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Active overnight trading keeps traders awake!

Corn: December Corn futures traded higher in early trade, as traders gear up for a possible decline in the U.S. crop ratings last week. The USDA reported 62% of the U.S. Corn crop was rated good to excellent last Monday, down 2% from the prior week. Less than expected rainfall in parts of the Corn Belt may lead to a lower crop rating in this afternoon’s report. At the close of overnight trade, December Corn was trading at $3.38 ½, up 2 cents a bushel.

S&P 500 futures: More volatility is expected in the S&P 500 futures this morning, as traders reassess last week’s 87-point sell off in the S&P futures. Since the re-opening on Sunday, September e-mini S&P futures have traded in a nearly 15-point range, with over 200,000 contracts already being traded as of 6:30 am Chicago time. With no major economic reports out today, traders will look towards corporate earnings reports and any additional news on the sub-prime loan situation to gauge their trading decisions today. In early trade, September mini-S&P 500 futures are trading at $1461.00, up 3.00.

Treasury futures:
September 10-year Note futures are trading higher in early trade, following the lead of the European Bond market, as credit spreads continue to widen. This is causing a flow of funds into the Government Bond market, as traders and investors look for a “safe haven” to park funds. September 10-year Note futures are trading at 107-200, up 0-075.

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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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Cornflicting Weather Forecasts Sink Corn Futures!

After an initial spurt to two-week highs, Corn futures lost their luster, as commercial selling and updated weather forecasts put bears in control. December Corn started the day session slightly higher, with forecasts of above-normal temperatures in the Midwest keeping traders concerned that crop conditions would continue to deteriorate. However, some private forecasts are now calling for increased precipitation in the parched regions of South Dakota and Minnesota going into the weekend, putting pressure on Corn futures. In addition, failure to hold above the widely-watched 20-day moving average in December Corn – currently at 3.42 ¾ – sparked some momentum-based selling. Resistance for December Corn is seen at the July 17th highs of $3.48 ½, with support at the recent lows of $3.24 ½. December Corn closed at $3.35 ¾, down 6 ½ cents a bushel.

After posting a record high of $78.77 for a nearby contract, September Crude Oil plunged over $2 at its lowest point of the session, despite a larger-than-expected drawdown of U.S. Crude stocks last week. In its weekly energy stocks report, the EIA reported that U.S. Oil inventories fell by 6.5 million barrels last week, down sharply from average forecasts calling for a decline of 700,000 barrels. Refineries ramped up production significantly, with utilization reported at 93.6% – well above estimates. Gasoline and Distillates both showed increases with gains of 600,000 and 2.8 million barrels, respectively. After the initial rally to a record high, Crude Oil futures were hit with a wave of selling, as traders booked profits with the expectation that refined product inventories should increase given the sharp rise in utilization. September Gasoline made another attempt to test the $2 level, falling as low as $2.0020 before buyers emerged and prices rebounded over 2 cents off the day’s lows. The 20-day moving average at $74.72 looks to be the next support point for September Crude, with today’s highs at $78.77 seen as resistance. September Crude Oil closed at $76.51, down $1.70.


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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

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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FOMC Takes Center Stage!

Stock Index futures: Equity index traders may get a bit of a reprieve this morning after several days of extreme volatility, as the market gears up for the end of FOMC meeting this afternoon and the announcement on interest rates. The market expects the Fed to keep interest rates steady at 5.25%, but will be keenly interested in its statement after that decision is announced, especially in regards to how the Fed plans to handle the fear surrounding the subprime loan situation. In early trading, September S&P 500 futures are trading at 1467.00, down 0.75

Wheat: Another day, another contract high in December Wheat futures in Chicago, as surging demand due to tight world supplies has traders continuing to bid up prices. Weekly Wheat export inspections came in at 25.127 million bushels for the week ending August 2nd, well above the high end of estimates. Morocco issued a tender for 630,000 metric tons of option origin soft Wheat, which is deemed supportive to U.S. Wheat futures. Paris million Wheat futures hit another new all-time high this morning, trading as high as EUR220 a metric ton in the November contract. The U.S. Winter Wheat harvest is nearly completed, with the USDA reporting 94% harvested so far, up 6% from last week, and 3% above the five-year average. At the end of the overnight session, December Wheat was trading at $688 ½, up 5 cents a bushel.

Lean Hogs: October Lean Hog futures plunged yesterday after reaching contract highs on Friday, as traders liquidated long positions fearing a decline in wholesale pork demand while slaughter rates continue to increase. However, prices may remain volatile in the near-term, as many believe China, the world’s largest pork consumer, will need to increase its imports of pork due to a supply shortage after disease ravaged the country’s pig crop. Wholesale pork prices in China were up 44% through July due to supply shortages. October Lean Hogs closed yesterday at 75.05, down 2.55.

U.S. Economic reports for August 7th 2007

All times are U.S. Central time

7:30 AM: 2Q Advance Productivity (Consensus +2.0%)
1:15 PM: FOMC Policy Statement
2:00 PM: June Consumer Credit (Consensus $6 Billion)

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Wheat Takes Center Stage!

Earlier this year, all grain traders wanted to talk about was the Corn market, as surging demand for Ethanol and livestock feed led some to question whether we could produce enough to meet demand. Fast-forward to August and that talk has cooled right along with Corn prices, as the Wheat market has quietly moved to the forefront in the minds of grain traders. Just this morning, Chicago December Wheat moved to a new contract high of $6.89 ½ per bushel, with Japan looking to tender for 131,000 tons and Egypt in the market for 55,000 tons as well. This follows a Morocco tender for 630,000 metric tons of optional origin Wheat. It appears that Mother Nature was not kind to Wheat growers this season, with excessive rains hurting the crops in the U.S. and France, while hot, dry conditions have played havoc with Canadian, Australian, and Ukrainian production. This is causing Wheat importers to try to lock in supplies – despite high prices – in fear that high quality Wheat will not be available in the coming months. Traders will keep a close eye on this Friday’s USDA crop production and supply/demand report, especially world ending stock figures.

Looking at the daily chart for December Wheat, we notice the resilience of the rally, as prices remain well above the 20-day moving average. In addition, the most recent Commitment of Traders report shows a battle between large and small speculators, with large specs holding a net-long position of 27,977 contracts and small specs net-short 27,781 contracts as of July 31st. With prices at contract highs, it will be interesting to see if the small specs can continue to hold their short positions in the face of commodity fund buying. The 14-day RSI has reached oversold territory with a reading of 75.21. $7.00 looks to be key resistance for December Wheat, with support found at the recent lows of $6.39. At the end of the day session, December Wheat was trading at $6.88 ½, up 5 cents.


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Stock Sell-off Looks to Overshadow Major USDA Report!

Grain futures: It was a fairly quiet night in the Grain futures markets, as traders saved their strength for this morning’s USDA crop production and supply/demand report. Corn traders are looking for a moderate increase in production from the July report, with average estimates for a 12.909 billion bushel crop versus 12.840 billion in July. Soybeans are expected to also show a slight production rise to 2.653 billion bushels, up 28 million bushels from July’s report. All U.S. Wheat production is expected to decline, with average trade estimates calling for 2.129 billion bushels versus the 2.138 billion bushels in July’s report. At the close of the electronic overnight session, December Corn was trading at $3.45, down 3 1/4, November Soybeans were trading at $8.82, up 4 ½, and December Wheat was trading at $6.88 ½, down 1 ¼.

Cotton: U.S. Cotton production is expected to show a slight improvement in today’s USDA report, with average estimates calling for a 17.70 million-bale crop, up from 17.50 million bales in the July estimate. This is still well below 2006 production of 21.59 million bales, as producers switched acres from Cotton to Corn and Soybeans. In early electronic trade, December Cotton is trading at 6224, down 18.

Stock Index futures: No recovery in U.S. Stock index futures this morning, as major foreign stock indexes continue to slump, with the DAX 30 currently down 1.6%, the FTSE 100 down 3.01% and the Nikkei 225 closing down 2.37%. The European Central Bank added an additional 61.05 billion Euros ($83.6 billion) into the banking system today after yesterday’s 94.8 billion Euro injection. The Central Banks of Canada, Australia, and Japan joined the U.S. Federal Reserve in adding funds to help stem a short-term credit crunch. In early trade this morning, the September e-mini S&P 500 index was trading at 1440.00, down 18.00, while September mini-Dow futures are trading at 13185, down 142.

Mike Zarembski, Senior Commodity Analyst


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USDA Raises Corn Crop Estimate, Lowers Wheat and Cotton!

The August crop report has something for everyone, with the USDA raising U.S. Corn production due to a sharp increase in yield estimates. However, difficult weather conditions forced the all Wheat production estimate down by over 20 million bushels from July’s figure. The following are key highlights from this morning’s report:

Corn: The USDA raised the U.S. Corn production estimate to 13.054 billion bushels, up from 12.840 billion bushels in July and above pre-report estimates. Average Corn yields are expected at 152.8 bushels per acre, up from 150.3 in July. 2007-08 Corn carryout is expected to increase to 1.516 billion bushels, slightly above the 1.502 billion estimate for July.

Soybeans: The 2.625 billion bushel estimate for July remains unchanged for August, though average analyst estimates were calling for a moderate increase to 2.653 billion bushels. Average yields also remained in place at 41.5 bushels per acre. Carryout totals were lowered to 220 million bushels, down 25 million bushels from July and 27 million bushels below analyst estimates.

Wheat: All Wheat production is expected to decline to 2.114 billion bushels, down from 2.138 billion in July and 15 million bushels below pre-report estimates. Increased world demand is expected to increase U.S. exports, with 2007-08 carryout totals expected to drop to 404 million bushels, down form 418 million bushels in July.

Cotton: The USDA lowered U.S. Cotton production estimates to 17.346 million bales, down from 17.50 million bales in July and well below the 17.70 average pre-report estimates. U.S. Cotton carryout is expected to fall to 5.80 million, down from 5.90 million in July.

Early calls by CBOT traders are for Soybeans to open up 3 to 5 cents higher, Wheat to open up 2 to 3 cents higher, and Corn to open 1 to 3 cents lower. In early trade, December Cotton is trading at 6225, down 17.

Mike Zarembski, Senior Commodity Analyst


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Bulls Taking the Upper Hand So Far This Morning!

Stock Index futures: After Friday’s volatile session, Stock Index futures are higher in early trade this morning, following assurances of liquidity from the Federal Reserve, European Central Bank, and Bank of Japan on Friday. European Stock indexes are higher this morning, lending some support to the U.S. market. On the economic calendar today is the release of Retail Sales figures for July at 7:30 AM Chicago time, with expectations for a rise of 0.2%, with ex-autos expected to show an increase of +0.4%. In early trade, September e-mini S&P 500 futures are trading 1461.75, up 10.75.

Copper: After falling to nearly 2-month lows on Friday, September Copper futures are showing signs of a recovery this morning, as rising demand from China, a decline in exchange stockpiles, and higher equity prices are combining to support prices. According to preliminary customs data from August 10th, Chinese Copper imports are up 49% from a year ago to stand at 1.72 million metric tons. In addition, Copper inventories in Shanghai fell by 1.7% last week, coming in at just below 90,000 mt. The London Metal Exchange reported Copper stocks fell by 200 mt this morning to stand at 114,300 mt. In early trade, September Copper is trading at 341.25, up 5.30.

Corn: Buyers continue to support Corn futures in overnight trading, as disappointing weekend rainfall amounts in parts of Iowa and Illinois have some traders concerned about potential yield losses due to the hot and dry weather. The recent rally comes despite Friday’s USDA estimates for a 13.054 billion bushel Corn crop. However, some traders are skeptical about this total given the iffy growing conditions in some parts of the Corn Belt. At the end of the overnight session, December Corn was trading at $3.54 ¼, up 3 ¾ cents.

Economic Data Scheduled for Monday, August 13, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July Retail Sales
9:00 AM: June Business Inventories


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Inflation Fears Subside, Rates Stay at 5.75?

British Pound: September British Pound futures fell below $2.0000 for the first time in nearly 6 weeks, after the U.K’s inflation rate dropped more than analysts had expected. Consumer prices rose by 1.9% in July, down from 2.4% in June and below the 2.2% consensus estimate. This was the first time the rate fell below the Bank of England’s 2% target rate in 16 months and gives cause for the BoE to keep rates steady at 5.75%. In early trade, September British Pound futures are trading at 1.9990, down 0.0135.

Soybeans: Soybean futures traded lower overnight, as yesterday’s USDA crop progress report showed 56% of the U.S. Soybean crop rated good to excellent as of Sunday – unchanged from last week. Traders were looking for a 1 to 2 percent decline in the crop ratings, which caused prices to give back some of Monday’s rally overnight. At the end of the electronic session, November Soybeans were trading at $8.79 ¼, down 2 ½ cents.

Gold: A stronger U.S. Dollar has put Gold futures on the defensive this morning, as lower growth and inflation rates in Europe are taking some of the shine off the precious metals sector. In addition, Gold traders will be looking toward this morning’s release of the July Producer Price Index (PPI) as a gauge to wholesale inflation levels in the U.S. In early trade, December Gold was trading at $679.00, down $1.90.

Economic Data Scheduled for Monday, August 14, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July PPI (Consensus 0.1%, Core 0.2%)
7:30 AM: June Trade Balance (Consensus -$61.0 billion)

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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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Spillover Effect!

What do Cotton, Gold, Crude Oil, Corn, and Cocoa all have in common? Well, in early trade this morning, these five, along with nearly every other U.S. traded commodity future, are trading lower, as fears of an economic slowdown have traders liquidating commodity futures across the board as they attempt to increase liquidity. This morning’s action in the commodity markets is a good lesson for traders on how interrelated the global markets really are, where the fundamentals that may be affecting Cocoa or Wheat can take a backseat to overriding concerns about liquidity and the forced liquidation of positions by speculators in normally uncorrelated markets to cover losses elsewhere. With many major European Stock markets down over 2% so far today and S&P futures trading at lows last seen in March, it will be interesting to see how commodities react once the day session begins. Should the stock indexes make a recovery, will commodities follow? Stay tuned……

Looking at the daily chart for December Gold, we notice that even a market once thought of as a vehicle for “safe haven” buying cannot stage a rally. Prices are lower in early trade, hovering just above recent lows at $668.80, with a stronger U.S. Dollar against the Euro not helping the cause of Gold bulls. Prices have now fallen below the 50-day moving average, which may trigger fresh selling by momentum traders. The $668.80 level will be widely watched, and a close below this level could signal a test of the $650.00 before major support is seen. Resistance is found at the 20-day moving average of $681.80. In the early going, December Gold is trading at $672.00, down $7.70.


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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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Grains Gain Despite More Rain!

Soybeans: Soybean futures rallied in overnight trading, as traders reacted to the USDA crop progress report showing 54% of the U.S. Soybean crop was rated good to excellent, down 2% from last week. In addition, drought conditions in China’s main Soybean growing region may lower output this year and cause a rise in Chinese Soybean buying later this year. At the end of the overnight session, November Soybeans were trading at $8.33, up 5 ¾ cents.

Wheat: Chicago Wheat futures continued to climb in early trade, as U.S. exports soared despite relatively high prices. The USDA reported 45.7 million bushels were inspected for the week ending August 16th, nearly three times the amount at this time last year. At the end of the overnight session, December Wheat was trading at $696 ½, up 5 ½ cents.

Two-year Note futures: Traders are starting to believe that the Federal Reserve will lower interest rates at their next meeting on September 18th, which is sending a bid through the short end of the yield curve—the most affected by a Fed Funds rate cut. This has sparked a climb in September Two-year Note futures in early trade, leaving them hovering just below contract highs of 103-112 set on Thursday of last week. In early trade, September Two-year Notes were trading at 103-082, up 0-040.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, August 21, 2007

(All times in U.S. Central Time)

U.S.

None


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Beans Bounce Back!

Soybean futures were not spared the recent “flight to liquidity” that triggered a large speculative liquidation in the commodity markets. November Soybeans were down the 50-cent limit last Thursday, but have rallied back modestly since then, rising 33 ½ cents from those lows to the end of the overnight session this morning. Some of the rally has been tied to weather concerns – in the northern Midwest, too much rain, raises the prospect of disease in the Soybean crop there, and in the South, too little rain and too much heat may adversely affect yields. On Monday, The USDA reported that 54% of the U.S Soybean crop was rated good-to-excellent, down 2% from last week and 4% from a year ago. With Soybean acres down this year due to increased Corn plantings, any “disappointment” in yields from current USDA estimates could send U.S. carryout totals to multi-decade lows!

Looking at the daily chart for November Soybeans, we notice prices moving above the 100-day moving average for the second consecutive day this morning. Yesterday’s attempt to close above this key moving average failed, so traders will be carefully watching today’s day session to see if bulls can once again regain the upper hand. Momentum has moved back into neutral territory with a 14-day RSI reading of 43.65. The next major resistance point is seen at the 20-day moving average near $8.52, with strong support at last Thursday’s lows of $8.04 ½. At the end of the overnight session, November Soybeans were trading at $8.38, up 7 cents.

Mike Zarembski, Senior Commodity Analyst


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Chicago Wheat Closes Near All-time Highs!

Chicago Wheat futures soared to new all-time highs for a non-deliverable period, as strong export prospects are keeping sellers at bay. Some initial support came from Europe, where LIFFE London Wheat made new all-time highs this morning, as continued wet weather in the U.K. has delayed the harvest with nearly 50% of the Wheat crop still in the ground. Speculative buyers were active, with commodity funds re-establishing long Wheat positions after last week’s commodity-wide sell-off due to liquidity concerns. Buy stops were also seen triggered above the previous contract high of $7.19 in the December Contract. The all-time high for Wheat futures was $7.50, but that took place in the last minutes before expiration of the March 1996 contract. $7.50 is seen as the next resistance level for December Wheat, with support now found at the recent highs of $7.19. December Wheat closed at $7.31 ¾, up 27 ¾ cents.

Gasoline futures were the lone bright spot for energy bulls this afternoon, as prices eked out modest gains on a higher-than-expected drawdown in Gasoline stocks last week. In the weekly energy stocks report, the Energy Information Administration reported that U.S. Gasoline stocks fell by 5.7 million barrels last week. This was well below pre-report estimates of a 600,000 barrel draw. However, a higher-than-expected build of both Crude Oil and Distillates – plus a shifting of concern about the level of Gasoline stocks to Heating Oil inventories as the peak driving season comes to a close – kept the Gasoline rally in check. 1.8000 is seen as the next support point for October RBOB, with resistance found at 1.8550. October RBOB Gasoline closed at 1.8234, up 0.0057.


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Carry On My Wayward Traders!

Japanese Yen/currencies: It appears that an appetite for risk among traders and investors has returned in the currencies. September Japanese Yen futures are sharply lower this morning, as traders start to sell Yen and buy higher-yielding currencies such as the Australian and New Zealand Dollars, once again initiating the so-called “carry trade.” The resumption of this popular trade appears to be bolstered by stabilization in world equity markets, as well as assurances from central banks around the globe that they will step in to supply liquidity as necessary to the short-term credit markets. In the early going, September Japanese Yen is trading at 0.8591, down 0.0131, September Australian Dollar is trading at 0.8192, up 0.0134, and the September New Zealand Dollar is trading at 0.7154, up 0.158.

Chicago Wheat: Soft Red Winter Wheat futures continued their surge to near all-time high prices overnight, as several more nations are seeking Wheat purchases amid continuing tight world supplies. Taiwan, Japan and India are either looking to purchase or have already announced purchases of Wheat this morning. India is the second largest Wheat consumer behind China, and additional purchases from this region are strongly supportive to Wheat prices. In addition, there are concerns that Australia, the world’s third largest Wheat exporter, may experience warmer than normal temperatures this spring according to some forecasters, which has the potential to hurt crop yields. At the end of the overnight session, December Wheat was trading at $7.43, up 11 ¼ cents.

Sugar: October Sugar surged to near 2-week highs this morning, as Russia proposes to raise its raw Sugar duty from $140 per ton to $220 per ton. This news is expected to increase short-term demand as buyers obtain supplies ahead of the scheduled December increase. In early trade, October Sugar stands at 9.69, up 0.19.

Mike Zarembski, Senior Commodity Analyst

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Record High For Chicago Wheat!

Chicago Wheat futures hit an all-time high this morning at $7.54 a bushel in the December 2007 contract, as strong exports and extremely tight world ending stocks have buyers scrambling to obtain supplies. Statistics Canada lowered that country’s Wheat production estimate to 20.322 million tons, well below the average pre-report estimates. Wheat futures in London and Paris also made new all-time highs today to add to the buying pressure, before profit-taking selling emerged once new highs were made. Prices fell sharply inter-day before a late short-covering buying surge near the close kept Wheat prices in the green at the close. Resistance for December Wheat is now seen at the new highs of $7.54, with support found at $7.15. December Wheat closed at $7.39, up 7 ¼ cents.

It was turnaround Thursday in the Cocoa ring today, as short covering buying propelled prices sharply higher after 6 ½-month lows were made on Wednesday. The only real fundamental news out this morning was the current arrival totals out of the Ivory Coast – the world’s leading Cocoa producer. Current arrivals totaled 1,186,000 metric tons, down nearly 10% from last year’s levels. However, traders report today’s rally was mostly technical in nature, with buy-stops being triggered above the recent highs of $1780 in the December Contract. $1815 is seen as the next resistant point for December Cocoa, with support found at Thursday’s lows of $1750. December Cocoa closed at $1792, up $38.

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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LME Stocks Increase, Copper Retreats!

Copper: Lead month September Copper fell sharply in early trade, as exchange warehouse stocks increased sharply this morning. The London Metal Exchange (LME) announced that Copper stocks increased by 10,075 metric tons to stand at 135,625 mt. In addition, a large increase of Nickel stocks on the LME was also weighing on the base metals complex. In early trade, September Copper was trading at 327.30, down 7.65.

Wheat: Chicago December Wheat fell just short of a new record high in overnight trade, as traders look for a continuation of the strong demand for U.S. Wheat while the weather plays havoc with growing conditions worldwide. Major Wheat exporters such as Canada, Ukraine, France and Australia have had production problems thanks to unpredictable weather this year. This morning, Egypt is looking to buy 60,000 mt of Wheat and Bangladesh plans to import 50,000 mt. At the end of overnight trade, December Wheat was at 748 ¾, up 10 ¾ cents.

Stock Index futures: Weakness in several European and Asian markets this morning is spilling over into U.S. trading, with e-mini S&P 500 futures trading in the red. This morning’s report on consumer confidence for August is expected to show a decline from the 112.6 reading in July. The Conference Board will release the figures at 9:00 AM Chicago time. In early trade, September e-mini S&P 500 futures are trading at 1463.00, down 6.75.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, August 28, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Consumer Confidence for August (Consensus 104.5)
1:00 PM: FOMC minutes from August 7th meeting


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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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A Large Crop Gets Larger?

It appears that U.S. Corn producers did their job to help supply the insatiable appetite for the crop this year thanks in large part to rising demand for Corn-based Ethanol and livestock feed. The USDA’s August crop production report estimated the U.S. Corn crop at a whopping 13.054 billion bushels, but many observers believe the crop will be even larger. Professional Farmers of America came out with its own Corn crop estimate last week, estimating the U.S. crop at 13.109 billion bushels, or 0.4% above the USDA estimate. Early harvest reports from the southern Corn Belt showed better-than-expected yields, which also support higher crop estimates. 59% of the U.S. Corn crop was rated good-to-excellent last week, up 1% from the week before and 2% above conditions last year at this time. This news has kept Corn prices in check, with current prices nearly 90 cents below the mid-June contract highs of $4.35. Not all the news is bearish, however, as analysts expect Corn production from the northeast growing region of China to decline by about 6 million tons this year as drought conditions pare yields. Analysts look for China’s total Corn production to decline by between 1 and 2% this year. Traders should expect choppy trade in Corn futures until the next USDA crop production report on September 12th.

Looking at the daily chart for December Corn, we notice prices hovering below the major moving averages. Momentum as measured by the 14-day RSI has turned lower with a reading of 40.11. Last week’s high of $3.70 may have confirmed a double top formation, along with the July 13th highs of $3.71. This area will be formidable resistance for the December contract, and a test of support in the $3.24 to $3.26 area is not out of the question. At the end of the overnight session, December Corn was trading at $3.44 ¼, down ½ cent.

Mike Zarembski, Senior Commodity Analyst


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Wild, Wild Wheat Trade Overnight!

Wheat: Chicago Wheat futures traders have had an exciting morning so far, with a surge in the last 90 minutes of the overnight session sending prices for the December contract to an new all-time high of $783 ½. Though no specific news seems to be responsible for the move, traders remain nervous over world Wheat ending stocks, with the Australian Wheat crop now forecasted to be in the 20 to 22 million metric tone range. However, rainfall has been light again this season, and many traders fear that this estimate may be overly optimistic once the harvest begins. Iraq has issued a tender to buy 50,000 of Hard Wheat this morning. At the end of the overnight session, December Wheat was trading at $7.81 ½, up 23 cents.

Stock Index Futures: The roller coaster ride for index traders continued this morning, as September e-mini S&P 500 futures gave back a portion of yesterday’s 27.25 point gain ahead of this morning’s release of the next preliminary estimate of 2nd quarter U.S. GDP. Expectations are for an increase to 4.1% versus the previous estimate of 3.4% growth rate, due mostly to a narrower-than-expected trade gap in June. In early trade, September e-mini S&P 500 futures were trading at 1457.75, down 7.75.

Dollar Index: September Dollar index futures were strong in early morning trade, as the seven major CME currency futures were all trading in the red after the Bank of England announced that it loaned 1.6 billion pounds at the penalty rate of 6.75 %. This news continued to stoke fears that the recent credit crunch is far from resolved, sending currency traders to safe haven buying of the U.S. Dollar. In early trade, September Dollar Index futures were trading at 80.96, up 0.32.

Mike Zarembski, Senior Commodity Analyst

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Will We See $8 Wheat?

Wheat futures continued their torrid climb today, posting a new all-time high price of $7.88 ½ per bushel for the December contract as continued strong exports and concerns about Wheat production from Australia and Argentina have underpinned this historic bull market. This morning, the USDA reported U.S. Wheat export sales totaled 1.23 million metric tons for the week ending August 23rd, well above the high end of pre-report estimates. U.S. Wheat sales have soared the past few months despite prices that are nearly double that of last year. It appears that world Wheat ending stocks will be near 26-year lows, with the latest USDA estimate coming in at 114.8 million tons for the 2007-08 marketing year. This has forced Wheat buyers to obtain supplies from the few countries that currently have Wheat available for sale – including the U.S. – and is the key reason U.S. exports are up sharply despite high prices. The once unfathomable $8.00 level is now seen as the next resistance point for December Wheat, with support found near the $7.24 area. December Wheat closed at $7.84 ½, up 26 cents.

After falling to near 3-month lows yesterday, Cotton futures rebounded sharply this afternoon on the strength of solid export sales and short covering buying. The USDA announced this morning that U.S. cotton sales for the week ending August 23rd totaled 476,300 running bales for the 2007-08 marketing year. This was well above pre-report estimates, and sharply above the previous week’s totals of 400,500 bales. During yesterday’s sell-off, commercial buying emerged, allowing prices to close well above the day’s lows. Speculative short covering buying was seen above yesterday’s highs of 5810. A double-bottom formation appears on the daily chart for December Cotton in the 5560 to 5565 area, and should act as strong support. Minor resistance is seen at the recent highs of 5938, with major resistance found at the 20-day moving average of 5995. December Cotton closed at 5907, up 165.

Mike Zarembski, Senior Commodity Analyst


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Stock Indexes Higher as President Attempts to Help Subprime Mortgage Holders

Stock Index Futures: Sharp gains are seen in U.S. Stock Index futures market this morning, as President George Bush will announce a plan to help subprime mortgage holders. It is believed the President will allow the Federal Housing Administration to guarantee loans for borrowers who are delinquent, which should help to avoid foreclosure and even allow refinancing of the loans at more favorable terms. Index traders are reacting positively to the news, as it should help ease the recent credit crunch brought on by the subprime loan situation. In early trade, September e-mini S&P 500 futures were trading at 1477.75, up 16.25.

Treasury futures: President Bush’s plan to help subprime mortgage holders is doing no favors for Treasury bulls, as traders start to price in a reduced chance of multiple Federal Reserve interest rate cuts. The short end of the yield curve has been particularly hard hit this morning, with December 2-year Note futures trading lower by 0-0850, at 102-3150.

Wheat: The historic $8 per bushel level didn’t put up much of a fight in overnight trade, as Chicago Wheat prices stormed to another new all-time high price of $8.07 ¾ for the December contract. With below-average production from most of the world’s leading Wheat exporters, world Wheat ending stocks are expected to be at 26-year lows for the 2007-08 marketing year. Now traders are starting to fear that dry conditions in Australia and Argentina – both among the Southern Hemisphere’s leading Wheat producers – will cut yields there as well. India’s State Trading Corporation is tendering for a large amount of Wheat, with some analysts believing India may be in the market for as much as 700,000 tons. Paris million Wheat futures also made new-all time highs this morning, rising by 7% to 272 Euro per ton. At the end of the overnight session, December Chicago Wheat was trading at $8.05 ¼, up 20 ¾ cents.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 31, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: Personal Income for July (Consensus 0.3%)
7:30 AM: Personal Spending for July (Consensus 0.3%)
7:30 AM: Core PCE Inflation for July (Consensus 0.2%)
8:45 AM: Chicago PMI for August (Consensus 53.0)
9:00 AM: Factory Orders for July (Consensus 3.0%)
9:00 AM: University of Michigan Consumer Sentiment for August (Consensus 83.0)


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What’s Up With Wheat?

Earlier in 2007, traders were focused on the U.S. Corn crop, as soaring demand for Ethanol and strong usage for animal feed had the markets wondering how high Corn prices would have to go to curb demand. In retrospect, traders should have been asking the same question about Wheat, as Chicago Wheat futures have soared to new all-time highs this morning, with tight world stocks and strong U.S. exports combining to keep prices climbing. Yesterday, the USDA reported that U.S. Wheat export sales totaled a strong 1.23 million metric tons, despite prices that are well above year-ago levels. India is still aggressively looking to buy Wheat, receiving offers of 530,000 metric tons in its latest tender and looking perhaps to buy up to 700,000 mt if terms are favorable. The U.S. remains one of the few – if not only – Wheat exporters that can still supply large quantities of the crop, as poor weather conditions have wreaked havoc on nearly every major Wheat-exporting country this season. Wheat buyers are counting on improved crops from major Southern Hemisphere growers such as Australia and Argentina to help bring additional supplies onto the market, but so far dry weather condition are making it difficult for these countries to provide bumper crops and help curtail skyrocketing world Wheat prices.

Looking at the daily chart for December Wheat, we notice prices accelerating to the upside as commodity funds scramble to buy and those unfortunate to be short rush to cover their positions in the wake of new all-time highs. Needless to say, prices are well above the major moving averages, and the 14-day RSI is in vastly overbought territory with a current reading of 89.92. It is difficult to project support and resistance levels in this uncharted territory. Traders should be prepared for heightened volatility, and limit moves may become more common until traders can get a better handle on how strong demand for Wheat really is. At the close of the overnight session, December Chicago Wheat was trading at $8.05 ¼, up 20 ¾ cents.

Mike Zarembski, Senior Commodity Analyst


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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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Perfect Storm for Wheat Futures!

Every day seems to bring new bullish fundamentals for the Wheat futures market, setting the stage for the current explosive run to all-time record high prices. Australian Wheat production may fall as low as 16 million metric tons this year – nearly 30% below the most recent government forecast – as hot, dry weather has damaged the crop on the western portion of the continent. Nearly every major Wheat exporter has experienced some problem this year, keeping supplies tight. India purchased 795,000 metric tons of Wheat this past weekend, with the majority coming from Russia. Despite record high prices, there are reports that India is still in the market for even more Wheat to ensure adequate domestic supplies. Egypt is reported this morning to have tendered to buy Wheat as well. Wheat futures markets around the world are trading at record or near-record highs again, with Liffe’s November Paris milling Wheat futures up 5.3% today, trading at a new all-time high of 300 Euro per ton. Liffe’s November London feed Wheat futures also hit a record high of 197.50 Pounds per ton in early trade. In South Africa, December Wheat futures traded a record 2,999 Rand per ton on the South African Futures Exchange. In the U.S., the most-active December Chicago Wheat futures were trading up the 30-cent limit at the end of the overnight session, and the spot month September contract posted a new all-time high of $8.37 per bushel today. Now that Wheat prices have gone parabolic, there is no telling how high prices have to go to start to ration demand. Wheat, unlike other commodities, is a necessity with few good substitutes available, which is why we’re seeing Wheat exports holding strong despite the high prices. Traders must expect extreme volatility in the Wheat futures market, with limit moves becoming more common on both the upside and downside in the near-term.

Looking at the daily chart for December Wheat, we notice prices moving near-vertically as few sellers are willing to stand in front of a charging bull. No surprise that the 14-day RSI has reached vastly overbought levels with a reading of 88.25. With the market trading in a near-panic mode, any support and resistance points would be nearly worthless as prices can and will move quickly through these points. Though fundamentals figure to remain bullish, that does not mean a sharp price correction cannot take place – a decline of $1 or more may occur quickly and slippage on protective sell-stops may be severe! At the end of the overnight session, December Chicago Wheat was trading at $8.35 ½, up 30 cents.

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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Gold Regaining Investors’ Interest!

Gold: December Gold futures started the week on an up note, rising for the fifth time in the last six sessions as continued volatility in world equity markets has traders looking for a “safe haven” investment. In addition, the most recent Commitment of Traders report shows large non-commercial traders increasing their net-long position by over 25,000 contracts for the week ending September 7th. In early trade, December Gold is trading at $713.80, up $4.10.

Treasury futures: Despite the recent sharp rally in the U.S. Treasury complex, foreign owners of U.S. debt are not terribly happy, as the declining U.S. Dollar is cutting into profits or even causing losses for these investors. It appears that key Asian buyers have been net-sellers of U.S. Treasuries recently as they seek out better returns and increased diversification from Dollar-based assets. In early trade, December Ten-year Note futures are trading at 110-15, down 0-025.

Wheat: Chicago Wheat futures added to gains made on Friday, surging to a new contract high of $8.72 per bushel overnight, as Australia’s Wheat crop received only scattered rainfall over the weekend, which was insufficient to help the stressed crop. In addition, Western Australia’s state Department of Agriculture cut the region’s Wheat production to 5.1 million tons – down from 5.6 million tons – due to drought conditions. At the close of the overnight session, December Wheat was trading $8.65, up 21 ½ cents.

Mike Zarembski, Senior Commodity Analyst

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They Call It Yellow Metal!

Gold futures continue their torrid pace upward, with the December contract hitting highs not seen since May of 2006 as a weaker U.S. Dollar and commodity fund buying continue to underpin the market. Fresh momentum buying came in and buy stops were triggered once the recent highs at $718.00 were taken out in the December contract. The sharp rally coincided with a speech by Fed Chairman Ben Bernanke, but the timing may have been little more than a coincidence as the Chairman did not discuss his views on interest rates or his outlook for the U.S. economy. Reports that some Gold producers were beginning to lift established hedges was also deemed supportive to the market. $725.00 is now seen as the next resistance point for December Gold, with major support found at $700.00. December Gold closed at $721.10, up $8.90.

Corn futures continued their recent consolidation, as traders squared up positions ahead of tomorrow’s USDA‘s crop production and supply/demand reports. Current estimates are for the U.S. Corn crop to have increased, with average estimates from a Dow Jones Newswire survey calling for a 13.128 billion bushel Corn crop versus 13.054 billion in the August report. The increased production is expected to come from higher average yield estimates. Corn demand is expected to remain strong, with analysts looking for a modest decline in 2007-08 carryout totals from the 1.137 billion bushel estimate by the USDA last month. Technical traders will note a possible symmetrical triangle pattern forming on the daily chart for December Corn. This consolidation pattern consists of lower highs and higher lows for the past month, and will need to see a breakout of either the upper or lower trendline on above-average volume to provide a clue to the next direction for Corn prices. Current support is seen at $3.36 ¾, with resistance at $3.52 ½. December Corn closed at $3.40 ¾, down 5 ¼ cents.

Mike Zarembski, Senior Commodity Analyst

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Gearing up for the USDA Crop Report

The following is a summary of pre-report estimates for this morning’s USDA Crop Production and Supply/Demand reports:

Soybeans: Average estimates for 2007 Soybean production are for a crop of 2.650 billion bushels versus the August USDA estimate of 2.625 billion bushels. Ending stocks for the 2007-08 season are estimated at 217 million bushels.

Corn: Corn production is expected to have increased from the August USDA estimate, with analysts looking for a crop near 13.13 billion bushels versus 13.054 in the August estimate. Average Corn yields are expected to have increased to 153.7 bushels per acre versus 152.8 bushels in August.

Wheat: 2007-08 U.S. Wheat carryout totals are expected to decrease once again, with average estimates coming in at 376 million bushels versus 404 million bushels in the August report.

Cotton: U.S. Cotton production is expected to show a moderate increase from the August USDA estimates, with analysts expecting a crop of 17.41 million 480-pound bales versus the August estimate of 17.35 million bales. This increase is expected to raise the U.S. carryout figures to 5.93 million bales, up 0.13 million bales from August.

Mike Zarembski, Senior Commodity Analyst

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Wheat Prices Fly as Bulls Continue to Buy!

The records keep on coming for Wheat futures, with the December 2007 Chicago Wheat futures contract surpassing the $9 per bushel level for the first time in history. Panic buying took hold at the end yesterday’s day session as traders were fearful of being caught short ahead of the USDA supply/demand report due out today at 7:30 AM Chicago time. Analysts expect the USDA to cut its U.S. Wheat carryout estimates, as strong U.S. exports and unfavorable growing conditions in nearly all of the major Wheat-exporting countries are expected to keep next season’s stock extremely tight. The average estimate for 2007-08 Wheat ending stocks is 376 million bushels according to a Dow Jones Newswire survey, down from the 404 million bushels the USDA estimated in its August report. Canadian Wheat stock estimates were lowered, as Statistics Canada estimated Canadian Wheat stocks at 6.828 million metric tons as of July 31st – well below pre-report estimates of 7 to 8 million metric tons. Traders also feel that the USDA will lower its production forecasts for Australia, Argentina and the EU as well. With record high prices, one might assume that Wheat-importing nations would hold back on their buying in hopes of lower prices, but that hasn’t been the case recently. Japan is said to have tendered for 155,000 metric tons and Egypt is back in the market for another 55,000 tons, with some of it expected to be U.S. Hard Red Winter Wheat. Though a correction in prices seems imminent, traders should be aware of the famous market words to live by – “markets can stay irrational longer than I can stay solvent!”

A look at the daily chart for December Wheat inspires one simple reaction – WOW! The 14-day RSI was reading an extremely overbought 89.14. With prices in such uncharted territory, support and resistance points are nearly meaningless. However, this morning’s major USDA report could be the catalyst for a badly needed correction in prices. Even if the report is deemed bullish after the release, extreme volatility should be expected! At the end of the overnight session, December Wheat was trading at $9.06 ¾, up 16 ¼ cents.

Mike Zarembski, Senior Commodity Analyst

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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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Can’t Go Up Every Week!

Ten-year Note futures: Barring any surprisingly weak U.S. economic data this morning, December Ten-year Note futures look to be headed for a down week, with flight-to-quality buying of U.S. government debt waning as the short-term credit crunch eases a bit. Traders are expecting today’s report on U.S. retail sales for August to show an increase of 0.5% versus a 0.3% rise in July. Also out this morning is the Reuters/University of Michigan Consumer Confidence Index, which is expected to show a reading of 83.5 for September, up 0.1 from August. In early trade, December Ten-year Notes were trading at 109-310, up 0-100.

Wheat: The long-awaited correction in Chicago Wheat futures has begun, after the “buy the rumor, sell the fact” decline in prices following Wednesday’s USDA crop production and supply/demand reports. Since reaching an all-time high of $9.11 ¼ on Wednesday, December Wheat has fallen as low as $8.28 in early trade this morning. Traders will be eagerly awaiting the September 18th crop estimate by the Australian Bureau of Agricultural and Resource Economics for the official estimate of the Australian Wheat crop. The USDA estimated the Australian crop at 21 million metric tons, down from 23 million metric tons in its August estimate. However, some private forecasters are calling for a crop as low as 12 million metric tons. At the end of the overnight session, December Wheat is trading at $8.36 ¼, down 8 ¾ cents.

Japanese Yen: Yen futures are poised for their first weekly loss in nearly three weeks, as an improvement in world equity markets and a slight easing of the recent credit crisis has traders starting to resume the so-called “carry trades.” The Yen was especially weak versus the New Zealand Dollar, with the high interest rate differential between the two countries making this pair among the most popular with speculators looking for high returns. In early trade, the December Japanese Yen was trading at 0.8810, up 0.0034.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, September 14, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Retail Sales for August (Consensus 0.5%)
8:15 AM: Industrial Production for August (Consensus 0.3%)
8:15 AM: Capacity Utilization for August (Consensus 82.0%)
9:00 AM: Business Inventories for July (Consensus 0.3%)
9:00 AM: University of Michigan Sentiment Index for September (Consensus 83.5)

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Bears Don’t Like Cold Beans!

Soybeans: Freezing temperatures in parts of the northern Midwest over the weekend have bean traders buzzing, as concerns mount that crop damage may have occurred in parts of Iowa, Minnesota, and Wisconsin. This news helped send November Soybeans to highs not seen in three years, with prices moving closer to the psychologically important $10 per bushel level. At the end of the overnight session, November Soybeans are trading at $9.71 ¼, up 16 ½ cents.

Stock Index futures: U.S. equity index futures have started the week on a down note following losses in Europe, as a major U.K. mortgage lender, Northern Rock Plc, fell to seven-year lows after customers continued to withdraw savings following a bailout by the Bank of England last week. This has sparked fears that the recent credit crunch has not been resolved and may spread throughout the world. In early trade, December S&P 500 futures are trading at 1476.00, down 9.00.

Coffee: Following a move to 9-year highs by the Robusta contract in London, Arabica Coffee futures in New York rose to one-month highs in early trade, as traders fear tight supplies ahead of the harvest in Vietnam – the world’s largest producer of Robusta Coffee – starting in November. High Robusta prices have caused some Coffee roasters to switch to using more Arabica beans in their blends. In early trade, December Coffee is trading at 122.75, up 1.85.

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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Copper is Red Hot!

Copper futures surged to their highest levels since August 1st as speculators rushed to cover short positions after yesterday’s surprising 50 basis point cut in the Fed Funds rate.
Traders viewed the aggressive move as a sign that the Fed is prepared to intervene, if necessary, to prevent the U.S. economy from falling into a recession, even at the risk of stimulating inflation. Any sign of an improving growth rate for the U.S. economy is a bullish sign for the entire base metals complex, including Copper. The most recent Commitment of Traders report showed non-commercial traders being net short 9,091 Copper contracts as of September 11th, and today’s sharp reaction was fueled by the covering of some of those short positions. Chinese demand continues to be strong, with the International Copper Study Group forecasting a 340,000 ton Copper deficit for the first half of 2007, due mostly to the voracious appetite for base metals in China. The next resistance point for December Copper is seen at 363.10, with support found at the 50-day moving average of $341.10. December Copper closed at 357.55, up 12.75.

Wheat futures closed sharply lower this afternoon, as profit-taking selling and unwinding of Corn/Wheat spreads pressured the market. With little new fundamental news out today, traders began to focus on the demand picture, with the notion that high prices will start to curtail export demand, especially after India announced that its Wheat stocks were adequate at current levels. Today’s sell-off allowed the December contract to briefly trade down the 30-cent limit, as sell stops were seen being triggered below the recent lows of $8.53 ¾. Traders also reported a moderate amount of Corn/Wheat spreading taking place, as large speculative accounts continue to unwind their spreads. $8.28 is seen as the next support point for December Wheat, with resistance found at $8.76. December Wheat closed at $8.45, down 24 cents.

Mike Zarembski, Senior Commodity Analyst

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Inflation Fears Spur Run-up in Commodities

Soybean futures continue to their strong price surge, with deferred months trading above the $10 per bushel level, as concerns about tight inventories and reports that China will lower import duties have traders in a buying mood. The USDA reported U.S. Soybean export sales totaled 513,600 metric tons for the week ending September 13th, in line with expectations. Dry weather conditions in northern Brazil may affect Soybean plantings, with forecasts calling for the dryness to persist possibly through the early parts of October. With the Soybean harvest about to begin in earnest, there is little sign of harvest pressure selling so far, which is surprising given the relatively high price at which November futures are trading. Support is also found from the rise in overall commodity futures prices, especially with a weak U.S. Dollar and inflation concerns in light of the Fed’s shift in focus from fighting inflation to preventing a weakening of the U.S. economy due to the housing slump. $10 is seen as the next resistance point for November Soybeans, with support found at $9.52 ¾. November Soybeans closed at $9.89, up 18 cents.

Cocoa futures soared to 7-week highs this morning, as continued weakness in the U.S. Dollar against the British Pound and fresh technical buying propelled prices higher. Concern about the spread of Black Pod disease in the West African growing regions was fundamentally supportive to the market. In addition, the December March Spread continues to widen with the December contract now trading at a $25 premium to the March contract, which traders are taking as a sign that near-term demand is strong. An overall rally in commodity prices was also a factor in today’s gains. $1982 is seen resistance for December Cocoa, with support found at $1830. December Cocoa closed at $1971, up $71.

Mike Zarembski, Senior Commodity Analyst

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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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Will Harvest Pressure End the Corn Rally?

Corn futures have been upstaged this year by the surging Wheat and Soybean markets, even as U.S. producers did their jobs and produced a near-record Corn crop to meet the demands from both the ethanol and livestock industries. However, December Corn hit a three-month high yesterday, as speculative buying – most notably by commodity funds – has helped to break Corn futures out of their bearish posture. There is some talk among traders that Corn acreage will be lower next season as producers look to take advantage of relatively high Wheat and Soybean prices in 2008 and dedicate more acres to those crops. This is beginning to be played out in the December 2008 contract, where prices are well above $4 per bushel as Corn fights to retain acres from competing grains. Near-term, traders should keep an eye on hedge selling on any rallies in December 2007 Corn, as the U.S. harvest continues. The USDA reported that 22% of the U.S. Corn crop was harvested versus only 12% last year, and 80% of the crop was rated as mature, well above the five-year average of 65%. Among the largest Corn-producing states, Illinois reported 46% of its crop harvested versus 13% last year, Iowa had only 7% harvested, and Minnesota only 9%. Though both of these states were still above the five-year averages, the size of this year’s crop is so large that harvest pressure will continue to be a serious factor on Corn prices as they continue to harvest the crop.

Looking at the daily chart for December 2007 Corn futures, we notice yesterday’s rally above $3.80 was met with strong selling pressure which forced Corn prices to end the session on a down note. Some moderate selling continued in the overnight session as well. However, Corn continues to hold above the 100-day moving average, which is a bullish sign for momentum traders. Commodity funds are holding a large net-long position in Corn futures, with the most recent Commitment of Traders report showing these large speculators net-long 164,457 contracts as of 9/18. Small speculators are net-short 114,240 contracts, which may add fuel to the bull run, especially if buy stops are triggered should December Corn trade above resistance at Monday’s highs of $3.80 ½. Support is seen at the 100-day moving average, currently at $3.62 ¼. At the end of the overnight session, December Corn was trading at $3.72, down 1 ½ cents.

Mike Zarembski, Senior Commodity Analyst

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Are Grains Becoming the “Kings of Commodities”?

Wheat: Chicago Wheat futures prices continue to defy gravity, rising sharply higher in overnight trading after Wednesday’s limit-up move trapped bears trying to pick a top in the market. Continued strong demand and deteriorating crop prospects in Australia are among the key fundamental reasons behind this historic climb. The Australian Bureau of Statistics reported that Wheat stocks in storage owned by the major grain companies fell by 20% in August to stand at 2.8 million metric tons. At the end of the overnight session, December Wheat was trading at $9.35 ¼, up 18 cents.

Soybean Meal: December Soybean Meal futures jumped to contract highs in overnight trading, following the strong performance of Wheat and Soybean futures. Asian buyers are substituting Soybean Meal and Corn for use as animal feed, as high Feed Wheat prices are causing users to seek alternatives. U.S. Soybean Meal exports are expected to total somewhere between 75,000 and 150,000 metric tons last week. At the end of the overnight session, December Soybean Meal was trading at $288.90, up $4.10.

Soybeans: New-crop November Soybeans surged in overnight trade, surpassing the $10 per bushel level as Beans battle it out with Wheat for acreage next season. Brazilian producers are behind in their Soybean plantings so far this season due to dry weather. Traders are looking for strong Soybean export totals this morning, with estimates ranging from between 500,000 to 800,000 metric tons. At the end of the overnight session, November Soybeans are trading at $10.01 ¾, up 11 cents.

Mike Zarembski, Senior Commodity Analyst

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Follow the Leader

Corn futures prices are trying their best to keep pace with the skyrocketing Wheat and Soybean markets as the battle for next season’s acreage begins. The growing demand for ethanol, combined with solid animal feed demand, gave producers ample reason to plant Corn this year. And plant they did! With just under a quarter of the U.S. Corn crop harvested so far this year, reports indicate that Corn yields are coming in above earlier estimates, which may send the actual size of the Corn crop past the most recent USDA estimate of 13.3 billion bushels. If this holds, it would be the largest crop on record. According to the National Agricultural Statistics Service, producers are expected to harvest the most Corn acres since 1933. However, prices continue to rise despite harvest pressure selling, as December Corn moved to 3-month highs this morning. This is a case where Corn is being carried along with Wheat and Soybean prices to prevent the spreads from becoming too far out of line. Demand for Corn will continue to grow, with Asian feed buyers switching to Corn from Feed Wheat for animal feed. This morning’s USDA weekly export sales are expected to come in somewhere between 600,000 and 1.5 million metric tons last week. Traders should keep their eyes on the new-crop 2008 contracts for the grains to see how the battle for acreage is playing out.

Looking at the daily chart for December 2007 Corn, we notice the rally in the overnight session sent Corn prices to highs not seen since the last week of June. Prices have moved well above the major moving averages, and momentum is on the rise. However, the 14-day RSI has moved into overbought territory – though only modestly – with a current reading of 74.75. The next area of resistance is not seen until the $3.90 area, with support found around the recent lows near $3.68. At the end of the overnight session, December Corn closed at $3.81, up 6 cents.

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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Wheat Prices Rebound as Buyers are Found

Wheat futures rebounded this afternoon after weak longs finished exiting the market following yesterday’s limit-down move. Buyers were found after overnight selling pushed the lead month December contract below the $9 per bushel mark. Despite near-record high prices, Wheat buyers continue to lock in supplies, with the USDA announcing sales of 290,000 metric tons of Hard Red Spring and Hard Red Winter Wheat to unknown origins. Traders also expect the USDA to report strong sales in Thursday’s weekly export sales report – current estimates are for U.S. Wheat sales to total between 1.2 and 1.9 million metric tons for the week ending September 27th. The next resistance point for December Wheat is seen at $9.46 ½, with support found at $8.85. December Wheat closed at $9.26, up 3 ½ cents.

Lead month December Copper posted new contract highs this morning, as continued commodity fund buying and labor issues supported prices. Technical traders have renewed optimism now that major resistance at 370.20 has been taken out, negating a potential triple-top formation. Ongoing mine strikes in Mexico and Peru are keeping the supply picture tight. Copper prices were also supported by buying in other base metals – particularly Lead – which reached new all-time highs today. 380.00 is seen as the next resistance point for December Copper, with support found at 361.40. December Copper closed at 376.35, up 5.25.

Mike Zarembski, Senior Commodity Analyst

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Is a Two Billion Bushel Corn Carryout Total Within Sight?

Reports of higher yields and the potential for slower demand from Ethanol producers have traders looking for a large Corn surplus. Analysts are continuing to raise their estimates of this year’s crop, with private forecasters looking for a total somewhere between 13.3 and 13.5 billion bushels. Weather forecasts are calling for near perfect conditions for harvesting this weekend, which may spur additional hedge selling as producers move Corn to local elevators. U.S. export sales appear solid, with Corn export sales expected to come in between 1 and 1.4 million metric tons last week – the totals will be reported in this morning’s USDA weekly export sales report. Large speculators continue to hold a large net-long position in Corn, with the most recent Commitment of Traders report showing large non-commercial traders net-long 193,687 contracts as of September 25th. If next week’s USDA crop production report holds a bearish surprise for traders, this large long position may be the catalyst for a sharp sell-off should the funds start to liquidate their Corn holdings.

Looking at the daily chart for December Corn, we notice prices below the major moving averages, despite a moderate rally in overnight trading. The 14-day RSI remains weak, with a current reading of 38.35. December Corn is holding just above an area that appears to offer decent support between the $3.30 and $3.40. Should support hold, a test of the 20-day moving average near the $3.60 area is a definite possibility. At the end of the overnight session, December Corn is trading at $3.48 ¾, up 4 ¼ cents.

Mike Zarembski, Senior Commodity Analyst

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Copper Tarnishes Bull Run

Copper: After rising 2.4% in London trading last week, Copper futures are giving back those gains in early trade, with traders fearing that Chinese demand will dry up in light of high prices. However, Copper could receive a boost later in the week if a strike by workers at Southern Copper Corp. in Peru continues into its second week. In early trade, December Copper is trading at 361.55, down 10.90.

Wheat: Chicago Wheat futures continue their decline from all-time high prices, with traders looking for sharply increased plantings this fall as producers take advantage of “attractive” new-crop Wheat prices. Wheat futures in Paris were down as much as 4% in late morning trade, adding to the weakness in the Chicago market. At the end of the overnight session, December Wheat was trading at $8.76 ¼, down 13 ¾ cents.

Dollar Index: The greenback is higher versus the Euro and Yen in early morning dealings, as traders expect European finance ministers to discuss ways to halt the Euro’s steep climb against the U.S. Dollar during the ECB meeting in Luxembourg today. In early trade, December Dollar Index futures are trading at 78.490, up 0.255.

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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Soybeans Rally on “Turnaround Tuesday”

It appears that bulls took the Columbus Day holiday off, as pent-up buying emerged throughout a good portion of the commodity markets this morning – especially Soybeans. Traders noted fresh speculative buying once yesterday’s highs of $8.39 ¼ were taken out during the opening minutes of the day session. The weekly USDA export inspections report was mildly supportive to Soybeans, with 17.998 million bushels inspected for the week ending October 4th – up from the 13.617 million bushels reported the previous week and well in line with pre-report estimates. The recovery in Wheat futures from sharply lower levels overnight was also deemed a positive factor by Bean traders. Hot and dry weather in the Soybean-growing regions of Brazil is a deterrent to early planting by producers, as adequate soil moisture is needed to get the crop off to a good start. Support for November Soybeans is seen at $9.19, with resistance found at the 20-day moving average, currently at $9.65 ½. November Soybeans closed at $9.50 ¼, up 24 ¾.

Gold futures rebounded after a lower start to the session, as the U.S. Dollar curtailed some of its gains against the Euro, and Oil futures rallied back above $80 per barrel to spark fresh buying by investors looking for an inflation hedge. Metal traders will also be awaiting the details from the minutes of the September 18th FOMC meeting for clues on whether Fed governors are poised to make further interest rates cuts this year. The September meeting saw the Fed cut the Discount and Fed Funds rates by 50 basis points each on concerns of a slowdown in the U.S. economy due to the recent short-term credit crunch. If it appears that the Fed is wont to make further rate cuts, this could be construed as “inflationary” and act to support Gold prices. Support for December Gold is currently seen at the recent lows of $726.30, with resistance found at $750.70. December Gold closed at $743.10, up $4.40.

Mike Zarembski, Senior Commodity Analyst

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Bears Freshly Squeezed as O.J. Rallies to 4-Month Highs

Orange Juice futures surged this morning as speculative buying emerged ahead of Friday’s USDA crop production report. Traders expect a rebound in Florida Orange production for the 2007-08 crop year, with current estimates calling for production to total between 170 and 200 million 90-lb. boxes, well above the 129 million box harvest this past year. Traders report fairly heavy technical buying, with buy stops triggered above near-term resistance at 139.00 and 144.00 in the November futures. Prices surged as high as 147.00 before selling emerged to cap the day’s gains. Options volume was heavy as traders position themselves before the government’s first official estimate of the 2007-08 crop. 149.25 is seen as the next resistance level for November Juice, with support found at the 100-day moving average of 133.90. November FCOJ closed at 141.60, up 4.55.

Short-covering buying sparked a rally in Corn futures this afternoon, as traders square up positions ahead of Friday’s USDA Crop report. Traders are looking for an increase in U.S Corn production, with average estimates calling for a 13.5 billion bushel crop versus last month’s estimate of 13.308 billion bushels. Average yields are expected to have increased as well, with traders looking for a nearly 2 bushel per acre gain from last month’s 155.8 bushels per acre USDA estimate. Additional support for Corn today came from gains in pit mates Wheat and Soybeans. Despite today’s rally, December Corn remains well below the major moving averages, with resistance found at the 50-day moving average at $3.52. Support is seen at the recent lows of $3.35. December Corn closed at $3.47 ¼, up 4 ¾ cents.

Mike Zarembski, Senior Commodity Analyst

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Grain Double Whammy

Wheat – Wheat led the charge in grains yesterday, closing limit-up in the front month December futures. World Wheat stocks remain very tight, and the Australian harvest – already reduced in size due to drought – is of very poor quality. Wheat stocks are expected to shrink to 300 million bushels, down over 60 million bushels from the September report. After selling off sharply since the beginning of the month, the December contract jumped 37.50 cents the last two days, which can at least partially be attributed to funds squaring up positions prior to this morning's USDA Supply and Demand and Export Sales reports. Funds were reportedly short roughly 14,000 contracts (futures and options) coming into trading yesterday. Yesterday's rally did little to improve the technical outlook for Wheat, which remains bearish overall, but is showing signs of a possible short-term reversal. Momentum did turn positive and comes into trading at +38. The RSI stands at a neutral 51 percent, which leaves the door open for a possible run-up before the market experiences overbought conditions in the short term. Solid support comes in at 865, with minor support in the 775 area, while resistance can be found in the 895-900 area, 911.25 and contract highs of 961.50.

Soybeans – Beans have been a solid performer this week, climbing 56 cents over the last three trading sessions. Today's USDA Supply and Demand report is expected to show production at 2.648 billion bushels, which is higher than prior estimates, but lower than last year's 3.188 billion bushel figure. Yield per acre is also expected to rise to 41.9 bushels per acre, which trails last year's yield of 42.7 per acre. Talk among traders suggests that the yield may actually drop to 41 bpa due to the flooding in the Midwest in August and a warm, dry September. Funds have a net-long position of roughly 114,000 contracts (futures and options), which could spark a fire sale if today's numbers are disappointing. The November Bean chart is a bit messy. After confirming a bear flag on Monday, which figured to send the market into a tailspin, Beans rallied sharply to negate the pattern. The price action Tuesday and Wednesday caused a bullish engulfing on the charts, but momentum and RSI are showing bearish divergence. This confusion on the chart is not unusual in the days leading up to a key report, but leaves many traders scratching their heads nonetheless. Support comes in at 958 and recent lows of 922, while resistance can be found 994 and contract highs of 1017.75.

Corn – Corn remains the neglected child of the grain sector, unable to get the attention of traders. The USDA report may need to show some major surprises to get Corn traders excited. With analysts hyping up Corn in the early part of the year, farmers diverted acres earmarked for other crops, creating a glut. Analysts forecast the total U.S. Corn crop at 13.459 billion bushels, compared to13.308 billion in last month's report and 10.535 billion last year. Other than the rally late last month, which gave Corn bulls false hope, Corn prices have hovered near the $3.50 mark since June. Ethanol production has not been the boon that many expected, but an increase in the figure from the USDA may finally call Corn bulls into action. The December Corn chart seems to be forming a bearish coiling consolidation pattern, which could lead to more downside. Momentum comes in slightly bearish at -3 and the RSI is a neutral 37 percent. Support comes in at 335 and 325, while resistance can be found at 360 and 370.

Rob Kurzatkowski, Commodity Analyst

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Bernanke Rocks the Market

e-mini S&P – Comments by Ben Bernanke yesterday sucked the life out of equities in the early going and the market was unable to recover, with the S&P posting a second consecutive day of double-digit losses. The Fed Chairman warned investors that while the Central Bank’s rate cuts will help the economy, the Fed cannot “insulate investors from risk,” and noted that the slumping housing sector is likely to continue its drag on the economy. DataQuick Information Systems also released data showing that southern California home sales declined by nearly 30 percent in September, with the lowest number of units sold since the company began tracking housing data in 1988. The market will have more housing data to digest with today’s release of Housing Starts and Housing Permits at 7:30 AM CST. The figures are expected to come in at 1.285 and 1.3 million, respectively, both down from August. Also hitting the newswires, Citigroup, JPM and Bank of America announced that they have set up a rescue fund of sorts to bail out global credit markets at the behest of the Treasury Department. The fact that such a fund was set up probably adds more fear than comfort to the marketplace, at least among small investors. The spike in Crude Oil prices has also weighed on the market in the first two days of trading this week. Technically, the December e-mini continues to stay in an uptrend, but the close below the 18-day MA may signal that a near-term high is in place. The RSI and slow stochastics are both in neutral territory, which leaves room for more downside before the market ventures into oversold territory. Support comes in at 1530.00 and 1500.00, while resistance can be found at 1566.00 and all-time highs of 1586.75.

Wheat – Wheat finished lower overall, but did bounce back late in the day to avoid a technical breakdown. Lack of positive fundamental news seems to have taken the wind out of the Wheat market's sails, leading to this most recent wave of selling. Unwinding of long Wheat / short Corn spreads after Friday's supply and demand report and continued profit-taking helped push things to the downside, even as traders have largely shrugged off the news that heavy rains have set back early winter Wheat planting. December Wheat held above the critical 830 mark, which if violated would have confirmed a head and shoulder reversal pattern. Wheat found solid support around 815, which also happens to be in the neighborhood of the 50-day SMA, and the strong close formed a bullish hammer, which may give Wheat a slight bullish short-term technical bias. The momentum indicator showed almost no change from the previous trading session and registered a bearish -40.50. Both the RSI and slow stochastics are showing oversold levels, which could give the market a lift. Support comes in at 815 and the 38.2 Fibonacci retracement support of 765.25, while resistance can be found at recent highs of 890 and 911.25.

10-year Notes – The treasury markets have retreated since the surprise rate cut in August drove 10-year Note yields down to 21-month lows of 4.3 percent. Traders have been reluctant to jump into the treasuries despite credit fears and weakening economic indicators. This hesitance has been based on a number of wildcard factors, including inflation fears stoked by rising energy prices and the growing belief that the Fed may shift gears and raise rates. Last Friday's PPI data showed contained inflation, but traders are looking for follow-through in this morning's CPI release. The housing report may not make much of an impact on the market unless there is a huge surprise one way or the other. December Notes have weakened technically, with prices trading below the 50-day SMA for the over a week. A close below 108-00 may spark selling and trigger stops. Support can be found at 108-00 and 106-13, while resistance comes in at 109-06.5 and 109-30.

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Stock Indexes Feel the Heat

S&P – The stock market commemorated the 20th anniversary of the Black Monday meltdown with a huge sell-off on Friday. The lingering credit crunch has hit the markets especially hard over the past week, stoking fears that the economy may contract even if the Fed continues cutting rates. Many traders had been tolerating the disappointing housing numbers, figuring that corporate bottom lines might at least benefit. But this view has largely changed in the wake of Bank of America's disappointing earnings release, which demonstrated yet again that subprime debt worries are very much in play. The subprime worries have made their way around the globe, with international investors scooping up distressed debt and the European and Asian markets bracing for the oncoming pinch. The bludgeoning of the market continues this morning, with the December e-mini S&P dropping over 12 points after shedding over 40 on Friday. American Express and Countrywide – both with heavy debt exposure – are set to release earnings today, and traders anticipating bad numbers have been dumping shares of both stocks in the early going. The December e-mini dropped below the 50-day moving average on Friday as the market closed on support in the 1505 area. Currently, the market is well through this support area, as well as the key 1500 psychological mark. The e-mini is also very oversold, registering a 24 percent reading as of Friday's close and a reading in the low teens this morning, which could bring some bargain hunters back into the market. Likewise, slow stochastics are very oversold, but have not given an indication when a crossover will take place. Support now comes in at 1485 and 1465, while resistance can be found at 1520 and 1530.

Wheat – Wheat went limit-up on Friday on news that Russia plans to curb exports, a move that would test the already tight stocks in the global Wheat markets. Wheat is off this morning, as Russia enacted a 10 percent tax on exports instead of the 30 percent tax many were expecting. Solid rains across much of the winter Wheat-growing region have only been a minor obstacle to farmers still planting and should aid growth. Traders may continue the recent liquidation phase in the market due to the weak technicals and lack of positive fundamental data. The market confirmed a head and shoulders top last week that measures a move into the low 700's. Support has been found in the 50-day moving average, with the market unable to even temporarily break through this area. Momentum is beginning to show fairly significant bearish divergence from the RSI and price, suggesting a near-term bearish bias. Support can be found at 815.50 and 765, while resistance comes in at 890 and 910.

Copper – The fire sale in the equity markets has Copper traders liquidating positions. The weaker-than-expected growth in the U.S. housing sector continues to plague the market, but a broader global slowdown could send the market spiraling downward. If economic conditions cause a recession in the U.S. and a slowdown in Europe and Asia, Chinese exports would likely slow significantly, which could dramatically decrease demand for Copper going forward and decrease the chances of fresh stockpiling by China. December Copper confirmed a double top, measuring a move to 338.20 last week. It looks like the 50-day moving average has provided some support to the market – at least initially – in overnight trading. Momentum is showing bearish divergence from the RSI, suggesting possible further downside. Support comes in at 342 and 332, while resistance can be found at 358.10 and 366.

Rob Kurzatkowski, Commodity Analyst

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Buy the Hump, Sell the Dump and Don’t Diddle in the Middle

Corn has been trading in a range of about 330-390 over the past three months, but today saw a turn to the downside. The high on the day for the December contract came in shortly after the open at 368, before the bears came charging in to force a close around 361. Corn did manage to close above its 25-day moving average at 360.28, even though it snuck below for a brief period at a low of 359. It is still several points above the 15-day moving average.

From a fundamental standpoint, Corn may have been following the lead of one of its grain complex brethren today, as news of Russian export tariff increases drove down the price of Wheat.

From a longer-term perspective, prices are still well below the highs of 431 seen last June. With shorter-term support and resistance levels at 330 and 390, the market is squarely on the fence. Should Corn break above the 389.5 mark set on September 27th, a bull market may be in the works. However, it is firmly in the “don’t diddle in the middle” stage right now.

Mike Tosaw, Director of Education

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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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Hot Chocolate

Cocoa – Cocoa prices jumped sharply on news that black pod disease is spreading, and many farmers may not be able to contain the outbreak because the government agency that would normally provide financial assistance has had its funds frozen. World Cocoa output is expected to easily surpass demand by around 100,000 metric tons, provided the outbreak does not worsen beyond expectations. If the fungus problem becomes more widespread, the chances of a smaller crop of low quality increase significantly. It will be interesting to see if large Cocoa users such as chocolate makers react by purchasing current stocks to offset the possibility of higher prices in the future. December Cocoa confirmed a double bottom on the daily chart on Friday, which measures an upside move to 1980. The market is a bit overbought at the moment and is heading toward resistance at 2000, which could slow down further advances. Momentum remains strong, but is starting to lag behind both price and RSI. Support comes in at 1915 and 1890, while resistance can be found at 1980 and 2000.

Wheat – Wheat finished close to limit-up in the front month December contract on expectations that exports will remain strong. There is also a consensus building among traders that Australia will once again downsize its crop due to the severe drought there. Wheat is sharply lower this morning on a broad sell-off in commodities, with traders now thinking that yesterday’s rally was overdone. The recent run-up in energy prices has driven freight prices to new highs, which may curtail imports. The current winter Wheat crop is sprouting well ahead of schedule, but reports from southern Kansas and parts of Texas suggest planting may be behind in these states due to heavy and no rains, respectively. December Wheat remains bearish on the daily chart, and a close above 855 may be needed to swing short-term technicals higher. Momentum is showing some bullish divergence from RSI, suggesting some short-term firming or even strength. Support comes in at 790.25 and 760.50, while resistance can be found at 855 and 880.

Australian Dollar – The Aussie rallied to 23-year highs on overall Dollar weakness and strong commodity prices. The USD finished weaker against all of the majors except the Yen on expectations that the Fed will lower rates on Wednesday. Australia’s economy relies heavily on exports of raw materials – namely industrial metals – so the broad commodity rally was certainly a driving force for the Aussie. The December Aussie did give back a good chunk of early gains on the late-day Copper sell-off. High interest rates may keep the Aussie attractive going forward, but commodity liquidations and technically overbought levels may make hamper further advances. The December contract had a weak close, forming a bearish gravestone doji pattern on the daily chart. Momentum is showing bearish divergence from the RSI and price action which, in addition to the bearish chart pattern and overbought levels, suggests a negative short-term bias. Support comes in at .9050 and .8800, while resistance can be found at yesterday’s intraday highs of .9246.

Rob Kurzatkowski, Commodity Analyst

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Bears Eat Their Wheaties

Wheat gave back about half of what it gained yesterday, with the December contract closing down 14.5 at 814 on the heels of a 28.5 point gain yesterday. Wheat continues a downtrend that started at the beginning of this month when the contract peaked at 961. Following the moving averages, both the 15- and 25-day have yet to catch up to the current downward pricing action.

Although slow stochastic indicators are still above the 20 mark – a number below 20 indicates a potential reversal – volume has remained stable since the month began, and we are still above psychological support at 800. Buyers came in on October 25 and 26 as Wheat dipped below that mark, but there is no charted support at that number within the last year. If 800 does not turn out to be the magic number, there is no support until around the 740 mark established in late August.

Also worth mentioning is that Crude Oil once again fell below the 90 mark today – an almost 4% decline on the session. The weekly EIA report is due tomorrow at 10:30 AM Eastern time. The Fed is also scheduled to give a policy statement on interest rates, which always makes life interesting in the markets.

Director of Education Mike Tosaw

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Rising Supplies Tarnish Copper

Copper – Copper extended its recent slide on rising LME warehouse stocks and increased production. In a year marked by worker turmoil, order seems to have been restored on the labor side for the most part, which should help boost output barring anything unforeseen. Weakening global demand – especially in the U.S. housing sector – does not appear to be on the rebound and Copper traders fear the Chinese government may intervene with higher interest rates in the early part of 2008, which could further trim demand. Despite the numerous bearish factors surrounding the market, traders were given some hope last week with strong GDP and payroll data showing that the economy may be in better shape than previously thought. The Chicago PMI data was less encouraging, however, posting a sub-50 reading to suggest contraction of the manufacturing sector. European factories may stimulate demand, as the sagging Dollar could attract buyers looking to capitalize on relatively cheap commodity prices. Copper is slightly higher this morning on expectations that inventories will be worked down due to increased demand. December Copper seems to have some support around 330 after sliding from the 375 area a month ago. The 18-day moving average crossed through the 50-day average, which is bearish longer-term. Momentum is a very bearish -0.311 and the RSI is an oversold 22 percent, which suggests today's rally may be a technical bounce due to some profit-taking. Support comes in at 325 and 305, while resistance can be found at 342 and 355.

Gold – Gold managed to post modest gains in a turbulent trading session to close at record highs. The Gold market also detached itself from the energy sector, which posted losses across the board. Energies and treasuries were out of favor yesterday due to technically overbought levels and easing political tensions, setting up the precious metals sector the safe haven de jour. The banking sector has been hit hard by the mortgage crisis and a correction in the stock market which, coupled with low interest rates, could keep the Dollar depressed and thus aid Gold prices. Gold continues to edge higher this morning on a weak USD and rising energy prices. Gold remains bullish on the daily chart, rocketing to the highest levels since 1980 in early trading. The market appears overbought at the moment, but this hasn't dissuaded traders. Momentum continues to climb higher and there was a bullish crossover of the ADXR indicator, suggesting the possibility of further upside. Support has been solidly established at 800 and 780, while resistance may be found at 835 and 850.


Bean Oil – With Crude Oil and Gold prices soaring, Bean Oil has been off of the radar for many traders while the market has quietly made a run to new highs. Increased bio-fuel demand and a weak Dollar leading to higher export demand have fueled the market recently, as has the strength in Soybean prices. Worries that the USDA will show increased production may weigh on the market in the coming days and restrict upward price movement. This figures to be a volatile week in the grain markets ahead of Friday's report, as traders readjust their positions. December Bean Oil remains bullish on the daily chart and the market is breaking out above the 42.75 resistance area in overnight trading. Momentum is starting to turn somewhat flat, which could signal further consolidation or, possibly, a small correction. The RSI is also showing overbought readings, which may hamper upside price action. Stochastics have crossed to the upside, which is bullish near-term. Support comes in at 42.00 and 41.00, while resistance may be found at 43.33 and 44.00.

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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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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Bulls Eat Some Corn

The December Corn contract (CZ7) closed at 383 today – an almost 2.5% increase from yesterday's 373. Corn has been trading sideways now for almost a year, leading many to believe it may be set to make a break one way or the other. The 375 mark has acted for both support and resistance lately.

On the daily candles, the 375 level appears to be somewhat of a magnet from either side. Last week 375 seemed to be resistance, but now that we have had some breaks in resistance, that same number is emerging as a support mark. Buyers came into the market yesterday when the market slipped below 375. The next level of support is around the 350 level. The moving averages were also split to start the day, but we are above both the 15- and 25-day averages now. The stochastic indicators are choppy at best right now, not giving us anything like the nice rounded showing we had seen in early October.

On the economic front, CPI, initial jobless claims, and Crude inventories will all be released tomorrow. Crude traders will be paying close attention to the inventory numbers after yesterday's announcement lowering estimates for the fourth quarter.

Mike Tosaw, Director of Education

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Chinese Imports Boost Beans

Soybeans – Beans rallied to new highs on strong Chinese imports of Bean Oil and speculation that domestic production will fall below USDA estimates. Stronger energy prices and a weaker U.S. Dollar also helped lift the market to 19-year highs. China is expected to continue stockpiling imports of Soybeans and related products in an effort to bolster reserves and stave off food inflation. Informa is expecting the 2008 U.S. Bean crop to be around 60 million acres – larger than the 2007 crop, but lower than prior estimates. Beans were down in overnight trading on profit-taking and weakness in energy prices. The Dollar is slightly higher this morning, making exports a bit less attractive. January Beans are technically overbought, with the 9-day RSI registering an 85 percent reading. The overbought levels may leave the market susceptible to further profit-taking. Stochastics are close to crossing over to the downside, which could signal short-term technical weakness. Support comes in at 1052 and 1020, while resistance may be found at 1100.

Copper – Copper had its strongest showing in over two months, jumping almost two cents. There was also speculation that Chilean production may stall due to the 7.7 magnitude quake in the Copper-rich nation. Yesterday's enthusiasm for the base metal has been tempered by a host of factors, including a bleak U.S. economic outlook, record Chinese production and comments by Copper miners that Chile's mines can make up for the lost production in a short period of time. China's domestic production for October jumped 44 percent over last year, which tempered a 10 percent monthly increase in imports. Australian and Indian production also increased over the past month, which could be a drag on prices. The bounce the market has seen over the prior two sessions could also be attributed to technically oversold levels, but the market remains in a downtrend. December Copper has a wall of resistance between 320 and 340 that it must rally through to reverse the current trend. Support comes in at 315.00 and 303.50, while resistance can be found at 340.00 and 358.10

Gold – Gold futures are sharply lower this morning after recovering almost half of their losses over the prior two days. In addition to a stronger greenback, lower global stock prices are putting downside pressure on precious metal and energy prices. Slowing economies could signal lower inflation, making Gold a less attractive investment. The decline in equities may also force traders to liquidate Gold positions to generate cash in their accounts to meet margin calls. After eclipsing the $800 mark, there has been some confusion among traders as to where the next upside target may be. Thousand dollar gold was the talk by some of the more bullish analysts, but traders may have a tough time justifying this type of move in the near-term, as inflation has not yet been shown in U.S. economic data and energy prices have come down from record levels. December Gold is forming a bearish consolation pattern, suggesting further downside is possible. The market did bounce once prices flirted with the 800 area, and the 18-day moving average has acted as support over the past three trading sessions. Momentum has taken a sharp turn downward, but remains bullish at +37.60. Support comes in at 800 and 780, while resistance can be found at the 9-day MA of 817.90 and the high close of 837.50.

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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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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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 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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Corn Crosses 400!

December Corn (CZ7) crossed the 400 level for the first time since late June, giving a positive sign for Corn bulls. The next level of resistance doesn’t come until 425, which was established in mid-June – anything above 435 would be an all-time high.

Looking at the indicators, we see that the fast stochastic is above the 90 level. Can the trend continue without a reversal? We have been going higher since early October. This trend is also above both of the moving averages, indicating that things are moving fairly fast.

Tomorrow, all eyes will be on the Fed announcement due at 1:15 PM Central time.

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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Sweet Corn

Corn – Corn prices jumped overnight on expectations that ethanol use will increase, after Congress on Friday passed a new farm bill which would mandate substantial increases in biofuel usage. The bill would push ethanol demand near production capacity and force the fledgling ethanol industry to find ways to use crop leftovers – such as husks and cobs – to produce the alternative fuel. Sagging Dollar prices have boosted export demand for Corn and related products, such as sweeteners, while lower feed stocks in Europe and Australia have also helped drive demand overseas. March Corn briefly made new contract highs in early trading and prices remain strong. The market is very overbought right now, but the overbought levels have been more than offset by strong momentum, which is outpacing the RSI indicator. Support for the March contract comes in at 425 and 410, while resistance can be found at 450 and 465.

Soybeans – Bean prices continue to rally in overnight trading on expectations that demand for U.S. exports will remain strong. The Dollar is trading a bit weaker in overnight trading, which could help give exports – which have already surpassed USDA estimates – a lift. China's appetite for Beans and Oilseed has not waned in the face of rising prices, and demand is forecast to remain strong through the end of the crop year. Crude Oil prices are lower in overnight trading and could hamper rallies, as it would adversely affect Bean Oil demand. January Soybeans remain overbought on the daily chart, with prices rising in 8 of the last 10 trading sessions. The overbought conditions may restrict further upside, but momentum remains very strong and is outpacing RSI in the early going. Support comes in at 1145 and 1114, while resistance may be found at 1175 and 1200.

S&P - Stock index futures are trading lower this morning on mounting fears of a severe slowdown or recession. While there is a contingent of analysts quick to use the R word, the fear of a severe slowdown is spreading in the same manner in which the credit crunch has spread to the broader economy. The Fed did little to boost investor confidence last week with a quarter point rate cut and its collaboration with European and Canadian central banks. New disclosures by Bank of America and Citigroup in relation to credit market exposure also shook investor confidence. Financial companies are leading the way lower this morning. After starting out with a boom, holiday sales are expected to disappoint and retail stocks have suffered this morning as a result. The December e-mini S&P is trading below both support at 1465 and the 18-day moving average this morning. A close below the 18-day could suggest that a recent high is in place. Momentum is showing bearish divergence from the RSI, suggesting more downside is definitely a possibility. Support can now be found at 1440 and 1406.25, while resistance comes in at 1483 and 1501.

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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In the Spirit of the Season, Wheat Gives Back

After a pretty big day for Wheat bulls yesterday, the bears made a short-term statement today, dropping the March contract (WH8) by nearly 2%. The low of the day held at the 950 level, but the close at 954 put us just below yesterday’s open.

Looking at the chart, we see that the past six months have been good to Wheat bulls, with prices increasing by over 50%. Although we have been in a bit of a channel since the beginning of October, the last few days have lingered above previous resistance in the 950 area. If we continue to the upside, there is no apparent resistance. But the bears were in control today, and the longer that lasts, the better the chance that the channel may continue. Should the bulls take over the trend, the longs will have a very happy New Year indeed.

Mike Tosaw, Director of Education

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Corn Exports Show No Letup

Corn – Corn futures posted solid gains yesterday on strong export data. Unlike the rest of the CBOT grain complex, the stabilization in the U.S. Dollar and rising prices did little to curb demand in Corn. Market chatter suggests that a host of factors may lead Soybean acres to increase significantly and take away from Corn acres in 2008, including attractive Bean prices, record Corn fertilizer costs and crop rotation. The ethanol hype over the past few years has also caused farmers to over-plant Corn, which has done ecological damage in the Midwest and may make the region more prone to drought conditions. Longer-term meteorological models suggests the La Nina weather pattern is picking up in the Pacific, which could cause dry conditions in both North and South America in the upcoming crop year. March Corn found support at the 9-day moving average over the past two trading sessions, showing that the market has maintained short-term positive momentum. Momentum is showing positive divergence from both price action and the RSI. Corn remains at overbought levels on the RSI, which may leave the market susceptible to profit-taking pressure. The bearish crossover on the stochastics on Monday was negated by the indicator lines crossing back up as a result of yesterday's move. Nonetheless, the indicator remains above the 80 percent mark, which gives further indication of overbought conditions. Support comes in at 430.25 and 411, while resistance may be found at contract highs of 443.25 and 465.

Coffee – Coffee fell for the second consecutive day on lack of buying interest in commodities and indications that Brazil's output may be larger than previously thought. The drought conditions in the key Coffee-growing regions may make much less of an impact on the 2008 crop than earlier projections, according to a joint report released by Fortis Bank and VM Group. The report is showing the possibility of a 50 million bag crop, trumping earlier estimates of 44 million bags. At this point, it is still too early to tell how the inclement weather has affected the crop in the infant stages of growth. Commodity fund activity was very light, with the inflationary GDP deflator figure being offset by a strong Dollar. In general, softs have gotten a lift from fund buying in recent weeks, as investment managers have diversified away from commodities that have made explosive moves over the year, such as metals and energies. Some of the selling may also be attributed to profit-taking ahead of year end, as well as the technically overbought conditions. The RSI, SMI and slow stochastics are giving overbought readings, with the latter two indicators showing bearish crossovers. The daily chart shows two consecutive spinning top candlesticks, which points to indecision among traders and may suggest a short-term reversal of the recent uptrend. March Coffee is still trading above the major moving averages and has not yet shown major evidence of a reversal, despite the claim made by the oscillators. Momentum has been resilient in the face of yesterday's sell-off. Support comes in at 132.50 and 131.25, while resistance can be found at 135.25 and 136.75.

Dow – Stocks finished higher in another choppy trading session yesterday. Buyers stepped in despite the first ever losses posted by investment banking powerhouses Bear Stearns and Morgan Stanley due to writedowns related to subprime loans. Leading indicators were weaker than expected at -0.4 percent, initial claims rose more than forecast and the revised GDP deflator showed a higher rise in prices than the preliminary release, all of which were equity bearish. Traders may key on the deflator figure, which paints a truer inflation picture, as it is shows an unfiltered view of the change in consumer prices, whereas the CPI data leaves out certain consumer staples. Online retailers are expected to have a stronger holiday season that previously believed, a fact that helped spark a rally in both tech and retail stocks. After the bell, RIMM posted strong earnings, which doubled last year's profits for the same period. The market will digest more inflation and income data with the release of the PCE incomes, spending and inflation figures at 7:30 AM CST. The March Mini Dow chart remains in a tight consolidation pattern, suggesting more downside may lie ahead. The 9-day moving average crossed the 18-day, which is a negative signal in the near-term. Momentum is showing positive divergence from the RSI, which conflicts with the chart to show a bullish bias. The RSI is quickly approaching oversold levels, which may support the market going into the New Year. Support comes in at 13185 and 12900, while resistance may be found at 13535 and 13645.

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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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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Commodities Strong Across the Board

Wheat – Wheat futures fell sharply yesterday on expectations that Friday's USDA report will show an increase in the forecast crop size for Argentina and Australia. A private forecast indicates that after several years of drought, Australian production may rise to record levels due to the La Nina weather pattern. While the pattern may adversely affect the U.S. crop due to dry conditions, the back end of the pattern produces good rains for the Aussie crop. New crop contracts have made solid gains versus the old crop recently, significantly tightening the spread that at one point was almost two dollars between the March and December contracts, but the Aussie and Argentinian outlooks may dampen hopes of another bull run in 2008. December Wheat recently broke out of a bullish wedge formation, signaling the possibility of higher prices. Yesterday's reversal pattern on the daily chart, along with a bearish divergence between the momentum and RSI indicators, may lead to the conclusion that this was a false breakout. With this morning's move to the downside, the momentum indicator is resting on the 0 line and further selling could cause the indicator to slip into the red for the first time in almost two months. Support comes in at 813.50, 807.50 and 797.25, while resistance can be found at 829.50, 839.75 and 846.00.

Sugar – Sugar continues to climb this morning, aided by rising fuel costs and solid commodity prices. Commodity index fund activity remains strong in the Sugar market, with funds adding positions to more closely match the DJ-AIG index. Morgan Stanley indicated that 53 percent of Brazil's crop has been diverted to ethanol production, giving traders hope that exports will be smaller that previously forecast. Although Oil prices dropped sharply yesterday, energy costs remain close to historic levels, which may result in higher ethanol use. Also in play, several sources have already indicated that Brazil may raise the ethanol component of its domestic fuel blend and India is also behind schedule harvesting its Sugar crop. The recent bullish turn in the fundamentals and relatively cheap prices have attracted investors to Sugar, but traders may move forward cautiously given the recent strong showing, which may open the door to profit-taking in the near-term. The March Sugar chart shows no sign of a letup after breakout out of a bullish consolidation pattern last week. Momentum is sharply outpacing the RSI indicator, which is bullish in the near- to mid-term. Support comes in at 11.28, 11.20 and 11.12, while resistance can be found at 11.45, 11.54 and 11.63.

Gold – The strength in commodity prices this morning has helped push the Gold market to new all-time highs, with the February contract trading as high as 879.30 as of the writing of this report. Today's pending home sales figures are expected to come in very weak, which could prompt the FOMC to lower interest rates when it meets later this month. Gold fundamentals remain very bullish and the ideal inflation scenario for precious metals bulls may be forming, with commodity prices rallying and interest rates falling. The Dollar continues to stumble in its bid to rally from all-time lows and the weakness in the U.S. currency will only add to the bullishness in the market. February Gold is breaking out of a bullish consolidation pattern on the chart. If the pattern is confirmed prices may rally to the target of 890 set by the wedge formation validated several weeks ago. Momentum remains bullish and is outpacing the RSI, which remains in overbought territory. Overbought conditions may do little to halt a strong bull run, but may bring about more consolidation and cause the market to labor going forward. Support comes in at 855.60, 849.00 and 844.50, while the market may find resistance at 879.30 and 885.70.

Rob Kurzatkowski, Commodity Analyst

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Wheat Continues Short-Term Downward Trend

Wheat continued its slide to the downside today, with the price for the March contract (WH8) resting at 882.5 at of the time of this writing – a 0.73 percent drop on the day. March Wheat had been as low as 878 in early trading before bulls came in and took the price up around 907. But just before the noon hour, the bears reasserted their muscle and slowly brought the price down to its current level as the afternoon progressed.

On the chart, the moving averages crossed yesterday and Wheat remains below both of them today. If the contract reverts back to that mean, the market could be in position for a nice gain as bulls may consider this level a potential double bottom – there is another level of support around this area on 12/31. On the stochastic indicator, Wheat is not near a turnaround level to either side, with bears looking at the highs back in early October. Over the longer-term, the market could be approaching resistance at 962 (October), 986 (December), and 950 (January).

In other news, the U.S. stock market made significant gains today as the March S&P contract (ESH8) ended the day with a 12-point gain. Fed Chairman Ben Bernanke's indications that there may be a rate cut at the end of the month spurred the positive moves in the equities. Later in the day, it was announced that Bank of America is in talks to acquire Countrywide Financial.

Mike Tosaw, Director of Education

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USDA Focus

Corn – Corn is little changed this morning ahead of the USDA report, which is expected to show lower yields and production for the 2007/2008 crop year. Average analyst estimates for production are 13.109 billion bushels, down from the 13.168 billion bushel figure released in November. The market is looking for an average yield of 152.3 bushels per acre, down from 153.0 bpa in November, and ending stocks are expected to shrink to 1.698 billion bushels, down from 1.797. Yesterday's export sales were rather lackluster, coming in at 670,000 metric tons, well below the lower end of estimates of 750,000 to 1.05 million MT. Corn has made a good run since the last figures were released, making the market ripe for profit-taking in the event of an upside surprise. The lower export sales figures were extremely disappointing given the amount of Corn U.S. farmers were selling overseas during the latter half of 2007. March Corn is technically overbought, which could accelerate sell-offs in the event of disappointing production numbers. The March Corn chart shows two consecutive spinning top patterns, indicating indecision. The pattern would normally portend a high likelihood of consolidation or a pullback, but may indicate that traders were squaring up positions ahead of the report. Support comes in at 470, 466.50 and 460.75, while resistance can be found at 480.75, 486.25, and 490.75.

Soybeans – Beans are trading about 5 cents higher this morning on very light volume. Average analyst estimates for production are 2.584 billion bushels, down from the 2.594 billion bushel figure released in November. The market is looking for an average yield of 41.2 bushels per acre, down from 41.3 bpa in November, and ending stocks are expected to shrink to 170 bushels, down from 185. Yesterday's export sales were poor for actual Beans – coming in at 118,400 MT – but Bean Meal was within the average range of estimate at 77,900 MT and Bean Oil almost tripled estimates to come in at 28,200 MT. China's appetite for Soy Oil has been a driving factor for the Bean market and the nation has demonstrated in the past that appreciation in commodity prices has done little to curb demand, so Bean Oil should be no exception. RSI has fallen back from overbought levels, indicating the market has room to maneuver higher in the event of a bullish report. The March Bean chart shows a bullish consolidation pattern forming, suggesting the market may see more upside in the near future. Support comes in at 1251.25, 1242.50 and 1233, while resistance can be found at 1269.75, 1279.25 and 1288.25.

Wheat – Unlike Corn and Beans, the Wheat market has struggled to keep its footing in recent weeks due to higher acreage estimates and improved growing conditions for overseas producers. The 2008 winter Wheat planting estimate is expected to show 48.657 million acres, up from 44.987 last year due to attractive prices. The hard red crop traded on the KCBOT is seen at 34.88 million acres, up from 32.94 million a year ago. While the figures are expected to be bearish for Wheat, the market has the most room to run in the event of a bullish surprise in the report. The NOAA stated that it sees the La Nina weather pattern continuing through March, which may impact on U.S. yields. This bullish assessment is tempered by the fact that Australia will likely see higher precipitation over the same time frame. July Wheat has been forming a wedge pattern on the chart, indicating the possibility of huge price swings on a breakout either way. Momentum is showing strong bearish divergence from the RSI, leading to a negative near-term bias. A violation of December 17th lows of 763 could trigger stops and lead to extended sell-offs. Support comes in at 769, 762.25 and 750, while resistance can be found at 788, 800.50 and 807.50.

Rob Kurzatkowski, Commodity Analyst

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USDA Results

Corn – The Corn figures were very bullish, with production coming in at 13.074 billion bushels, well below the 13.109 billion bushel consensus estimate. Both yield and carryout numbers were also well below forecasts, with yields coming in at 151.1 bpa versus estimates of 152.3 bpa and carryout pegged at 1.438 billion bushels versus estimates of 1.698 billion. The early call is 8-10 cents higher, but we may see 10-15 cents higher by the open.

Wheat – The Wheat number may be the most surprising of today's USDA figures. Winter Wheat seedings were 46.61 million acres total, below the consensus guesstimate of 48.657. The hard red crop was actually below last year's figure, coming in at 32.5 million acres versus last year’s 32.94 million acre figure. The early call is about 20 cents higher, but we may see the market open close to limit up, especially in KC.

Soybeans – Bean figures came in a little higher on the production and carryout numbers, while yields were in line with forecasts. The report is neutral to slightly bearish, but the Bean complex is expected to open higher on the coattails of the bullish Corn and Wheat figures. Production came in at 2.585 billion bushels versus estimates of 2.584 billion, while carryout was pegged at 175 million bushels versus estimates of 170 million. The early call is 5-7 cents higher.

Rob Kurzatkowski, Commodity Analyst

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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Corn Backs Off But Fundamentals Still Bullish

Corn – Corn shed some of its recent gains on profit-taking due to technically overbought conditions. The fundamental picture remains very bullish thanks in part to the lowest inventory figures since 1984. The grain markets have been aided by very strong overseas demand, along with a weak U.S. Dollar. While domestic prices are very high, the slumping greenback has made Corn a cheap import for countries with relatively strong currencies. China's demand has not waned and it is unlikely that high prices would due much to curb the nation's appetite for the grain, as we have seen with other commodities like copper, nickel and crude oil. Attractive Soybean prices may cause farmers to divert acres away from Corn, much the same way Corn diverted acres away from Beans this past crop year. March Corn remains very overbought, closing yesterday's trading at 91 percent on the 9-day RSI. This may put some downward pressure on the Corn market in the form of profit-taking, but the chart remains bullish barring some sort of gap reversal. Support comes in at 493, 498 and 505, while resistance can be found at 517, 522 and 529.

Gold – Gold futures continue to shine this morning on a weaker U.S. Dollar and lower stock index futures. The sagging equity markets and increased likelihood of future rate cuts by the Fed have given traders little incentive to dump positions. Physical demand for Gold remains very strong, as evidenced by the purchase of 10.75 metric tons by the StreetTracks Gold Trust ETF yesterday. The outlook for precious metals remains rosy due to the lack of alternatives, as global equities have been slumping, some other commodities are trading at levels difficult to justify based on fundamentals and treasuries/fixed income instruments lack the inflation hedge feature of commodities. February Gold remains very bullish on the daily chart, but yesterday's choppiness did form a spinning top candlestick, indicating the possibility of a near-term reversal or consolidation. The technically overbought conditions could influence traders to take profits. Support comes in at 892.40, 881.40 and 869.60, while resistance can be found at 915.10, 926.90 and 937.90.

10-Year Notes – March 10-Years are trading at new contract highs on the sell-off in equity futures and the continuing mortgage crisis. The treasury markets have seen a huge inflow of funds from nervous equity traders over the past few weeks. The subprime crisis – fresh in the minds of traders due to Citigroup's earnings release this morning – has certainly aided the “flight to quality” effect the market has seen. Today's retail sales report is expected to show zero growth despite the holiday shopping season, and could give further evidence of a need for the Fed to slash rates once again. The market has already priced in steep rate cuts from the Fed, so the central bank will have to act swiftly in order to appease fixed income bulls. The market will also have PPI data to mull over today, and a sharp increase in prices could cause prices to back off. If March Notes are able to hold rallies above 115-23.5, it could signal a breakout and add to the bullishness the market has seen. The RSI is beginning to creep toward overbought territory, which may inhibit further advances. Support comes in at 115-03, 114-22 and 114-12, while resistance can be found at 115-26, 116-04 and 116-17.

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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Hot Chocolate

Cocoa – Cocoa futures are trading higher for the sixth consecutive trading session, bolstered by tight supplies and rough weather conditions. The seasonal Harmattan winds from the Sahara have been fiercely blowing over the main growing region during a dry past week. If the arid conditions persist, the likelihood of a very small midcrop increases dramatically, which could lead to tight supplies over the summer. Ivory Coast arrivals set to begin October 1st are up by over 60,000 tons over the 2006-07 crop year, but the pace has slowed recently. There are also indications that supplies from neighboring Cameroon may be tight. Cocoa has gotten some outside market support due to the slumping Dollar, which may continue if the greenback is unable to stabilize. March Cocoa is close to testing recent highs of 2237 and prices may need to break above these levels to get some renewed buying pressure. The market is approaching overbought conditions on the 9-day RSI, which could put some downward pressure on the market in the near term. Support comes in at 2193, 2173 and 2161, while resistance can be found at 2225, 2237 and 2257.

Wheat – Wheat finished limit up in the front month March contract on a slumping U.S. Dollar and lower shipping costs, both of which could keep export demand strong for the old crop. Wheat received quite a bit of outside market support, as there was a broad rally in commodity prices. Old crop supplies remain very tight and the recent tightening of spreads between old and new crop seem to have reversed over the past few trading sessions. Widening spreads can be attributed to the weak greenback and lower shipping costs, as both of these factors would indicate the possibility of strong short-term demand, but it is unknown if these conditions will persist. Export controls by Russia and Argentina have also aided prices and opened the door for more U.S. exports. The limit move pushed March Wheat toward the recent high close of 962.50. A breakout above this recent high could spark buying and bring about a test of the $10 mark. Momentum has turned sharply higher and is outpacing RSI, suggesting a bullish near-term bias. Support comes in at 943, 923 and 913, while resistance can be found at 973, 983 and 1003.

S&P – Stock futures are higher this morning on renewed confidence and expectations that durable goods orders will rise. In his State of the Union Address last night, President Bush indicated that he wants Congressional legislators to put aside partisan politics and put together a stimulus package quickly. There has been some skepticism on how quickly such a package could be put into action because of the vastly different way in which the two political parties want to offer aid to consumers. Durable goods orders, released at 7:30 AM CST, are expected to rise 1.5 percent after falling the previous 4 months, which could hint that there is some life left in the economy. Consumer confidence is expected to fall to 87 percent, but it would not at all be surprising to see the figure come in closer to 85 percent due to the bad press the economy has gotten recently. Traders are betting that Wall Street will be able to bully the FOMC into a half point rate cut on Wednesday, lowering borrowing costs. March e-mini S&P futures were not able to make much headway technically, despite rallying strongly yesterday. 13,900 remains the barrier that the market may have to cross in order to gain a bullish bias. Support comes in at 1323.75, 1293.00 and 1275.75, while resistance can be found at 1371.75, 1389.00 and 1419.75.

Rob Kurzatkowski, Commodity Analyst

Bears Keep Wheat Below 1000

Today in the grain markets, the March Wheat contract (WH8) made an attempt to get over the 1000 mark but couldn’t quite make it, hitting a high on the day of 993. With that high established early, the bears took over and never looked back. Although it was a bullish day overall in the markets, Wheat could not follow suit.

On the chart, we see that this is the third time in the last month and a half that prices have flirted with the 1000 mark, only to retreat. Although Wheat managed to get to 993, 1000 seems to be a scary number for the bulls. They have had three chances to bring the price higher, but haven’t been able to pull it off. The next level of support is around the 900 level based on trading activity earlier this week.

Also, the stochastic indicator is about in the middle, indicating that there are no overbought or oversold conditions based on that indicator. With neither bulls nor bears taking a side, it makes it hard to get a solid decision.

The big news tomorrow is of course the Fed announcement. It will be a widely watched event to be sure.

Mike Tosaw, Director of Education

Great Grains

Wheat – Dwindling stocks have left Wheat importers scrambling to lock up supplies, resulting in another limit up session for the grain. Yesterday’s close marked the sixth consecutive limit up session for the prized hard-red spring variety traded on the Minneapolis Grain Exchange. Supplies of Spring Wheat are at the lowest levels since 1978 and the USDA is forecasting a 30 percent decrease in the size of the protein-rich variety. The situation is not expected to get better anytime soon due to dry conditions in Canada and Argentina. Producing nations have been exporting at breakneck speed, evidenced by the strong U.S. export sales figures over the past two months. The MWH8 contract is limit up in electronic trading, breaking the $15 per bushel mark and bringing the Chicago and KC contracts up right along with it. March CBOT Wheat broke through previous contract highs and closed above the $10 mark for the second consecutive session. The market is now eying $11, which may offer some resistance and finally slow things down. The MWH8 future has gained over 75 percent over the past three months, versus gains of just over 25 percent in the KWH8 and WH8 (see chart below). This suggests a possible “short squeeze” under way in Minneapolis, with shorts being forced to buy back positions on top of new money hitting the market.

Cocoa – Cocoa futures are extending recent rallies with strong gains overnight. Relatively under-priced compared with a number of other markets, Cocoa has managed to attract a fair amount of the fund money leaving other commodities. The attractiveness of Cocoa can be evidenced by the market's resiliency on this past Friday and earlier this week, while the rest of the commodity markets were dragged down by the Gold sell-off and renewed strength in the greenback. Growing regions in the Ivory Coast and Ghana have not seen any significant precipitation in recent weeks, which, coupled with the Harmattan winds, may lead to a small midcrop of sub-par beans. Expectations that the next crop year may yield a record harvest could somewhat temper the bullish enthusiasm, and the market may labor if and when it approaches 2500. March Cocoa made new contract highs of 2405 in electronic trading, but has initially rejected advances beyond 2400. Due to the overbought technical conditions, traders may be inclined to take profits if the market is not able to rally beyond the 2400 mark by the pit close. A sharp reversal may see the market test support at 2237 or possibly the 2174 Fibonacci retracement support. Support comes in at 2332, 2310 and 2290, while resistance can be found at 2416 and 2433.

Rob Kurzatkowski, Commodity Analyst

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USDA Friday

Wheat – March Wheat futures are limit up this morning, bolstered by strength in the Minneapolis contract and expectations that the USDA will slash the ending stocks figure. U.S. Wheat carryout was forecast at 292 million bushels in January, but consensus estimates are looking for this number to be trimmed to 274 million bushels. Importers have been scrambling to get their hands on supply despite record high prices, which has eaten into already tight inventories. Export sales data did show Wheat exports at 11.5 million bushels, down 39 percent from the week before and 18 percent below the 4-week average, but exports are still well ahead of the USDA's expectations for this marketing year. Wheat will likely find strong buying pressure unless the USDA raises the carryout figure, but the chances of that are slim to none. The fundamental buying in March Wheat has been so strong over the past few sessions that you can pretty much throw out the technicals until the chart shows some sort of reversal pattern. The RSI is giving an overbought reading of 80 percent on the 9-day and 74 percent on the 14-day, indicating that the market has room to run before it reaches extremely overbought levels in the lower 90's.

Soybeans – March Beans closed electronic trading 29 ½ cents higher on expectations that the USDA will cut the ending stocks figure. January's report pegged ending stocks at 175 million bushels, which is expected to fall to 167 million bushels in today's report. Stocks are already much lower than last year's 574 million bushel figure due to strong export demand for Soybean Crush. Export sales for Beans were especially strong at 38.1 million bushels, easily surpassing the high side of estimates at 33 million bushels. The export number is 86 percent higher than the 4-week average and more than double the prior week's figure. March Beans appear to be breaking out above the recent consolidation resistance area near 1330. A close above 1341.50 would be considered a breakout, but a close above contract highs of 1373 would be more encouraging. Momentum has moved sharply higher and is outpacing the RSI indicator, which comes in overbought at 77 percent. Support comes in at 1310, 1288.75 and 1276.50, while resistance can be found at 1343.75, 1355.75 and 1377.25.

Corn – March Corn finished 7 ½ cents high in the overnight session on expectations that the USDA will lower ending stocks. The average estimate forecasts the ending stocks figure to be 1.411 billion bushels, down from 1.438 billion bushels in the January report, but still up from last year's ending stocks figure of 1.304 billion bushels. The Corn market has been overshadowed by the Soybean and Wheat markets, which could result in lower acreage for the 2008-09 crop year. Export sales for the feed grain were disappointing, coming in at 40.5 million bushels, a figure that was within the range of estimates, but still 46 percent lower than the prior week and 36 percent below the 4-week average. Demand may increase for sweetener use due to climbing sugar prices in recent weeks, but further strengthening in the greenback may act to offset this. March Corn remains the most technically vulnerable of the grains, needing to break out above the 515 mark to renew enthusiasm. Support comes in at 492, 484.75 and 478.50, while resistance can be found at 505.75, 512 and 519.25.

Rob Kurzatkowski, Commodity Analyst

Planned IMF Sale Sends Gold Lower

Gold – Gold futures are lower for the third consecutive session after the U.S. Treasury Department announced that it would back the IMF's planned sale of 12.9 million ounces of the precious metal. Even with South Africa running at full capacity, production fell short of physical demand last year, so the move shouldn't flood the physical Gold market by any means. The move may actually support Gold prices over the long haul, as it could rejuvenate demand down the road if prices correct sharply. The precious metals market still has a host of bullish factors going for it, so the move by the IMF can be seen as somewhat bearish over the short to medium term. The daily April Gold chart remains bullish, but may be vulnerable over the short term if the contract suffers a daily close below 930. Momentum has outpaced price and RSI to the downside, hinting at lower prices over the near term. Support comes in at 932.40, 924.20 and 912.90, while resistance can be found at 951.70, 963.00 and 971.20.

Copper – Copper is lower for the third consecutive trading session after a huge two-day jump in LME inventories. Supply, rather than demand, has been the focus for traders of the yellow metal, and the 10 percent increase in stocks on Friday and Monday is considered by many to be bearish near-term. The LME reported stocks decreased 100 tons this morning. Despite the recent inventory spikes in London and Shanghai, the overall trend in inventories remains lower, which may support prices over the mid-term. Chinese demand remains robust, but there are many uncertainties in the U.S. and European economies. The three-day reversal on the March Copper chart hints at lower prices over the short term, possibly testing support in the 3.55-3.60 area. Momentum has remained stronger than both price and RSI, suggesting the recent selloff may be a temporary phenomenon. Support comes in at 3.6700, 3.6100 and 3.5110, while resistance can be found at 3.8295, 3.9190 and 3.9885.

Wheat – March Wheat finished overnight trading 43 cents higher, but sold off after the Minneapolis contract gave back $1.20 of yesterday's gains. Adding fuel to the recent rally, India announced that it plans to import Wheat for the third consecutive year due to poor crop conditions. Global demand figures to outpace production once again for the 2008 crop year, which could keep prices near records going into 2009. Friday is First Notice Day for March futures on all three major exchanges, which may result in even more volatile trading.

Rob Kurzatkowski, Commodity Analyst

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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USDA Data Suggests Tight Bean, Wheat Stocks

Soybeans – Soybeans are expected to trade 15-20 cents higher on what is generally seen as a supportive USDA Supply and Demand report. The U.S. carryout figure for Beans was 140 million bushels, down from the February report suggesting a 160 million bushel carryout. The figure was at the lower end of expectations, confirming very tight supplies of the oilseed. Tempering the U.S. data, however, was world carryout, which was seen at 47.44 million metric tons, up from the February reading of 45.82, mainly due to increased South American production.

Wheat – Wheat is seen opening 20-25 cents higher on further declines in U.S. stocks. U.S. carryout is pegged at 242 million bushels, falling 30 million bushels from the February report. World carryover has been revised up to 110.4 million metric tons from the prior estimate of 109.7, but this small upward revision does not change the fundamental outlook of the old crop Wheat. The tight stocks may result in even more government intervention overseas, resulting in higher acreage for the new crop year. China has already increased allocations of land for farming the grain.

Corn – The Corn report was seen as neutral to bearish, but the market may find some outside support from Beans and Wheat to open higher. Today’s U.S. carryout estimate of 1.438 billion bushels was unchanged from the February report and higher than the consensus estimate of 1.435 billion bushels. World carryover was revised up to 104.0 million metric tons from last month’s 101.9 million metric ton figure. The report shows that unlike Beans and Wheat, the Corn market is adequately supplied due to high acreage even though demand has been solid.

Overall, the report confirmed the market’s suspicions that Bean and Wheat stocks will remain tight. The supportive prices of these grains may result in higher acreage for the new crop year at the expense of Corn and Cotton, respectively. Much of the drawdown in U.S. stocks was a result of robust global demand rather than pressured supplies, save for certain grades of Wheat. If export demand begins to cool, we may see a restocking of U.S. supplies. This is highly unlikely at this point due to the weak Dollar making the U.S. the global supplier of grain. Traders will soon begin to shift their focus toward planting intentions for the new crop year, and it will be interesting to see how this year’s battle for acreage will play out, both in the U.S. and globally.

Rob Kurzatkowski, Commodity Analyst

Stocks Rebound Ahead of Fed Decision

S&P – Stock index futures are sharply higher this morning on expectations that the Fed will lower interest rates later today. The Fed’s quick action on the Bear Stearns meltdown seemed to have eased some of the worries regarding the banking sector, but the move could have set a dangerous precedent. If the central bank is going to bail out banks that have made poor decisions, there is little incentive to back off from engaging in risky ventures and trades. This morning’s PPI numbers showed inflation increasing briskly, which may put producers in a tough spot. They have to pass the rising costs on to consumers to remain profitable, but doing so may decrease sales due to economic conditions that are shaky at best. Inflation may continue to ramp up after today’s Fed decision, as funds and overseas investors may continue to divert capital into commodities. Fed Fund futures are pricing in a 90 percent chance of a 100 basis point cut and a 10 percent chance of a 10 percent cut. The June e-mini S&P chart remains bearish, despite yesterday’s spinning top followed by a strong morning. The chart has duped traders several times into thinking we have hit a bottom in the past two months, so it may take a significant upward move to restore confidence. Advances beyond 1340 would be encouraging in the near-term, but we may have to see prices move beyond 1400 before longs begin buying in full force. Support comes in at 1250.25, 1221.00 and 1189.25, while resistance can be found at 1311.25, 1343.25 and 1372.25.

Copper – The Copper market has recovered slightly this morning after dropping 15 cents yesterday. LME stockpiles continue to diminish, which has been the trend since the beginning of the year. Emerging market demand for the metal remains steady, but lacks the strength to support the sharp rise in prices since the market bottomed out in December. A rate cut could once again bolster commodity prices, but this positive news could be tempered by a decrease in building permits, which came in at 978,000, well short of the consensus estimate of 1.02 million. The upward revision in both housing starts and building permits for the month of January is somewhat encouraging, but not enough to convince traders that we are nearing the light at the end of the tunnel in the housing meltdown. Yesterday’s sharp sell-off in the May contract confirmed a downward breakout from a bearish consolidation pattern and drove the market below support at 3.75. Momentum continues to move lower despite the rise in prices, hinting that the market is continuing to lose strength. Support comes in at 3.5935, 3.5065 and 3.3635, while resistance can be found at 3.8235, 3.9670 and 4.0535.

Wheat – Wheat futures bounced back slightly in overnight trading after closing yesterday’s session limit down. Yesterday’s broad sell-off in commodities dragged the grain markets down, which could be seen in two different lights. On one hand, traders may believe that a sharp economic downturn coupled with tight lending could slow demand. On the other hand, traders may have pulled funds from commodities to make investments in the equity and treasury markets, indicating that we maybe approaching a bottom in the stock market and the Dollar. The first scenario has the potential to drag down commodity prices across the board and lead to more “normal” recessionary conditions of no growth and slow demand, while the second scenario could be supportive for the grain markets longer-term, as it hints at sustained demand. Time will tell which one of these scenarios will in fact play out. May Wheat bounced off of its uptrend line, suggesting the trend remains in tact for the time being. Breakdowns below1080 could confirm a double top formation and possibly a trend reversal. Support comes in at 1164.50, 1088.75 and 1046.25, while resistance can be found at 1282.75, 1325.25 and 1401.00.

Rob Kurzatkowski, Commodity Analyst

Fire Sale

Gold – Gold futures are sharply lower once again on a broad commodity sell-off, which has been as swift as it has been brutal. Commodity markets may have gotten ahead of themselves, with prices driven up by speculation that supplies for raw materials will be tight and inflation will remain high, but without enough concrete evidence supporting these opinions. One also has to weigh the Bear Stearns meltdown into this mess, as Bear was a large player in the derivatives markets whose client base included many hedge funds, which may now be liquidating positions and adding fuel to the sell-off. The timid rate cut this week disappointed Gold traders and has led to a recovery in the Dollar Index, which is still not out of hot water. This week's Commitment of Traders (COT) report may clear up whether this is simply a long liquidation or if new shorts are indeed entering the market. Yesterday’s sell-off did some chart damage for the April contract, tumbling through support at 960 and 950. The market's ability to hold above 900 – the next relative low – after testing this area is somewhat encouraging. The market is now very oversold, which could bring some value buyers into the market and may result in some short covering.

Wheat – Wheat futures are sharply lower once again after finishing yesterday’s session limit down. The rebound in the Dollar has made Wheat more expensive to importers of U.S., which may slow demand. Commodities have lost their appeal as an inflation hedge, especially if a global slowdown looms. Fundamentally, not much has changed in the grain markets on the supply side or expected acreage figures, which are both price-supportive. Yesterday’s weak close signals a double top formation on the daily chart, suggesting the possibility that more downside lies ahead. A solid close below the $10 mark in the May contract would offer further confirmation.

Rob Kurzatkowski, Commodity Analyst

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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

April Fools' Gold

Gold – Gold prices continue to tumble on broadly lower commodity prices and a higher U.S. Dollar. Subprime write-downs by European banks have led to a stronger greenback, which could find further support if the ISM number comes in better than expected. Funds have significantly reduced the size of their positions in commodities, putting pressure on the precious metals market. Even today's indication by ETF Securities LTD that Gold investment with the firm has exceeded 1 million ounces has not been able to stop the slide. Recovery in the U.S. equity markets could further pressure prices, negating Gold's “flight to quality” effect. The June Gold chart confirmed a bearish consolidation pattern yesterday, signaling the market may be ready to test lows near 860. Momentum has shown bearish divergence from RSI, suggesting the possibility of further weakness. Support comes in at 910.50, 899.50 and 881.90, while resistance can be found at 939.10, 956.70 and 937.70.

S&P – Stock futures are trading higher this morning, despite UBS and Deutsche Bank both increasing their subprime write-downs. Some market observers believe the market is beginning to see the light at the end of the tunnel in the credit crisis. News that Lehman Brothers and UBS are raising new equity was seen as a positive sign that these companies' problems are nearing an end. Traders are awaiting today's release of the ISM manufacturing data after yesterday's surprising Chicago PMI report. Analysts are forecasting the index to register a 47.5 percent reading, which would be a signal that the economy is contracting. A stronger reading – especially above the key 50 percent mark – would be seen as a positive sign and could result in a strengthening U.S. Dollar on expectations that the Fed will not have to be as aggressive with rate cuts. The technical landscape for the June e-mini S&P contract looks to be improving. After confirming a W bottom formation, the daily chart shows a bullish consolidation pattern, which may bring about a test of relative highs at 1392.50 and 1402.50. Momentum has been outpacing RSI, suggesting near-term strength. Support comes in at 1312.25, 1300.25 and 1291.25, while resistance can be found at 1333.25, 1342.25 and 1354.25.

Wheat – Wheat prices continue to tumble on news that farmers will increase their spring plantings of the grain by 7.8 percent. Fund liquidation has driven the July contract down by over three and a half dollars from contract highs, fueled by speculation that global supplies will not be as stressed as they have been over the past two years. The stabilization of the greenback, or rather its inability to make new lows, may be a sign that the currency is ready to recover, which could significantly hurt exports. The July Wheat chart remains bearish. After reversing sharply from contract highs, the chart shows the contract violating a triangle pattern that measures a move to relative lows at 893.75. Failure to hold this level could result in further liquidation and may result in a reversal of the uptrend. Support comes in at 909.25, 881.75 and 827.25, while resistance can be found at 991.25, 1045.75 and 1073.25.

Rob Kurzatkowski, Commodity Analyst

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

Holding Pattern for Metals, Financials

Gold – June Gold is trading lower this morning on a rosier outlook for the U.S. Dollar. Tomorrow's FOMC policy statement is expected to be hawkish in nature due to the rising costs of food and energy, which should bolster the greenback. The weakness in the currency is the primary reason for the exponential rise in energy prices over the past year and a half, and the Fed has come under political pressure to stem the tide. Trading figures to be fairly light until the statement is released tomorrow afternoon, and the language of the report will likely be the focus of traders more than the actual rate decision. Any hints at future rate cuts can be seen as bullish for the Gold market. The June Gold chart shows that the market may be vulnerable to selling pressure, as we trade near major support at 880. Furthermore, the contract failed to get any traction from the spinning top pattern, suggesting further weakness. A positive technical development is the bullish divergence between momentum and RSI, which hints at recovery. Support comes in at 890.20, 884.80 and 880.90, while resistance can be found at 899.50, 903.40 and 908.70.

S&P – Stock index futures are slightly lower in overnight trading, dragged down by disappointing earnings from Visa. The company – which had the largest IPO on record – reported a 28 percent increase in profits over last year, but missed the almost unattainable earnings expectations of many. Today's consumer confidence and tomorrow's GDP figures will give traders a better grip on economic conditions, but trading will probably be light prior to the FOMC decision. The consumer confidence figure is expected to drop to 61.0, its lowest level in 14 years. The June e-mini S&P chart remains bullish near term, but the market is in for a test as we approach major resistance in the 1390-1400 area. Solid advances beyond the 1400 mark may signal a larger recover for the market, while a rejection suggests sideways-to-lower action for the market. Support comes in at 1392.50, 1387.25 and 1381.00, while resistance can be found at 1403.75, 1309.75 and 1415.00.

Corn – Corn futures continue to charge forward due to slower-than-expected planting progress. Only 10 percent of this year's crop has made it into the ground so far, well below the 35 percent average. Yesterday's USDA report slashed the acreage figure to 86 million acres from the prior estimate of 90 million acres. With acreage expected to come in much lower than last year, it is imperative that farmers get as much of the crop planted as early as possible to stay above the trendline yield. The December Corn chart remains bullish, spiking to open higher on the overnight session and making new contract highs. One technical damper is the bearish divergence between momentum and RSI, suggesting that the trend may begin to weaken. Support comes in at 618.50, 606.25 and 599.75, while resistance can be found at 637.25, 643.75 and 656.00.

Rob Kurzatkowski, Commodity Analyst

Greenback Attack

Gold – Gold futures have failed to keep up with the booming energy market, dropping sharply in overnight trading on a stronger U.S. Dollar. Gold bulls were hoping that today's Akshaya Tritiya festival – a day when Hindus traditionally purchase precious metals – would help fuel demand for the yellow metal. Indian imports of the metal have fallen for seven straight months, fueling speculation that the recent downtrend in Gold prices may fuel cash market buying. With little evidence to this point that Indian demand has increased enough to impact prices, traders have once again shifted their focus toward inflation and exchange rates. Kansas City Federal Reserve President Thomas Hoenig suggested that the central bank may be forced to increase interest rates to combat inflation, a statement that promptly sent the Dollar higher and precious metals sharply lower. June Gold rejected resistance at the 890 level yesterday and in early trading, which can be seen as bearish in the near term. Prices may have to cross this technical threshold before the technical bias favors the bull camp. Momentum is showing bearish divergence from the RSI indicator, suggesting the market may have a difficult time gaining upward traction. Support comes in at 872.00, 866.40 and 860.10, while resistance can be found at 883.90, 890.20 and 895.80.

Corn – Corn prices are higher in overnight trading on higher energy prices. The rising cost of Crude Oil and improved outlook for gasoline demand has fueled speculation the demand for ethanol will rise. The delayed plantings in the U.S. have also supported prices, as only 27 percent of the U.S. crop has made its way into the ground versus 45 percent a year earlier. The low seedings figure may impact yields and trim output even more than previously thought. Nonetheless, longer-term risks to price remain, with the EU expected to increase production of Corn, Wheat and Barley and the Fed suddenly shifting to a hawkish policy. If the U.S. currency's exchange rate appreciates, it could impact export demand. The December Corn chart remains in an uptrend, but failure to establish new contract highs on bullish news may cause some traders to become disenchanted. Momentum is showing bullish divergence from the RSI, underscoring the fact that the market is still technically vulnerable. Support comes in at 612.25, 601.25 and 588.25, while resistance can be found at 636.25, 649.25 and 660.25.

Dollar Index – KC Fed President Hoenig's remarks about inflation and Fed policy helped drive the greenback's rally. His talking points reflect a similar outlook to many private sector economists, suggesting that inflation is not a temporary risk to the economy. Emerging giants China, Russia and India are building infrastructure at a rapid pace and people's food tastes in these nations has shifted to include more meat, which requires higher grain usage. At the same time, fuel costs are rising at the quickest pace in some time. This trend is not likely to shift and in all likelihood will only get stronger, leaving the Fed with only one option – strengthening the U.S. Dollar. Simply raising interest rates is not the answer, as it would only bolster the greenback to a certain degree. Current U.S. account deficits show that the economy is still consuming far more than it is producing, an issue which must be addressed if we are going to return to a “strong Dollar” policy, similar to that of the Clinton administration. The speech by Hoenig is a step in the right direction, but the Fed will need to take steps to shore up confidence in the battered currency. The June Dollar's close above resistance at 73.105 can be viewed in a positive light, but the market may need to rally beyond the relative high of 73.90 before stronger buying pressure steps in. Momentum continues to show bullish divergence from the RSI, suggesting the market may test the 73.90 high. Support comes in at 72.88, 72.59 and 72.28, while resistance can be found at 73.48, 73.79 and 74.08.

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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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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Not A Gold Start

Gold – Gold prices are sharply lower for the second consecutive session on falling Crude Oil prices and gains in the Dollar Index. Iran's foreign minister stated that talks with the West over its nuclear program took a much more positive tone, leading to the slide in Oil prices. Meanwhile, the ECB's policy statement did not have the extremely hawkish tone that most traders were looking for and was not particularly forward-leaning, which is unusual given the generally forthright nature of the bank. Most traders are still looking for further tightening by the end of the year, but now there is an air of uncertainty, especially after German industrial production showed another unexpected decline. In addition to the outside market keeping Gold prices depressed, technicians seem disappointed in the fact that the August contract was unable to advance beyond resistance at 947.70, the April 17th relative high close. Prices tumbled before the RSI gave an overbought reading and the indicator has fallen more sharply than the momentum indicator, which can be seen as positive over the mid-term. Support comes in at 924.70, 915.90 and 903.20, while resistance can be found at 946.20, 958.80 and 967.70.

Dollar Index – The September Dollar Index has bounced back from recent lows – which came dangerously close to testing all-time lows – on poor manufacturing data from Germany and a vague ECB policy statement. A slowdown in the Eurozone may help the Dollar over the long haul, especially if the ECB continues in its tightening policy, further stymieing growth. An extended recovery may be difficult to come by, though, as the market has largely lost faith in the Federal Reserve's ability to keep inflation in check. The bounce from recent lows is encouraging for the Dollar, but technicians would like to see rallies beyond recent highs at 74.75. Even then, traders may be skeptical of the Dollar's ability to hold after signaling several false breakouts. Momentum has struggled to stay above the zero line and is showing negative divergence from RSI, both of which can be seen as negative near-term. Support comes in at 72.49, 71.90 and 71.50, while resistance can be found at 73.48, 73.88 and 74.47.

Corn – Corn prices tumbled overnight on warmer weather moving into the flooded Midwest. Traders are expecting the warmer weather to aid in taking the flood levels down and possibly boosting yields. The flip side to this coin, though, is that roots may be exposed due to the flooding and susceptible to heat stress if the hot weather persists. To put it simply, farmers are hoping for warmer than usual, but not extremely hot weather. It will take some time to sort out exactly how much crop was damaged in recent flooding, making the next couple of weeks prone to extreme volatility. The December contract finds itself in a vulnerable position technically, with the market trading dangerously close to support at 735. The sharp run-up to current levels leaves the market with little support until 655.50. On a positive note, the market has recovered from overbought levels and we are still within shouting distance of highs. Support comes in at 756.25, 725.50 and 704.00, while resistance can be found at 808.50, 830.00 and 860.75.

Rob Kurzatkowski, Commodity Analyst

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Commodities Pop on Dollar Drop

Gold – Precious metals prices continue to march forward due to uncertainty in equities and a new record low in the Dollar. Gold has had a perfect storm of bullish developments recently – equity prices continue to plummet, energy prices are near all-time highs, tensions remain high in the Middle East and the greenback has not been able to mount any sort of comeback. The Fannie Mae and Freddie Mac bailouts have caused the Fed to react by increasing the money supply, which hurts the U.S. currency's chance of a recovery and lessens the chances of inflation subsiding. As traders begin to flock to safe haven investments, interest in Gold ETFs has continued to climb, which, in turn, has led to higher physical demand for the yellow metal. August Gold was able to close above resistance at 964.30, opening the door for a possible run at contract highs. Despite a sharp market rally and otherwise bullish technicals, momentum is beginning to lag behind prices and RSI, hinting that some consolidation may be on the way. The RSI indicator is now overbought, also hinting that this recent rally may begin to cool a bit in the near term. Support comes in at 959.80, 945.90 and 937.60, while resistance can be found at 982.00, 990.30 and 1004.20.

Corn – December Corn futures jumped almost 8 cents in overnight trading on concerns that yields may fall below expected levels. The flooding that parts of the Midwest experienced last month may have slowed pollination and, as a result, reduced crop yields. After falling six of the past seven trading sessions, the market has been looking for some sort of bullish news, but the enthusiasm may be short-lived, as warm temperatures and ample rains are forecast for the next several weeks. Also, 64 percent of Corn was in good or excellent condition as of July 13th, identical to the same period last year, and two percent higher than a week ago. December Corn closed below the 50-day moving average yesterday, suggesting that the long-term trend in prices may be shifting lower. The chart suggests that the market may not run into ample support until it falls to the 640-650 area, and momentum continues to slide despite the bounce overnight. The RSI indicator is oversold at the moment, which could lead to some short covering, as the market probes for a near-term bottom. Support comes in at 676, 669.75 and 696.50, while resistance can be found at 692.50, 702.75 and 709.

Rob Kurzatkowski, Commodity Analyst