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.

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.

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.

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.

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.

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.

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.

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 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)

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.

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

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

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

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

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)

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.

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

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%)

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.

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.

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

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

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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Senior Commodity Analyst
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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

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

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

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

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%

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

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

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)

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

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)

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

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

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

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

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

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

$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

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)

(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%)

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

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

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

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

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

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

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