. Momentum continues to outpace both the RSI indicator and prices, suggesting the trend may still be strengthening in the near term. Support comes in at 968.00, 960.90 and 955.70, while resistance can be found at 980.20, 985.50 and 992.50.

Cocoa – Cocoa futures have succumbed to profit-taking pressure and are lower, despite reports from Cameroon that exports of beans were down 41 percent for the week. It is officially called a trucker strike, but in reality trucks are being blocked from moving by anti-government factions that may lead to further supply disruptions. Cocoa fundamentals remain strong with increasing chances that the mid-crop will be small and poor in quality, which has attracted strong fund buying. There are reports that some farmers have prematurely harvested a portion of their crop to capitalize on high prices, adding even more potential mid-crop problems. May Cocoa remains technically overbought, and the bearish crossover in the stochastics points to the possibility of still more downside. The crossover conflicts with the momentum indicator, which is showing slight bullish divergence. Support comes in at 2740, 2703 and 2668, while resistance can be found at 2812, 2847 and 2884.

Crude Oil – The Oil market has given back some of last week's gains over the past two sessions, with traders now thinking that OPEC may leave output unchanged. Many traders were previously banking on a production trim at the cartel's Wednesday meeting, which has prompted this most recent rally in the energy markets. Trading has been out of tune with fundamentals suggesting that the U.S. has ample supply, as illustrated by inventories rising for seven consecutive weeks. Trading may remain choppy ahead of Wednesday's meeting and release of inventory data. The market may be weak over the next two days, with longs lightening up positions in the event that OPEC doesn't make any adjustments. Technically, April Crude remains very bullish on the daily chart and the activity over the past two sessions may just be profit-taking. Prices seem to have comfortably settled above the $100 mark after initial rejections. Momentum is screaming higher, easily outpacing both price and RSI, suggesting near-term strength. Support comes in at 101.11, 100.39 and 99.43, while resistance can be found at 102.80, 103.77 and 104.50.

Rob Kurzatkowski, Commodity Analyst

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OPEC Keeps Supplies Steady

Crude Oil – Crude Oil is higher this morning after a majority of OPEC ministers decided to keep output unchanged. This week's trading is a far cry from the bullishness that had been prevalent over the past two weeks, as illustrated by yesterday's sharp drop ahead of the cartel meeting. The petroleum market – like many commodity markets of late – has become detached from supply and demand fundamentals, with fund and investment money becoming the driving forces behind the push beyond $100 a barrel. The market is expecting a build of 2.3 million barrels of Crude Oil this week and a larger build may bring about a test of the century mark. The Crude chart is indicating that the market may be vulnerable to profit-taking pressure. After the spinning top formed by Monday's trading, the market formed a large down candle, which tested near-term chart support in the 99.00's. Another close below 100.00 could be bearish psychologically and a close below 97.00 would be considered bearish near-to-medium term. Momentum is showing bullish divergence from the RSI this morning, but is not particularly strong. Support comes in at 97.81, 96.11 and 93.35, while resistance can be found at 102.27, 105.03 and 106.74.

Cotton – The Cotton market is limit up once again this morning after being the lone bright spot during yesterday's broad commodity sell-off. Near record Crude Oil prices have many traders believing that demand for the fiber will rise, as synthetic fabric prices are likely to climb. There may be an acreage battle brewing this year due to the rising cost of Wheat, which may steal acres away from Cotton and pressure supplies. A positive outlook from commodities guru Jim Rogers has also helped attract spec buying. Many former and current floor traders are beginning to point the finger at the ICE exchange, which has made several moves that are perceived to have hurt both speculative and commercial shorts. The exchange expanded limits and raised margins twice in a 24-hour period, which put shorts on call and essentially forced them out of the market. Also, the elimination of floor trading in futures has some critics pointing out the fact that option traders and hedge funds are determining price and direction in a market that has traditionally been driven by commercials, making a strong argument that some markets are simply not suited for electronic trading. The technically overbought conditions, along with the possibility that traders do not want to get locked into a position ahead of Tuesday's USDA report, may make the market vulnerable to profit-taking. Given the high volume of fund positions, sell-offs may be as dramatic as those seen in the Wheat market in recent weeks.

Gold – The Gold market is unable to get any footing this morning after falling almost $18 an ounce yesterday. The market flirted with the 990 area the previous two sessions and some longs may have become frustrated that prices did not test the $1,000 mark. Yesterday's broad sell-off in commodities – namely energies – and stabilization in the Dollar also helped spur long liquidation. The fundamentals for the precious metals market have not changed, as the equity markets remain weak and inflation risks remain. This may just be the healthy near-term correction the Gold market needs after five consecutive positive sessions. Yesterday's sell-off caused little if any chart damage and April Gold remains in a strong uptrend. The market has recovered from overbought conditions on the RSI, which is being outpaced by the momentum indicator, suggesting near-term strength. Support comes in at 953.00, 939.60 and 921.00, while resistance can be found at 985.00, 1003.60 and 1017.00.

Rob Kurzatkowski, Commodity Analyst

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Crude Jumps to New Record

Crude Oil – April Crude Oil futures have rallied to a new record high on an unexpected drawdown in U.S. inventories and a new record low for the greenback against the Euro. Much of yesterday's broad rally in commodities can be attributed to the Dollar trading at all-time lows, attracting a huge inflow of funds from equity and fixed income markets. Even though Crude inventories fell for the first time in eight weeks, the market continues to completely disregard fundamentals, which are anything but bullish. Gasoline inventories are at 14-year highs and the drawdown in Crude Oil inventories can largely be attributed to increased refinery activity. While OPEC did not officially cut production quotas, the feeling among many traders is that some member states will begin to pull back their own production, fearing slow demand may lead to oversupplies. The April Crude chart remains bullish but vulnerable to selling pressure due to overbought conditions. Support now comes in at 101.06, 97.61 and 95.66, while resistance can be found at 106.46, 108.41 and 111.86.

Cocoa – A weaker Dollar and supply worries have sent the Cocoa market sharply higher in early trading. Rains in drier parts of the Ivory Coast, along with technically overbought conditions, have caused some consolidation in recent sessions, but fundamentals remain bullish. Cocoa, Coffee and the grain markets are the few markets that actually have extremely bullish fundamentals, while the rest of the commodity market seems to be banking on a weaker U.S. currency, inflationary pressures and speculation that fundamentals will shift. This disconnect between supply and demand fundamentals and prices may make some commodity markets vulnerable to selling pressure in the weeks and months ahead, which could adversely affect fundamentally strong markets, such as Cocoa. Technically, May Cocoa appears to be breaking out of the bullish consolidation pattern on the daily chart, but the initial rejection of Tuesday’s contract high of 2845 is somewhat troubling. Momentum remains strong and is outpacing the RSI, which remains technically overbought. Support comes in at 2729, 2681 and 2651, while resistance can be found at 2836 and 2885.

S&P – The stock market is set to open lower on continuing worries over the mortgage sector. Thornburg Mortgage, Inc. received a default notice for failing to meet a margin call issued by JP Morgan, and a bond fund managed by the Carlyle also failed to meet several margin calls. To make matters worse, banking giant UBS has reportedly shed a good chunk of its mortgage assets in what was widely regarded as a fire sale. UBS is expected to have write-downs of close to $20 billion due to the mortgage crisis. Due to the credit crunch, banks have been very tight with lending, which has exacerbated the problems in the housing market. This could have banks suffering the effects of the crisis much longer than previously thought. High inflation and a weakening consumer sector have even the most optimistic market observers worried. Equities may continue to suffer, as investors struggle to find stocks that have value in the current environment. March e-mini S&P futures have broken the downside of the bearish wedge formation and formed a bear flag on the daily chart, suggesting the possibility of further declines. The contract low close of 1309.25 is an important point for the market, as a new contract low may bring about long liquidation. Support comes in at 1322.25, 1308.75 and 1297.50, while resistance can be found at 1347.00, 1358.25 and 1371.75.

Rob Kurzatkowski, Commodity Analyst

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Traders Nervously Await Non-Farm Data

Crude Oil – Profit-taking ahead of the weekend, along with some early reluctance among buyers, has Crude Oil futures trading lower in the early going. Today's release of non-farm payrolls, which are forecast to show a very small increase of 25,000 jobs for the month of February, has Oil traders a bit weary. Weaker-than-expected results could signal further slowdowns in demand for petroleum from U.S. consumers, especially if the figure shows further contraction in the labor market. A sharply lower U.S. Dollar could act as a buffer to any selling pressure the market may feel as a result of the data. Commodity markets – especially energies and metals – have risen sharply in recent weeks due to inflationary concerns, and the Oil market has become somewhat detached from supply and demand fundamentals. A strong figure could bolster some moderate buying, but traders may want to lock in profits ahead of the weekend, which could make it difficult to garner upside traction. The daily April Crude Oil chart remains bullish after breaking out to yet another new high yesterday. It would likely take sell-offs below 97.00 to reverse the recent trend. Support comes in at 103.55, 101.64 and 100.44, while resistance can be found at 106.67, 107.88 and 109.80.

Dow – Indecision among traders ahead of the non-farm payroll report has stock index futures little changed going into the number. Another month of contraction in the job sector may all but confirm that the economy is in a recession, which may adversely affect consumer behavior, even for those currently employed. Yesterday's release of foreclosure data suggests that distressed homeowners have lost hope and simply caved, which leads many to believe the housing market may get much worse before it gets better. The Fed's aggressive rate cut strategy may help bail out distressed banks, but banks have been reluctant to lend money after the sub-prime crisis, which may hurt them in the long run. The lack of buyers in the housing market may drive down the value of homes further, depreciating the value of foreclosed homes and thus compounding the woe for banks. The March Mini Dow chart shows a downside breakout of a wedge formation, signaling the possibility of even more downside. The move suggests the market may test the 11,000 mark before it rebounds. Weekly and monthly charts are much more ominous and hint at a more extended correction. Support comes in at 11950, 11831 and 11638, while resistance can be found at 12262, 12455 and 12574.

Platinum – The Platinum market has broken down this morning on South African authorities’ comments that electrical supplies to mines will be increased. This sparked a wave of long liquidation, which seems to have stopped out quite a few smaller traders that established longs late in the move. The thinness of the Platinum market certainly had an impact on the scope and swiftness of the drop in prices. The sharp losses over the past two sessions could also be the result of the market’s opinion that prices have risen too quickly. Today’s payroll report is a mixed bag for Platinum traders – on one hand, the metal could become more attractive as an investment vehicle and inflation hedge, but on the other, it could be a sign that demand will slow. If the market is unable to pare losses and regain the $2,100 mark, today’s sell-off will have done some chart damage. The violation of this support area could signal a reversal of the uptrend. The next significant chart support comes in at the first Fibonacci retracement area of 2003.90, with additional Fib support coming in at 1909.20 and 1814.50.

Rob Kurzatkowski, Commodity Analyst

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Crude Lingering Around 110, Gold Hits 1,000

Crude Oil – Crude Oil jumped to $110 a barrel yesterday despite the weekly EIA inventory report showing a much larger build than expected. The Oil market has been driven primarily by the freefall in the greenback, which is now trading at 12-year lows against the Yen and all-time lows against the Euro. Fresh overseas money seems to be coming in daily to take advantage of the battered currency, with the bulk of overseas traders establishing long positions. This is the driving factor behind Crude's recent detachment from supply and demand fundamentals. The market does appear to be a bit top heavy, which could make it vulnerable to profit-taking, especially if the dollar manages to find some near-term footing. The April Crude chart remains bullish, but the angle of the up move has steepened sharply, which could be a harbinger of a near-term correction. The RSI is overbought, as are the stochastics, suggesting near-term vulnerability remains. The question for the market now is whether new shorts will attempt to test the waters after getting burned so many times before. Support comes in at 107.94, 105.96 and 104.83, while resistance can be found at 111.05, 112.18 and 114.16.

Gold – The sharp decline in the U.S. Dollar relative to the major currencies has sparked a fresh wave of buying in Gold. The April contract traded at $1,000 an ounce, which remains the high of the session to this point. The historic levels in Crude and now Gold have offered strong outside support to other commodity markets, which could spark a new round of margin calls among shorts. This may force shorts out of the market, further fueling the solid buying the market has seen. If the April contract is able to hold current levels, it would signal a new breakout on the chart, which could be especially strong if we are able to close above the key psychological $1,000 mark. Momentum is outpacing the RSI indicator, suggesting further strengthening. Support comes in at 966.30, 952.20 and 934.80, while resistance can be found at 1015.10 and 1029.30.

Cocoa – Warehouse workers in the Ivory Coast extended a strike for increased pay and better working conditions, sparking a wave of buying. A weakening Dollar, along with the short squeeze, has exacerbated the buying situation. Shorts now appear to be moving to the sidelines for the time being, leaving no resistance for buyers. Commercial short hedges in the softs markets have been discouraged by the wild price action since the ICE’s move to electronic trading. Many short hedgers have either moved into the options market to avoid margin calls or simply left themselves un-hedged for the time being, leaving futures trading to the speculators. The May contract may be signaling a breakout if we are able to sustain current levels. Today’s early move has driven prices beyond the 2845 resistance area. Support comes in at 2714, 2656 and 2561, while resistance can be found at 2961 and 3020.

Rob Kurzatkowski, Commodity Analyst

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Flat CPI Surprises Traders

S&P – Stocks have gotten a bounce from a flat CPI report, which may open the door for more Fed rate cuts. Given the recent climbs in Crude Oil and foodstuffs, the report caught traders off guard, inspiring skepticism that this low inflation scenario will develop into a pattern. Stock traders have lost faith in the Fed’s policy decisions of late, even though the central bank has used virtually every weapon in its arsenal to combat economic stagnation and revive the beleaguered banking sector. To put it in simpler terms, traders believe there are too many things broken to easily fix by simply injecting liquidity. The rate-cutting policy of the Fed has led to a plummeting greenback and has done little to improve either the banking or housing sectors, resulting in a sharp drop in consumer confidence, which has been evident at the checkout line. Banks will likely continue to be tight with lending due to their poor financial conditions and may not be as proactive in renegotiating the terms of home loans, which may lead to steeper foreclosure rates. Foreign investment in the U.S. has fallen due to the Dollar’s exchange rate – even if foreign entities make money on their investments, the result could be a net loss when converted back into their home currency. Overseas money has been tied up in commodities, which has contributed to the boom in those markets. If investors begin bargain hunting and the stock market can recover from current levels, consumers may begin feeling better about the economy and could begin spending again. This might lead to a mild recovery, but the loss of wealth from the housing crisis may be the 800-pound gorilla holding back a larger-scale rebound. The June e-mini S&P’s recovery from recent lows is somewhat encouraging for technicians. A solid close above the 1350 area could result in a bullish shift over the mid-term for the June contract, and rallies beyond 1400 could signal a longer-term recovery. Failure to move beyond 1350 could result in a continuation of the downtrend, possibly signaling that the market will confirm the bearish wedge continuation pattern’s measure of the low 1200’s. Support comes in at 1291.25, 1267.50 and 1250.75, while resistance can be found at 1331.75, 1348.50 and 1372.25.

Crude Oil – It appears that Oil traders are skeptical of the CPI report and stronger greenback as well, with April futures only posting minor losses in the early going. The tame report possibly signaling further expansionary policy by the Fed will likely continue to weigh on the Dollar, making commodities an even more attractive investment for overseas traders. The bias today seems to be neutral to lower, as profit-taking after this week’s run-up may rein in the market. We could see very choppy trading today due to a lack of fresh news. Yesterday’s candlestick formation showed much indecision among traders, which may hint at profit-taking in the near-term. The April contract is overbought on the 14-day RSI and slow stochastics, registering 73 percent and readings in the mid 90’s, respectively. Support comes in at 109.06, 107.79 and 106.82, while resistance can be found at 111.30, 112.27 and 113.54.

Gold – The CPI report has sparked some indecision among precious metal traders, resulting in little change in Gold prices this morning. The zero inflation report makes Gold somewhat less attractive as an inflation hedge, but the implications for the Dollar are bullish. April Gold may make another run at the $1,000, given the close proximity of the current price, but whether or not we can sustain a close above this level heading into the weekend remains to be seen. Yesterday’s move to new contract highs and rallies beyond the 1000.00 mark may be encouraging for traders. The April contract is now right at overbought levels on the RSI, registering 70 percent, which could hold back rallies. Support comes in at 983.80, 973.90 and 965.00, while resistance can be found at 1002.60, 1011.50 and 1021.40.

Rob Kurzatkowski, Commodity Analyst

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Bear Stearns Shocks the Stock Market

S&P – A surprise announcement that JP Morgan Chase will be buying Bear Stearns for $2 a share rocked stock index futures. The news underscores the vulnerability of banks, which have been speculating on high risk mortgage investments. In its boldest move yet, the Fed is providing financing for as much as $30 billion of non-liquid assets owned by Bear. Furthermore, the central bank will eat any losses associated with the sale of these assets, which include a large number of mortgage-backed securities. The news will probably weigh on the stock market for the remainder of the session – particularly financials and banks, which are sharply lower in pre-market trading. The June e-mini S&P chart continues to look like a disaster, taking out both the relative and contract low. The market has not yet attained the measured move of the bearish wedge formation, which hints at low 1200’s as its target. Support now comes in at 1252.00, 1211.00 and 1169.00, while resistance can be found at 1335.00, 1377.00 and 1418.00.

Crude Oil – The energy sector is sharply lower on the fire sale occurring in the equities market. The trouble in the banking sector has some very ominous implications for both the corporate sector and consumers, with banks likely to continue being stingy in providing financing. Home values are likely to plummet and the loss of wealth will likely lead consumers to be much more conservative with their spending, which will impact the U.S. economy and possibly China. The market may begin moving more in line with fundamentals, especially if the overseas and fund money that has been flowing into the market begins to ebb. Wariness among shorts – after getting burned so many times during Crude’s historic ascent – may keep the market from completely collapsing unless they can muster the fortitude to test the waters once again. The lows reached by the April contract were flirting with forming a bearish engulfing pattern on the chart. There does appear to be solid support in the 103-104 area, but failure to hold this area could result in the market falling well below the 100.00 mark.

Rob Kurzatkowski, Commodity Analyst

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Waiting

Crude Oil – An expected build of 2.3 million barrels has sent the Oil market lower in the early going. If inventories come in as expected, it would mark the ninth build in the past ten weeks. Despite economic uncertainties and an amply supplied market, Crude Oil has made a dramatic rise since August, primarily due to a tumbling Dollar and booming emerging markets. Due to the Dollar play, the market may be susceptible to selling pressure tied to the weak fundamentals. A larger-scale recovery in the stock market could also pull funds from the commodity markets, but a reversal in the greenback’s downtrend may be needed to bring the energy markets back in line with reality. Despite the sharp sell-off on Monday, no major chart damage was done and the May futures rebounded strongly from support near 102.00. The bearish crossover on the slow stochastics coupled with overbought conditions prior to the sell-off point toward possible weakness or consolidation in the near term. Support comes in at 105.53, 102.55 and 100.87, while resistance can be found at 110.19, 111.87 and 114.85.

Gold – The smaller-than-expected Fed rate cut continues to weigh on the Gold market in the early going. While the cut points toward a weaker U.S. currency, many currency and precious metals traders were pricing in a full point, leading to long liquidations. Today’s EIA energy inventory data will be closely watched by precious metal traders, with larger-than-expected inventories possibly further depressing prices in the near term on the thinking that inflation may not increase at the previously expected pace. April futures continue to drift toward the 960.00 support area on the chart. If the contract cannot hold this key support area, the market may see heavier long liquidation selling pressure and possibly even the emergence of shorts. Support comes in at 961.60 and 946.30, while resistance can be found at 1019.50, 1034.80 and 1056.10.

Dow – Stocks were strong through the entire session yesterday and rallied late to close near intraday highs, despite a smaller rate cut than the market was anticipating. A solid earnings report prior to the bell by Goldman Sachs set a positive tone for the day, as did the quick response from the Fed to the Bear Stearns crisis. Lehman Bros. profits tumbled, but the company remains solvent for the time being. Lehman seemed to be pegged as the next financial institution that could go under due to the subprime crisis, so the news was received as positive for financials. Adding to the collective sigh of relief after the Bear fiasco, Morgan Stanley posted record sales and trading revenue. Fannie Mae and Freddie Mac were cleared by regulators to purchase an additional $200 billion in home loans, which could aid the housing market. The cash Dow Jones index confirmed a W bottom formation, indicating the cash index could challenge resistance around 12,750 (12,770 in the June futures). This is by no means an indication that the market has completely turned around, but can be seen as a positive near-term signal. Support for the June futures comes in at 12127, 11849 and 11710, while resistance can be found at 12544, 12683 and 12961.

Rob Kurzatkowski, Commodity Analyst

Quiet Before The Open

S&P – Stocks posted solid gains yesterday on news that JPMorgan is increasing its bid for Bear Stearns and an unexpected rise in existing home sales. The better-than-expected home sales data has traders cautiously optimistic that we may be seeing a light at the end of the tunnel in the housing market crisis. Some of this bullish enthusiasm has waned in overnight trading, with futures posting only slight gains. Bank of America was downgraded by Merrill Lynch due to increasing loan delinquencies and the possibility that further write-downs are forthcoming. Today's only economic release is consumer confidence, which is expected to show a decline to 73.4 from 75.0 in February. Today's trading will likely be choppy and indecisive, with stocks vulnerable to selling pressure after the run-up over the last two sessions. The June e-mini S&P chart confirmed a W bottom formation, opening the door for more upside, possibly toward the 1400 mark. Momentum has moved lower this morning and is showing bearish divergence from both price and RSI, hinting that the bullish breakout could be a false signal. Support comes in at 1330.75, 1309.75 and 1294.50, while resistance can be found at 1367.00, 1382.25 and 1403.25.

Crude Oil – Despite the bounce in stock prices, Crude Oil futures have closed lower in five of the past six sessions on expectations that the U.S. economy will continue to falter. Fundamentals have been weak, but the recent selling pressure can largely be attributed to long liquidation, especially from overseas investors. The falling greenback has been the driving force behind the rally to new all-time highs in Oil, but the currency has managed to reverse course in recent sessions, helping spark the recent commodity exodus. Outside markets – especially precious metals – have put downward pressure on the energy market due to an extremely high volume of margin calls forcing traders out. Last week's EIA report was extremely bullish on the surface, but in reality it was not as supportive as a first glance would indicate. Demand for gasoline fell for the first time in over a month and the large drawdowns in gasoline and distillates could be attributed to lower refinery use. This week's inventory data may show a much larger-than-expected build in Crude Oil inventories considering the numbers in last week's report don't seem to add up. The May Crude chart shows a possible bear flag forming, suggesting further sell-offs toward the mid-90's are possible. Closes above 102.60 can be seen as bullish in the near term and a close above 105.00 could signal a new test of contract highs. Support comes in at 99.73, 98.61 and 97.26, while resistance can be found at 102.20, 103.55 and 104.67.

Wheat – Wheat futures are higher for the second consecutive session, aided by news that South Korea is removing tariffs on imports of the grain to curb inflation in food prices. High prices and the reversal in the exchange rate of the Dollar have weighed on Wheat prices in recent sessions. Governments may be looking to import more heavily in the near term in a bid to keep food inflation in check, but this may not last if the greenback is able to continue its recovery. The May Wheat chart confirmed a double top pattern and the rallies of the past two sessions look like consolidation due to some short covering. Momentum is sharply lower, outpacing both price and RSI, and signaling the likelihood of further corrections. Recent lows are near 980, which is solid support, and closes below this level could signal a reversal of Wheat's up-trend. Support comes in at 984.25, 948.50 and 909.50, while resistance can be found at 1059.00, 1098.00 and 1133.75.

Rob Kurzatkowski, Commodity Analyst

Buckshot in the Golden Goose?

Gold – After selling off sharply on Friday, the Gold market has managed to post modest gains in overnight trading on lower equity prices. Friday's PCE Inflation report showed much tamer inflation than previously thought, leading to heavy selling pressure. Lower energy prices combined with stabilization in stock prices and the U.S. Dollar have made Gold somewhat less attractive as an inflation hedge and investment vehicle. The lingering effects of the weak U.S. economy and Crude Oil prices north of $100 a barrel have prevented a larger-scale sell-off in precious metals, and longs seem to be waiting on the sidelines waiting for a recovery in commodity prices. A broad sell-off in commodities in recent weeks – namely in grains and softs – has put heavy downward pressure on the market. The June Gold chart shows that the market remains vulnerable to selling pressure. After making all-time highs on March 17th, prices have collapsed over a three-day period, followed by consolidation. Closes below Friday's low of 928 and 910 would be considered bearish in the mid-term, while advances above 960 could signal a reversal of recent bearish action. Momentum is showing bearish divergence from the RSI, hinting at further weakness. Support comes in at 924.20, 911.90 and 895.90, while resistance can be found at 952.50, 968.60 and 980.80.

Crude Oil – Oil prices are lower for the second consecutive session on news of a truce offer from radical cleric Moqtada al-Sadr, which has eased supply fears in Iraq. The key Basra pipeline was damaged by militants on Thursday, but was repaired by Friday. The truce offer from the cleric will not completely ease tensions over the Iraqi oil supply, and the attack underscores the vulnerability of the country's production capabilities. Recent economic data suggests that the U.S. economy is far from being in recovery mode, which could put further downward pressure on prices. Despite the U.S. slowdown, the past two inventory reports showed larger-than-expected declines in petroleum products and much smaller builds in Crude Oil. The reversal in the trend of large inventory builds and the vulnerability of the greenback suggest that prices could find solid support for the foreseeable future. Technically, the inability of the May contract to attach previous highs is somewhat discouraging, but the market does appear to be forming a bull flag pattern. If confirmed, the bull flag could indicate the market is ready to attack previous highs. Support comes in at 104.34, 103.06 and 101.42, while resistance can be found at 107.26, 108.91 and 110.18.

Rob Kurzatkowski, Commodity Analyst

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Crude Continues to Dance Around the Century Mark

Crude Oil – In early trading, Crude Oil has given up some of yesterday's strong gains on economic worries. Despite a substantial build in Oil inventories, futures rallied sharply on the much larger-than-expected drawdown in Gasoline inventories. Oil traders were also undeterred by a global economic downgrade by the IMF and Fed Chairman Ben Bernanke's testimony before Congress, where he stated that the U.S. economy is still at risk for recession. The IMF report reduced the expected growth rate of the U.S. economy from 1.5 to 0.5 percent, leading to a slide in the U.S. Dollar that helped contribute to yesterday's rally. This morning's trade has been marked by pessimism over the state of the global economy, which could quell demand for petroleum. The May Crude Oil chart looked as if it was going to confirm a double top, but yesterday's rally negated the pattern. If prices cannot break through the near-term high of 108.22 before selling off, it may signal vulnerability at the 100.00 mark. Oil bulls seem to start value buying when the market flirts with the century mark, but if the May contract cannot hold these levels a larger correction may loom. Support comes in at 101.41, 98.00 and 96.15, while resistance can be found at 106.67, 108.52 and 111.93.

Silver – Silver futures are slightly higher in early trading, but do not seem to be able to build on yesterday's momentum. Lack of follow-through buying in energies has weighed on the precious metals market, as has the recent strength of the U.S. Dollar. Despite indications that the U.S. economy is cooling and relatively dovish testimony from Ben Bernanke, recent weakness in precious metals underscores how much the Dollar weakness contributed to the sharp rise in commodity prices. Even though economic fundamentals suggest that Silver would be a “safe haven” investment, the strength of the greenback has held price advances in check. Tomorrow's non-farm payroll data will be keenly eyed by traders and further weakness in the labor market may result in the mindset that the Fed will again begin slashing rates with reckless abandon, which would likely be considered friendly to Silver. The daily May Silver chart shows that the market is vulnerable to selling pressure if prices cannot advance beyond the 18.685 mark. The chart shows the formation of a bearish flag pattern, which, if confirmed, could result in a test of the 15.50 support area. Momentum is showing bearish divergence from both price and RSI, suggesting near-term weakness. Support comes in at 16.755, 16.330 and 15.945, while resistance can be found at 17.565, 17.950 and 18.375.

Copper – Copper has given back about a third of yesterday's gains on a sharp increase in LME inventories. LME inventories jumped 500 metric tons, or half a percent. Shanghai inventories have also climbed over 4.5 percent for the week, showing a reversal in the de-stocking pattern that has taken hold since the beginning of the year. The economic uncertainties laid out by the IMF – suggesting we may be cooling on a global scale – and the greenback rally have weighed on prices in early trading. Copper has benefited from the tumbling greenback and reductions in LME and Shanghai inventories since the beginning of the year, but a reversal in these two trends may hold back prices. After trading sluggishly for over a week, yesterday's rally seemed to have shifted technicals to the upside, only to disappoint this morning. The market's failure to advance beyond the 4.00 mark could be met with selling pressure. Support comes in at 3.7990, 3.7210 and 3.6750, while resistance can be found at 3.9235, 3.9690 and 4.0475.

Rob Kurzatkowski, Commodity Analyst

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Job Contraction

S&P – The March Non-Farm Payroll report showed a loss of 80,000 jobs, underscoring the weakness in the labor market. The report included a downward revision of the February figure from a loss of 63,000 jobs to a loss of 76,000. The unemployment rate surged to 5.1 percent from 4.8 percent the prior month. Stock index futures sold off sharply immediately after the release of the data, but have bounced back to positive territory. While the recovery in the index futures defies common logic, traders may actually be pleased with the report, believing the Fed may continue injecting liquidity via rate cuts. Banking stocks got a boost in pre-market trading, which seems to go along with this mindset. Traders may also have been prepared for the report after yesterday’s large initial claims figure and are now looking beyond the report, hoping for an economic recovery later this year. If the market continues to move higher, the June e-mini S&P may show a breakout from a two-day bull flag pattern. A breakout could signal that the market may be ready to attack early February highs of 1402.50. Momentum continues to outpace both price and RSI, suggesting near-term strength. Support comes in at 1362.75, 1352.00 and 1344.50, while resistance can be found at 1381.00, 1388.50 and 1399.25.

Crude Oil – Oil futures have bounced back after selling spurred by the release of the payroll report. The demand outlook continues to look weak based on the data, but the possibility of a reversal of the recent upturn in the U.S. Dollar is friendly to commodities. The Oil market continues to play off of the currency markets instead of fundamental data. Even though the last two EIA reports were supportive of petroleum prices, the market is well off of highs because of the resurgence of the greenback. The daily and weekly May Crude Oil charts show consolidation and indecision. It is apparent when looking at the chart that there is reluctance to push prices beyond $110 a barrel, but at the same time, bulls seem to step up the buying pressure when the contract flirts with $100 on the downside. A breakout of this congestion will likely determine the direction of the market over the next several months after either the bulls or bears gain a decisive edge. Support comes in at 102.55, 101.26 and 99.32, while resistance can be found at 105.78, 107.72 and 109.01.

Bonds – Bond futures got a lift from the payroll report, as traders flocked to safer investments. While the report can be seen as very Bond-friendly, the implications for the U.S. Dollar may stymie treasury buying from overseas investors. Overall, the report could stop the recent slide in Bond prices. The solid economic data earlier this week hinted toward the Fed possibly pausing rate cuts, or at the very least being less aggressive with them. This report may change that mindset among traders. June Bonds found support at 117-00 and are currently trading above chart resistance at 118-23. Closes above 118-23 and 119-19.5 may be seen as bullish in the near term. Support comes in at 117-05, 116-25 and 115-28, while resistance can be found at 118-14, 119-11 and 119-23.

Rob Kurzatkowski, Commodity Analyst

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Crude, Products Pop on EIA

Today’s EIA report showed a surprise drawdown of 3.2 million barrels in Crude Oil inventories versus expectations of a 2.5 million barrel build. Further bolstering the bullish Oil data, gasoline and distillate inventories both dropped by much more than expected. Given MasterCard’s report indicating gasoline demand has fallen more than 6.8 percent from the same period last year, the data suggests what many had suspected – while OPEC has not officially cut quotas, individual member nations may be curbing exports to avoid a supply glut. The report really threw a red cape in front of the bulls, with prices surging over two dollars thus far. There is a decent chance that Oil prices will set a new intraday record, but whether or not the market is able to hold above these new record highs remains to be seen. Former Fed Chairman Greenspan’s comments that the U.S. economy is probably in a recession right now has pushed the greenback lower, further supporting commodity prices in general.

Rob Kurzatkowski, Commodity Analyst

China Sparks Raw Materials Rally

Crude Oil – Oil futures are little changed ahead of the weekly inventory report, which is expected to show a rise of 1.8 million barrels of Crude Oil, while gasoline and distillate inventories have forecasted drawdowns of 1.7 and 1.5 million barrels, respectively. News that China’s economy grew at a brisk pace of 10.6 percent, and that the world’s second largest petroleum consumer is expected to increase diesel imports by 50 percent in May, could support prices even in the event that the inventory report is perceived as bearish. Reports that Mexican ports have re-opened after bad weather forced closures may be seen as negative for prices. Yesterday’s sharp rally validated a bullish pennant continuation pattern on the daily chart, signaling a positive near-term bias. Momentum continues to climb this morning, despite the sluggish price action, further bolstering positive technicals. Support comes in at 112.37, 110.94 and 110.09, while resistance can be found at 114.65, 115.50 and 116.93.

Copper – Copper futures have jumped almost three percent in early trading on the stellar Chinese GDP figure. The sharp growth rate, combined with a large reduction in inventories over the past four months, has more than offset housing and manufacturing weakness in the U.S. In addition to China, other emerging nations such as India, South Korea and Russia have invested heavily in new infrastructure, fueling price growth. Even with today’s rally, the May Copper chart remains congested. Closes above prior highs of 4.04 would signal a technical breakout and might force shorts to cover. Momentum is outpacing both price and RSI, suggesting the market may be ready to test contract highs. Support comes in at 3.83, 3.79 and 3.75, while resistance can be found at 3.91, 3.95 and 3.99. The May contract has already rallied through the first two resistance areas this morning.

Rob Kurzatkowski, Commodity Analyst

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Market Googled

S&P – Stock index futures got a lift after Google beat the Street and defied earlier reports that its paid click business was cooling. The company posted profits of $4.84 a share (excluding special items) versus analyst estimates of $4.55 a share – news that sent the company's stock as much as $80 higher in extended hours trading. Citigroup reported a loss of $5 billion for the quarter due to write-downs of $12 billion and a 48 percent decrease in revenues. While the loss of $1.02 a share missed Street estimates of a $0.95 loss, the company will continue to “divest non-strategic assets," according to CEO Vikram Pandit, meaning the company will try to package and sell its more risky investment products. Investors took news of Citi going back to its core business as a positive and shares were higher in European trading. Dampening the relatively upbeat Citigroup announcement, analysts have suggested that Merrill Lynch may need a capital infusion to stay afloat, citing the fact that the company has already used up most of the capital it raised in 2007. With no major economic releases, corporate earnings and option expiration may lead to volatile, choppy trading for much of today's session. June e-mini S&P futures have flirted with near-term highs at 1389 in early trading, but closes above 1402.50 may be needed to spark extended rallies. Momentum is starting to turn lower despite today's rally, suggesting it may be running out of steam. Support comes in at 1362.25, 1352.50 and 1346.25, while resistance can be found at 1378.50, 1384.50 and 1394.25.

Eurodollars – Eurodollar futures are lower for the fifth consecutive session on technical weakness and changes in interest rate outlooks. Interest rate traders have shifted their outlook on Fed policy this week, with the rate cut bias going from half a point down to only a quarter point. With energy and food prices rising at their fastest pace in 17 years, the central bank may be forced to address the inflation issue, meaning less aggressive interest rate policy. The sharp rise in commodity prices can be directly attributed to two factors: tight supplies and a weak U.S. currency. While the Fed can do little to address the first issue, moderation of its recent aggressive rate-cutting policy can lead to stability in the greenback and aid in slowing down the commodity freight train. June Eurodollars broke support at 97.26, which has aided in accelerating the downside move. The next significant chart support areas are found at 96.835 and 96.40, suggesting further declines may be possible. Momentum has begun to move lower at a slower rate that the RSI, suggesting the market may find some stability in the near term. Support comes in at 97.0250, 96.9275 and 96.7925, while resistance can be found at 97.2525, 97.3875 and 97.4825.

Crude Oil – Oil futures are lower this morning on profit-taking and stabilization in the U.S. Dollar. Here too, the possibility that the Fed may begin backing off of its aggressive rate cutting strategy in order to shore up the slumping greenback can be viewed a negative for energy prices. On the other hand, fundamentals have improved recently and the driving season is beginning to approach, making a price collapse in energy prices unlikely in the near term. Technically overbought conditions and lack of fresh news has led to profit-taking over the past two sessions. Momentum remains flat – despite the market being lower this morning – suggesting near-term strength. Support comes in at 114.15, 113.45 and 112.75, while resistance can be found at 115.55, 116.25 and 116.95.

Rob Kurzatkowski, Commodity Analyst

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Crude $120?

Crude Oil – Oil prices reached a new milestone in early trading, briefly breaking through the $118 mark for a barrel. Shell Nigerian operations were disrupted due to stepped up attacks on pipelines – the Oil giant indicated that the attacks have reduced production by 169,000 barrels a day. Further bolstering prices, the union at a Scottish refinery in Grangemouth has threatened to strike, which could further put the squeeze on UK supplies. The Dollar is also trading lower against most of the majors, helping to support higher price levels. Oil fundamentals remain bullish ahead of the official start of the driving season. While demand has been lackluster, gasoline supplies remain somewhat tight at the moment, with analysts forecasting tomorrow's EIA number to show another drawdown in inventories. The daily Crude chart remains bullish, but the market is now in technically overbought conditions, which could spark some profit-taking later this week. Momentum has moved lower this morning – despite the market being higher – suggesting the trend may be weakening in the short term. Support for the June contract comes in at 115.42, 114.21 and 113.41, while resistance can be found at 117.43, 118.23 and 119.44.

Gold – Gold prices are slightly higher this morning on a weak greenback, but prices for the precious metal are well off of overnight highs. The Gold market has not been able to mount a sustained rally after reversing sharply from all-time highs. It looks as though some money has flowed back into the equity markets and that energies have stolen Gold's thunder. The inability of food commodities to hold rallies and worries that the Fed may address the inflation issues facing the U.S. have tarnished the appeal of precious metals as an investment vehicle. Next week's policy statement from the FOMC looms very large for the metal prices, with mentions of inflation and/or restrained rate cuts being bearish for prices. The June Gold chart shows a coiling congestion pattern, which points to a great degree of indecision among traders. The recent failure to make a run at late-March highs can be seen as bearish. Since the mid-March breakdown, momentum has not been able to get above the zero line, indicating sluggish conditions. Support comes in at 91.40, 903.30 and 892.50, while resistance can be found at 928.30, 939.10 and 946.20.

Rough Rice – Rice futures continue to trade near record high prices on slow planting progress. Vietnam, China, Egypt and several other large rice producers made efforts to reduce exports, which has helped fuel this run-up in prices. Thailand, the world's largest exporter of the grain, has decided against curbing exports, stating that high prices will curb demand and eventually lead to stable prices. Thai officials indicated that they see exports falling as much as 30 percent by the end of the year due to the high prices. Rice is in the midst of a short-term supply squeeze similar to Wheat, which may result in increased plantings in the future. While fundamentals remain bullish at the moment, increased U.S. plantings could put some major downside pressure on prices if the weather cooperates. The July Rice chart remains bullish, but two consecutive spinning top patterns may be a sign that the market may be reversing course or consolidating in the near term. Momentum continues to move lower, even though the market is up in overnight trading, suggesting this booming commodity may have chinks in its armor. Support comes in at 23.21, 22.72 and 22.01, while resistance can be found at 24.40, 25.11 and 25.60.

Rob Kurzatkowski, Commodity Analyst

Tough Times to Come?

S&P – Stock index futures are lower this morning on credit concerns and the $1.66 billion loss posted by bond insurer Ambac. Financial stocks have suffered the bulk of the damage thus far, but Oil and mining stocks are not far behind on losses in energy and metal futures. Further adding to the bearish sentiment, Boeing, UPS and Delta have all posted disappointing earnings figures. Due to a lack of economic data being released, today's trading will be earnings focused and volume should be fairly heavy. If the petroleum inventory report comes out bearish for Oil futures, the market may be able to stave off these early losses. On the other hand, a bullish report could send the market spiraling lower by mid-session.

The June e-mini S&P chart shows some promise, hinting that the market may be prepared to test the upper end of chart congestion at 1402.50. The market has held up better than it previously had at these levels, suggesting some of the panic and paranoia over recession has dissipated and traders are now focusing on forward earnings guidance instead of current economic conditions. Momentum is showing positive divergence from RSI at the moment, which is bullish over the near term. Support comes in at 1370.75, 1060.75 and 1050.75, while resistance can be found at 1390.75, 1400.75 and 1410.75.

Euro – The Euro is lower this morning on profit-taking and comments from ECB member states voicing their displeasure in the Dollar's sharp drop. The Eurozone may be forced to raise interest rates despite the credit crisis, which would likely lead to an even stronger Euro in the near term. A strong Euro would make EU countries less competitive in the global marketplace, which could lead to a slowdown in economic activity and a significant drop in the currency down the road, similar to what has happened with the Dollar. The declines in the Dollar have been a hot topic of discussion for the EU, with some states favoring the position of a strong currency versus the greenback, while others pointing out the loss of competitiveness for member nations. The largely socialist zone already has very high labor costs, and a loss of this competitive advantage may be the straw that breaks the camel's economic back.

The June Euro chart remains bullish and has held above the 9-day moving average in early trading. The pattern has been higher highs and lows, but the momentum indicator has been moving lower since peaking in mid-March and is a lackluster +0.0082 at the moment. This indicates that the uptrend remains vulnerable to selling pressure, but no reversal pattern has appeared to signal a correction. Support comes in at 1.5848, 1.5733 and 1.5664, while resistance can be found at 1.6032, 1.6101 and 1.6216.

Crude Oil – Oil is trading slightly lower this morning on the stabilization in the U.S. Dollar and talks to head off a strike at the Grangemouth refinery. Today's EIA report is expected to show a build in Crude Oil inventories of 1.5 million barrels, but a decline of almost 2 million barrels of gasoline. The gasoline figure has been a big driver for the market over the past several weeks and a large drawdown will likely continue this trend. On the flip side, if gasoline inventories show a much smaller draw than expected or a surprise build, a profit-taking sell-off may ensue.

June Crude is signaling the possibility of a reversal from record-high prices, but technicals can largely be thrown out the window in the early going due to the EIA report. Momentum has taken a sharp turn south, outpacing the RSI indicator and price to the downside, a bearish sign. Support comes in at 116.35, 114.62 and 113.31, while resistance can be found at 119.39, 120.70 and 122.43.

Rob Kurzatkowski, Commodity Analyst

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Pipeline Shutdowns Spark Crude

Crude Oil – Crude Oil futures have pared over a third of yesterday's losses on two major pipeline shutdowns. BP is temporarily closing down the Forties Pipeline System – which supplies the UK with 40 percent of its Oil – due to the work stoppage at the Scottish Grangemouth refinery. Although the stoppage is said to be for only 48 hours, in reality it takes over a week to fully restart a pipeline. Militants in southern Nigeria have also sabotaged one of Shell's major pipelines, marking the second such attack this week. It appeared that the market was ripe for a profit-taking sell-off prior to the news of the shutdowns, but the market seems to keep finding fresh news to push prices higher over the past few weeks. Prices still may ease going into the close given the solid gains this week, which could indeed lead to profit-taking after all. The June Crude Oil chart was signaling a strong reversal possibility prior to today's rally. Yesterday's sharp sell-off followed the inability of the market to post solid gains on Wednesday which, when coupled with overbought levels, seemed to be pointing lower. Now it appears that June futures may continue their uptrend, provided we do not see a sell-off below yesterday's low of 114.25. Support comes in at 114.11, 112.15 and 110.06, while resistance can be found at 118.16, 120.25 and 122.21.

Gold – Gold futures are down once again this morning on the continued recovery in the U.S. Dollar. Investment in the yellow metal has been lackluster over the past several weeks, with investors forsaking commodities in favor of stocks. Traders are now betting that the Fed will at the very least pause rate cuts after next week's policy meeting, which does not bode well for precious metal prices. The rising cost of food may force the central bank to rethink its interest rate policy, especially with the increased press coverage that food inflation has received recently. This may cause some backlash against the Fed politically, as many analysts have partially blamed the bank for this phenomenon. The technical outlook for June Gold may be turning positive if the market is able to hold relative lows at 876.30. The market sold off to 880 in the early going before making a recovery, suggesting buyers are waiting for an opportunity to get in at relatively cheap prices. Momentum has made moves to the upside, diverging from price and RSI, and suggesting the possibility of a reversal. Support comes in at 880.10, 870.80 and 856.20, while resistance can be found at 904.00, 918.60 and 927.90.

Bonds – Bonds may be poised for their biggest three-day decline since early February and their biggest two-week loss in almost 26 years. With traders now thinking that the Fed may pause or completely stop cutting rates after next week's FOMC meeting, Bonds have suddenly lost their appeal. According to many experts, the worst of the credit crisis may have passed, which suggests the Fed will be much less aggressive in the future. The weak greenback only adds to the downside pressure for Bonds, with overseas entities shying away from U.S. treasuries because of the currency risk. June Bonds look bearish on the daily chart, having confirmed a downside breakout from a bearish pennant pattern on the daily chart. The breakout suggests that the market may test February 20th lows of 113-31. Support comes in at 115-13, 114-23 and 113-27, while resistance can be found at 117-00, 117-28 and 118-18.

Rob Kurzatkowski, Commodity Analyst

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Oil Braces for EIA, Fed Announcements

Crude Oil – The Oil market is little changed ahead of this morning's EIA inventory data, which is expected to show a rise of 1.6 million barrels for the week. Once again the Crude Oil component of the report will take a back seat to gasoline inventories, which are expected to show a drawdown of 800,000 barrels. Tighter gasoline stocks have driven prices higher in recent weeks ahead of the summer driving season. The FOMC interest rate decision and policy statement released this afternoon will have longer-term implications for food and energy prices. A consensus of market observers is expecting a quarter point rate cut and a hawkish statement. A dovish statement, or one not perceived as very hawkish, may spark a late day rally, as it would signal the Fed will continue to take a soft approach to inflation. The June contract remains bullish on the daily chart, but Monday's spinning top followed by yesterday's sharp sell-off could signal a near-term correction. Momentum continues to outpace price and RSI to the downside, also signaling a possible reversal of the uptrend or stagnation. Support comes in at 114.12, 112.61 and 110.25, while resistance can be found at 117.99, 120.35 and 121.86.

Gold – Gold continues to tumble, falling another $7.00 in early trading. The precious metal has lost its luster as an inflation hedge of late, but could get a boost if the chain deflator component of today's GDP report shows higher inflation and/or if the Fed statement is seen as dovish. Gold may have a long, rocky road ahead if one of these two things does not happen. A large chain deflator number may work against precious metal prices if the central bank signals an end to cheap money. June Gold closed below support at 880, signaling a bearish downside breakout. Gold has stout support on the downside, suggesting sell-offs may be slow and drawn out rather than swift and brutal. Support comes in at 866.10, 855.50 and 840.60, while resistance can be found at 891.60, 906.50 and 917.10.

Rob Kurzatkowski, Commodity Analyst

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Credit Crisis Clearing?

Dow – Dow futures are slightly higher in overnight trading on positive credit market comments from Hank Paulson and the Bank of England. The U.S. Treasury Secretary suggested that the credit crisis was “closer to the end” and indicated that the economy is still growing at a very modest pace, backed up by yesterday's 0.6 percent advanced GDP figure. The BOE repeated the assessment that the worst may have passed, noting that appetite for risk and confidence will eventually make their way back into the credit markets. England's central bank also pointed out that balance sheet losses may be overstated due to “large discounts for illiquidity and uncertainty." Stock indexes have made decent progress of late, while fixed income and commodity markets – aside from energies and grains – seem to have faltered, suggesting that capital is returning to the equity market. Yesterday's FOMC statement was fairly neutral for the market. The quarter point rate cut was exactly what the market was expecting and the statement signaled the end of rate cuts, but was not as hawkish as many had expected. The June Mini Dow continues to trade above resistance at 12,770, signaling that the market may be beginning an up-trend. Price action is very sluggish and momentum is relatively flat, hinting that the market may labor in moving higher. Support comes in at 12725, 12642 and 12500, while resistance can be found at 12949, 13090 and 13173.

Crude Oil – The Oil market is trading lower this morning on a stronger U.S. Dollar. Exxon is resuming talks with Petroleum & Natural Gas Senior Staff Association of Nigeria in hopes of ending a weeklong strike that has cut over 800,000 barrels a day in production. Yesterday's EIA data suggests the U.S. is well supplied with Crude Oil, but Gasoline supplies remain uncertain ahead of the busy summer driving season. The FOMC statement was not as bearish for Oil prices as many had expected, with the Fed failing to emphasize inflation. Nonetheless, the central bank looks like it will at least take a break from its rate-cutting cycle, which may hurt demand. June Crude offered further confirmation of a short-term reversal from a spinning top formation. Yesterday's close below the 18-day moving average indicates that a near-term high may be in place. Momentum seems to be rebounding slightly this morning, despite the bearish price action, which can be seen as somewhat positive. Support comes in at 112.27, 111.09 and 108.87, while resistance can be found at 115.67, 117.89 and 119.07.

Dollar Index – The Dollar Index is trading higher this morning, aided by beliefs that the Fed may be done cutting rates. The June Dollar failed to get a lift from the FOMC statement yesterday, as currency traders were looking for a heavier emphasis on inflation. With the recent rebound in the stock market and a credit crisis seemingly nearing its end, the U.S. may receive an infusion of overseas funds to help support prices. The daily June Dollar chart is consolidating after rebounding from contract lows, suggesting prices may have more upside potential. The crossover of the 9- and 18-day moving averages to the upside is a positive development, and the contract is currently trading above the 50-day moving average – solid advances beyond the average may signal a reversal of the downtrend. Aiding the bullish technical sentiment, momentum is showing bullish divergence from RSI and remains above the zero line. Support comes in at 72.49, 72.26 and 71.86, while resistance can be found at 73.12, 73.53 and 73.75.

Rob Kurzatkowski, Commodity Analyst

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Barreling Upward

Crude Oil – Oil futures jumped to new all-time highs yesterday, closing just below $120 per barrel. The ISM Non-Manufacturing Index grew for the first time this year, registering a 52.0 reading. The surprise jump in the service sector fueled speculation that U.S. petroleum demand will increase, countering previous downbeat demand assessments. Nigerian rebels attacked and damaged a Royal Dutch Shell flow-station, which has cut output to the tune of 170,000 barrels a day. Also on the geopolitical front, Iran rejected possible incentives to halt its nuclear program and has remained defiant in the face of global pressure. Both of these situations will remain on traders' minds in the coming days and weeks, which could continue pushing Oil prices higher. June Crude Oil remains bullish on the daily chart, but the market must keep rallying to new highs to avoid a possible reversal pattern. Momentum is lagging behind price action, suggesting the market may be vulnerable to selling pressure. Support comes in at 117.23, 448.48 and 112.92, while resistance can be found at 121.54, 123.10 and 125.85.

Gold – Gold futures rallied sharply on higher Crude Oil prices and a weaker U.S. Dollar. The ISM report also opens the door for the possibility of higher inflation, given the rosier outlook on the U.S. economy and prolonged weakness in the Dollar. Additional rallies in the stock market may continue to weigh on Gold's appeal as an alternative investment vehicle, but brisker economic growth could make the yellow metal more appealing as a hedge to inflation. June Gold remains in a bearish continuation pattern on the daily chart, but rallies beyond the 890 mark could signal that a reversal may be in the works. Momentum has remained relatively flat despite yesterday's sharp rally and follow-through buying this morning, suggesting ample downside pressures remain. Support comes in at 863.20, 852.30 and 845.90, while resistance can be found at 880.50, 886.90 and 897.80.

Rob Kurzatkowski, Commodity Analyst

Under Pressure

Crude Oil – Oil futures have given back some of yesterday's gains on expectations that today's EIA number will show builds across the board. Crude Oil inventories are expected to climb by 2.5 million barrels, while gasoline and distillate inventories are expected to show builds of 1 million barrels each. Geopolitical events have been the wild card of late, sparking rallies despite the fact that the U.S. has been stockpiling petroleum. Traders are also concerned that global diesel demand may outstrip supplies due to high demand from Asia and South America. The U.S. Dollar has not been much of a factor in recent trading sessions, holding relatively steady against the majors, but a sharp move either way could bring it into play once again. June Crude Oil remains technically positive, forming a bullish consolidation pattern on the chart. Sell-offs below the $120 a barrel mark may be needed to spark heavy selling. Momentum is sharply lower despite yesterday's rally, suggesting the market may be vulnerable the selling pressure. Support comes in at 123.61, 121.41 and 119.73, while resistance can be found at 127.49, 129.17 and 131.37.

Gold – Precious metal prices have not been able to benefit from the rise in energy prices to mount sustained rallies. The Dollar has made strong gains against the Euro in recent weeks, diminishing the value of Gold as a hedge against the weak greenback. The Fed, ECB and BOE have been talking up inflation in recent weeks, suggesting they may soon be taking steps to curb rising prices in their respective jurisdictions. Today's CPI report is expected to show inflation holding steady, with an upside surprise likely to be negative for precious metal prices, as it would hint toward further action by the Fed. June Gold remains technically weak on the chart, failing to rally above the $900 mark. Yesterday's slide triggered a downside breakout from a pennant on the chart, suggesting more downside may be in the cards. Momentum has dropped at an even faster pace than price and RSI, seemingly backing up the bearish chart pattern. Support comes in at 858.30, 846.90 and 832.50, while resistance can be found at 884.10, 898.50 and 909.90.

Euro – The Euro continues to lose ground on the U.S. Dollar, much to the liking of many EU officials. Financial ministers in several member states have viewed the strong Euro as a barrier to growth, sparking inflation and making the union's exports less competitive. While the ECB held rates steady at their last meeting, many analysts are still somewhat biased toward a rate cut in the future, while the Fed is expected, at the very least, to keep rates steady. Technically, the June Euro chart has been eerily similar to the Gold chart in recent weeks, with the market forming a bearish consolidation pattern. Unlike Gold, this pattern has not been validated, but momentum has taken a sharp turn lower, suggesting a larger breakdown may be in the works. Support comes in at 1.5392, 1.5330 and 1.5255, while resistance can be found at 1.5529, 1.5604 and 1.5666.

Rob Kurzatkowski, Commodity Analyst

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Crude Continues to Climb

Crude Oil – A workers' strike in Nigeria and a plummeting dollar have led to higher petroleum prices in overnight trading. Militant attacks have already disrupted production by roughly 300,000 barrels a day in embattled Nigeria and the strike threatens to cut output by an additional 350,000 barrels a day. The U.S. Dollar, meanwhile, has given back a small portion of yesterday’s gains, helping to support Crude Oil prices in the early going. The market has largely shrugged off news that Saudi Arabia will be increasing production by 200,000 barrels a day, viewing it as a token gesture to appease U.S. politicians who have been lobbying the nation to open up the spigots. Supply disruptions have had much more of an impact on trading recently than any bearish news – such as the Saudi supply increase or China raising domestic fuel prices – underscoring the fact that this most recent rally has been driven largely by fear. These fears will likely continue given the current situation with Iran nearing a boiling point and the inability of Nigeria to get production back online. Technically, August Crude Oil continued to trade in a coiling congestion pattern on the chart, hinting at the possibility of an upside breakout on a new contract high close. Momentum is outpacing both price and RSI to the upside, adding to the bullish technical sentiment. Support comes in at 134.48, 132.22 and 130.39, while resistance can be found at 138.57, 140.40 and 142.66.

Gold – Precious metals started off the week on a sour note due to yesterday's sharp rally in the U.S. Dollar and heavy fund selling. The greenback has not been able to hold rallies beyond critical resistance areas but also has not suffered any significant setbacks, causing precious metals to remain in a holding pattern. If the Dollar is unable to gain any sort of upward traction in the coming days and weeks, it could embolden precious metal bulls on the thinking that the Fed will not be able to stave off inflation, at least in the near term. Heavy selling yesterday by funds was mainly due to the inability of the market to rally beyond near-term resistance. Given the economic conditions in the U.S. pointing toward stagflation and strong physical buying in the cash market, prices figure to find ample support north of the $850 area. That being said, the market may become vulnerable if the Fed is able to moderate inflation and/or energy prices somehow cool. August Gold has not been able to find a clear direction of late as stout near-term support and resistance areas have caused prices to ping-pong back and forth. Momentum has outpaced the RSI, suggesting a near-term positive bias. Support comes in at 873.20, 859.20 and 840.90, while resistance can be found at 905.50, 923.70 and 937.80.

Corn – Corn prices are lower overnight on dryer weather across much of the Midwest. Flood waters have yet to recede, but the dryer weather suggests that the worst has passed and growing conditions for some farmers will have improved when all is said and done. On the flip side, little is known about current crop conditions, as many of the flooded farmlands near the Mississippi River remain inaccessible. The floods may actually be a blessing in disguise for some farmers, as yields and crop quality may improve. December Corn remains within a stone’s throw of all-time highs, failing to suffer any major technical setbacks. Momentum and prices have leveled off in recent sessions, giving traders little in the way of near-term direction. Support comes in at 744, 729 and 720, while resistance can be found at 768, 776.50 and 791.25.

Rob Kurzatkowski, Commodity Analyst

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


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Another Crude Milestone

Crude Oil – Energy prices are extending yesterday's gains due to struggling equity markets and a falling U.S. Dollar. As global economies are forced to deal with climbing food and energy costs and stocks, demand for Crude Oil as an investment may increase. In essence, Oil has become the new Gold for investors, underscoring the fact that prices are wildly out of line with fundamentals. Recent news on the fundamental front has been mixed. Nigeria has had major supply problems because of militant attacks and labor turmoil, but this bullish development has been tempered by slowing demand, Chinese fuel price increases and increases in Saudi output. Energy prices figure to take a bullish hue from the ECB meeting next week. The August contract set a new record high close yesterday and prices continue to climb above previous intra-day highs today. Barring a late reversal into negative territory, today's action could be seen as a breakout. Support comes in at 135.42, 131.19 and 128.71, while resistance can be found at 142.13, 144.61 and 148.84.

Gold – Gold prices have hopped on the coattails of the Oil market, rallying over $12 in early trading. Precious metal traders have been emboldened by what can be seen as a dovish FOMC statement and a strong ECB bias toward a rate hike of 0.25 percent next week. The FOMC did itself very few favors by not releasing a hawkish statement, as currency traders took this as a signal that the Fed may talk a big game when it comes to strengthening the greenback, but the bank has done little in the way of policy to back up the rhetoric. With equity markets and the Dollar plummeting, traders have flocked to the relative safety of the commodity markets. August Gold looks as though the daily chart will signal a bullish breakout from nearby resistance at 912.50 barring a sell-off into negative territory. Momentum seems to be flattening during this session, hinting that the market may have a difficult time trying to cross the next resistance area at 940.00. Support comes in at 894.40, 873.60 and 860.70, while resistance can be found at 928.10, 941.00 and 961.80.

Rob Kurzatkowski, Commodity Analyst

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When Will It End?

Crude Oil – Like a broken record that keeps repeating, Crude Oil futures surged to another record high. Prices have now surpassed the $143 level, with traders considering possible supply disruptions from Iran amid continued frustration over the country's nuclear ambitions. Persistent militant attacks on the oil infrastructure in Nigeria and a weak U.S. Dollar have also contributed to higher Oil prices. Active trade in Oil futures is expected today as large traders square their books ahead of the close of the second quarter. August Crude broke out of its nearly 3-week consolidation pattern on Friday, which may have helped spur further technical buying this morning. The next major resistance level is seen at $144.00 and again at $145.00. The first line of support is found at $140.40, with additional support seen at Friday’s lows of $138.60.

Corn – Grain bulls might be “corncerned” about their positions after the USDA raised its estimates of planted Corn acreage this morning. The USDA estimated U.S. Corn plantings at 87.327 million acres – well above the pre-report estimates of something closer to 85.35 million acres, as well as the March estimate of 86.014 million acres. Also deemed “bearish” by traders was the Corn stocks figure, with the USDA estimating Corn stocks as of June 1st at 4.028 billion bushels, up nearly 0.500 billion bushels from this time last year. New-crop December Corn just missed reaching the $8 per bushel level on Friday, and today’s seemingly bearish report looks to cement this area as a level of strong resistance. Support is seen at the recent lows made on June 23rd at $7.38.

Mike Zarembski, Senior Commodity Analyst

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Is Black Gold Losing Its Luster?

Crude Oil – Oil prices are tumbling for the second consecutive session on speculation that Iran's talks with the West may have taken a turn for the better. While a compromise over the country’s nuclear program is not imminent, prices are falling on the mere fact that the standoff has not escalated. Israel's successful interceptor missile test also suggests that the nation may forgo a proactive military approach in dealing with the perceived Iranian threat. The U.S. Dollar may begin to strengthen against the Euro and British Pound, as both the Euro Zone and UK economies are beginning to show signs of potentially falling into recession. Weak German manufacturing news yesterday was followed by indications that the UK's services sector has slowed dramatically. The Fed may have a difficult time raising interest rates until early next year, as lending has not shown any significant improvement. It appears that the geopolitical firestorm and worries over the falling greenback have subsided for the moment, but bearish economic indicators or renewed tensions with Iran could spark a rally at any time. August Crude Oil is currently trading below the 9-day moving average, signaling possible short-term technical weakness. The market is also nearing the 18-day average on the downside; closes below the average may signal that a near-term high is in place. The chart pattern is hinting at the possibility of a short-term reversal to the uptrend and a close below the $140 mark could be a psychological blow to the bull camp. Momentum is showing bullish divergence from the RSI, suggesting that this correction may be short lived. Support comes in at 139.08, 136.80 and 134.07, while resistance can be found at 144.09, 146.82 and 149.10.

Silver – Precious metals posted solid gains in early overnight trading, only to reverse course and head lower going into the U.S. session. Global stock indexes and U.S. index futures are sharply lower, further aiding prices, but the weight of lower energy prices has taken a toll on the Silver market. The outlook for precious metals has improved recently due to weakening economic conditions around the globe, but the market has been unable to maintain upside due to outside market pressures. If stocks continue to plummet, traders may flock to the safe havens of Gold and Silver, but a rising Dollar could keep more traders on the sidelines. After testing resistance in the 18.40-18.45 area, the September contract has pulled back. For the market to pick up some steam, prices will likely need to clear this resistance area and 18.85 for the bulls to firmly gain control of the market. Inability to cross the 18.45 threshold could result in further range-bound trading. Momentum is showing bullish divergence from RSI, hinting at possible short-term strength. Support comes in at 17.62, 17.32 and 17.015, while resistance can be found at 18.225, 18.53 and 18.83.

Rob Kurzatkowski, Commodity Analyst

Point, Counterpoint

Crude Oil – Just as Israel tested its new interceptor missile, Iran went forward with its own long-range missile test – one capable of reaching Israel – further escalating tensions in its ongoing standoff with the West. This news sent Crude Oil futures $1.50 higher in early trading after falling more than $9 over the past two sessions. In addition to the new geopolitical development, traders will get to digest U.S. inventory data today, as the EIA is expected to show a decline of 2.5 million barrels for the week. Despite the bullish slant expected from today's report, Oil traders have begun to express their doubts about the global economy and commodity prices. Indicators outside of the U.S. are beginning to look more ominous, suggesting that inflation may begin to cool on weak demand for raw materials. Traders will continue to focus on Iran and possible supply disruptions, but the poor economic news may prevent the explosive rallies that we have seen in recent weeks. The August contract closed below the 18-day moving average yesterday, signaling that a near-term high may be in place. The chart pattern signals that the market may be in store for a correction, but weary bears may wait for a close below 132.00 before jumping into the market. Countering this bearish view, momentum remains above the zero line and continues to show bullish divergence from the RSI indicator. Support comes in at 133.31, 130.57 and 126.01, while resistance can be found at 140.61, 145.17 and 147.91.

S&P – Stock index futures are trading slightly lower this morning after posting solid gains yesterday. The news of Iran's missile test and the ensuing rise in Oil prices has weighed on the futures market in overnight trading. Airlines and retailers are expected to continue their pattern of disappointing earnings, which has overshadowed upgrades in U.S. metal manufacturers. The bottom line is that there is plenty of risk and uncertainty hanging over the market and many investors are simply not willing to stomach this risk until the economy shows more solid signs of improvement. The enthusiasm over the Fed suggesting that it will keep emergency funds open to banks may be short-lived, as the sector has stabilized but shows no signs of improvement. There are no major economic releases today, so the stock market may take its cue from the energy market after the release of the weekly inventory data. The September e-mini S&P chart shows a bullish engulfing pattern, suggesting a positive bias. Adding to this bullish view, momentum is outpacing the RSI indicator to the upside. While the chart shows potential, technicians would probably like to see the market close above the 1300 level before declaring a bullish reversal. Support comes in at 1248.25, 1222.75 and 1209.00, while resistance can be found at 1287.50, 1301.25 and 1326.75.

Rob Kurzatkowski, Commodity Analyst

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Triple Threat

Crude Oil – Worker unrest in Brazil and continuing geopolitical tension have inspired Crude Oil futures to test all-time highs. Workers at Petroleo Brasileiro SA are seeking pay for the day they returned after a two-week shift at an offshore rig and have threatened to strike as a result. In Nigeria, the Movement for the Emancipation of the Niger Delta, or MEND, is said to have called off its cease-fire agreement as of midnight on July 12. The group has threatened to attack British Oil interests after Prime Minister Gordon Brown pledged his nation's support to the Nigerian government. The group would also like the government to share more of its oil wealth with the poor inhabitants of the Niger Delta region. Hopes of improvements in Iran's talks with the West have been quashed by the country's recent test-firing of its long-range missiles. It's also an indication that the country expects to come under attack by either Israel or the U.S. at some point. The news out of Brazil is relatively minor for the petroleum market, but comes at an inopportune time, given the news out of Nigeria and Iran. Any agreement between workers and Petroleo Brasileiro SA would likely be seen as a trivial event unless things calm down in other parts of the world. In addition to the fundamental factors, this rally can be at least partially attributed to technicals, as the August contract was able to hold support at 135.50, which may have brought bulls back into the market after heavy profit-taking. Support comes in at 137.34, 133.04 and 130.64, while resistance can be found at 144.04, 146.44 and 150.74.

Gold – The explosive rally in Crude Oil and a weaker greenback have sent Gold higher this morning, potentially marking the fourth consecutive weekly gain in the precious metal. The climb for Gold has been slow and steady, as it has been overshadowed by the petroleum market and several food-based commodities. Given the economic uncertainty in the U.S. and abroad – not to mention the U.S. stock market officially confirming bear market conditions – traders may flock to the yellow metal as a safe haven investment. Some argue that given the economic conditions, Gold may even have more upside potential than petroleum due to the possibility of decreasing demand for energy products – a fairly bold statement in the wake of several major geopolitical events and the potential for precious metals to run into snags of their own. If conditions continue to worsen, jewelry demand may begin to wane and inflation may subside, causing Gold to lose its appeal as an inflation hedge. Technically, the August contract may be on the verge of a breakout above near-term highs of 950 and, more importantly, 964.30. Failure to advance beyond these levels may result in range-bound trading or possible sell-offs. Support comes in at 929.20, 916.40 and 906.40, while resistance can be found at 952.00, 962.00 and 974.80.

Rob Kurzatkowski, Commodity Analyst

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Sour Crude

Crude Oil – Oil fell sharply yesterday after comments by Fed Chairman Ben Bernanke indicating that risks to economic growth had increased. While this news is not exactly new, the amount of economic cheerleading being done by Bernanke, Treasury Secretary Hank Paulson and President Bush recently is probably an indication that all is not well. Demand has already shown signs of a slowdown, and threats to the supply side – namely the Iranian nuclear standoff and unrest in the Niger Delta – have kept prices near all-time highs. OPEC has slashed its demand outlook for a sixth consecutive month and also indicated that the trend will likely continue into 2009, citing a possible global economic slowdown. Today's EIA inventory report is expected to show Crude Oil inventories dropping 2.2 million barrels, while gasoline inventories are expected to be flat and distillates are expected to show a build of 2 million barrels. It would not be surprising to see the distillate number come in much lower than the consensus estimate, as the U.S. has been exporting a great deal of diesel fuel in recent months. August Crude Oil is close to confirming a bearish double top formation on a close below 135.34 that measures 123.50 to the downside. Bears may be hesitant to jump on the signal, though, as they have been burned on false bearish technical signals in the past. Traders instead may be looking for longs to liquidate positions first before they test the waters. Support comes in at 134.20, 129.65 and 123.39, while resistance can be found at 145.01, 151.27 and 155.82.

10-Year Notes – Note futures are higher this morning on lower stock index futures and a slide in commodity prices. The previously mentioned economic cheerleading being done by the Federal government and the poor performance in equities has traders looking for a safe haven to put their money, making treasuries attractive. The market may have gotten ahead of itself several weeks ago by pricing in higher interest rates later this year, but the latest recent banking crisis may inspire the Fed to keep rates low. A breakdown in commodity prices could lead to more money flowing into treasuries, as it would be an indication that inflation may be subsiding and would give fixed income an apparent advantage over commodities in terms of profit potential. This is unlikely to happen quickly due to continuing demand for raw materials in emerging markets and the possibility that some unforeseen geopolitical event might spark a rally in Oil prices. September T-Notes were unable to hold the bulk of yesterday's early gains, setting up a possible bearish pattern on the daily chart. A close above yesterday's high of 116-02 could negate the possible bear pattern and get the market back into bull mode. Support comes in at 114-29, 114/12 and 113-25, while resistance may be found at 116-00, 116-19 and 117-04.

Rob Kurzatkowski, Commodity Analyst

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Stocks Try to Mount a Rally

S&P – Index futures are higher in overnight trading, lifted by stronger-than-expected earnings from JP Morgan – 54 cents a share versus estimates of only 44 cents. Coupled with the surprising news from Wells Fargo, some traders believe that the worst may have passed for many of the nation's larger financial institutions. Merrill Lynch, Coca Cola, Microsoft, IBM and Google are also releasing earnings today, which will likely make trading very volatile – nothing new for the market these days. On the economic front, housing starts and permits and initial claims will be released at 8:30 ET, and the Philly Fed number will come out at 10:00 ET. Housing starts are expected to fall to 960,000 and permits are expected to show a more modest decrease to 965,000, while initial claims are forecast to increase to 380,000. As with corporate earnings, these figures have been revised down – or up in the case of initial claims - to the point where an upside (downside) surprise may be likely. The Philly Fed number is expected to show manufacturing in the region still contracting, with a consensus estimate of -15.0, which would be a very modest improvement over last month's -17.1 figure. The September e-mini S&P shows what appears to be a V-bottom reversal on the daily chart, which may be considered bullish. Traders will be looking for some sort of follow-through to confirm that pattern, preferably a close above the 18-day moving average, which is currently sitting at 1263.25. Failure to cross resistance at 1293.00 in the near term may result in the bears retaining control of the market. Support comes in at 1213.50, 1186.00 and 1169.75, while resistance can be found at 1257.25, 1273.75 and 1301.00.

Crude Oil – Crude is lower for the third consecutive trading session on demand worries. China, the world's second largest consumer of petroleum, has reported its slowest economic growth since 2005. Of the 23 industrialized nations, Canada has been the only nation to avoid bear market conditions in its stock indexes. Recent supply and demand data has shown that the skyrocketing cost of Oil has changed consumer and industrial behavior, which, in turn, has trimmed demand both in the U.S. and overseas. Yesterday's EIA report demonstrated that despite increases in imports of “black gold” and refinery utilization, both U.S. demand for gasoline and exports of diesel fuel continue to fall. Things have quieted on the geopolitical front as well, with fears of Nigerian rebel group MEND stepping up attacks on Western interests yet to be substantiated. More importantly, the U.S. has made the symbolic move of joining the EU in nuclear talks with Iran. The U.S. is also expected to show a diplomatic presence in Iran for the first time since 1980, which could be seen as something of a breakthrough. However, both of these situations have the possibility to change quickly, which would send prices back into bull mode. August Crude Oil confirmed a bearish double top formation yesterday, but prices finished well off of lows, causing traders to be cautious acting on the pattern. Thus far, prices have stayed above support at 132.00 and many market observers may be looking for a solid close below this level before ceding control to the bears. The August contract is also in danger of closing below the 50-day moving average for the first time since early February, which could be seen as a bearish indicator longer-term. Support comes in at 133.31, 132.03 and 130.96, while resistance can be found at 135.666, 136.73 and 138.01.

Rob Kurzatkowski, Commodity Analyst

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Worldwide Woes

S&P – European and Asian markets slumped in overnight trading, dragging down U.S. stock index futures before the bell. Recent data seems to confirm recent fears that the U.S. slowdown is spilling over to outside markets. Germany's Ifo Business Confidence Index saw its largest drop since the 9/11 attacks, falling to 97.5 from 101.3 points for the month of June; Citigroup trimmed earnings forecasts for the UK banking sector by 40 percent; and, National Australia Bank, Australia's largest lender, wrote off A$830 in U.S. mortgages, causing shares to plunge. Back in the States, traders are expecting today's 10:00 AM EST report on New Homes Sales to show a drop to 505,000, which could lead to more woes in the troubled lending sector. Weak home sales figures and skyrocketing foreclosure rates have prevented a recovery in banking shares. Mortgage rates have also climbed on expectations that the Fed may begin tightening rates by year-end, suggesting housing prices may not bottom in November-December of this year, as many had expected. One positive that can be taken amid all of this dismal data is the fact that the U.S. economy was the first to feel the impact of the credit crunch and, in theory, could make the quickest recovery. Banks have already written off enormous sums of bad debt and seem to be erring on the side of caution when giving their earnings outlooks. Another positive implication of a slowdown overseas is the possibility of rapidly decreasing inflation. Consumption of raw materials – namely food and energy – may slow significantly, aiding a U.S. recovery. In addition to New Homes Sales, the Durable Goods Orders report will be released at 8:30 AM EST, and is expected to show a contraction of 3 percent. September e-mini S&P futures bounced off of the 38.2 percent Fibonacci retracement resistance area on Wednesday, suggesting traders may not be confident in the market's chances of a recovery. The 9-day moving average may be on the verge of crossing the 18-day average to the upside, which could be seen as positive in the near term. The market is at a turning point in the short term. Crossing the 1293 mark – which is both chart and Fib resistance – could swing the market in favor of the bulls, while a close below the 1240 support area could lead to further declines. Momentum is showing strong bullish divergence from both price and RSI, suggesting a positive short-term bias. Support comes in at 1241.50, 1229.25 and 1207.50, while resistance can be found at 1275.50, 1297.25 and 1309.50.

Crude Oil – Oil futures have edged slightly higher in the early going this morning on comments from Israel and Nigerian militant group MEND. Israel upped its rhetoric, saying that military options are available if negotiations with Iran fail. This is hardly fresh news, but may have shaken the resolve of some Oil bears. Traders seem to be more focused on suggestions from MEND that it will attack major pipelines that feed two of the nation's four major refineries. Today's trading may have a slightly bullish bias due to prices dropping rapidly over the past two weeks and concerns that supplies may be disrupted. The bullish enthusiasm may be somewhat subdued due to worries that a global economic slowdown may continue to trim demand. Also, the odds of an attack on Iran prior to the November election are fairly slim, as Israel could have a falling-out with U.S. over what might be seen as sabotaging the election and disrupting Oil supplies. September Crude Oil technicals remain bearish, at least in the near term. The 18-day moving average is in danger of crossing through the 50-day to the downside, which may be seen as bearish over the mid-term. Price action over the past two sessions, while positive, suggests that prices are consolidating before moving lower. If the price of the September contract falls below the $120 mark, the market may see more downside. Momentum is moving lower this morning, despite the rally, hinting that bulls may not be very confident in their opinion. Support comes in at 123.86, 122.23 and 120.94, while resistance can be found at 126.78, 128.07 and 129.70.

Cocoa – Cocoa prices have gotten a boost from a weaker Dollar and a stronger British pound, leading to arbitrage buying. Cocoa has plummeted this month on improved growing conditions in the Ivory Coast. Traders were expecting that some of the problems that had plagued the midcrop may also hamper the main crop, leading prices ahead of themselves. The government in the Ivory Coast is also stepping up efforts to spay crops, which would decrease the likelihood of black pod and other diseases. The real story in Cocoa may be the fund activity, with many funds bailing out of their positions, sparking this plummet. The market has been a favorite of many hedge funds and the sharp drop in energy and grain prices may have forced many funds out of Cocoa to meet margin calls and de-leverage their positions. Technically, September Cocoa remains weak. The chart pattern shows the market consolidating around the 2750 area, which could mean more downside lies ahead. Fibonacci support at 2654 may be a key area going forward. If prices are unable to stop their slide at 2654, prices could test April lows. Support comes in at 2725, 2706 and 2678, while resistance can be found at 2772, 2800 and 2819.

Rob Kurzatkowski, Commodity Analyst

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