Gold: After trading at 5 ½ week highs and moving above the key $690 level yesterday, profit-taking selling has emerged in early Gold trade this morning, with weakness in European and Asian stock markets and a stronger U.S. Dollar index giving traders a reason to lighten up on long positions. Currently, December Gold is trading at $688.90, down $2.60

British Pound: Consumer confidence levels fell to 4-month lows this morning, as the Nationwide Building Society’s index of sentiment fell to a reading of 94 – its lowest level since April. The spending index bottomed out for the year, dropping 7 points to a reading of 79. This sent September British Pound futures lower, as traders believe the Bank of England will keep interest rates steady tomorrow. In early trade, September British Pound futures are trading at 2.0102, down 0.0039.

S&P 500 futures: September e-mini S&P 500 futures are giving back most of yesterday’s gains in early trade this morning, as traders fear recent upheaval in the credit markets will hurt earnings in the 3rd quarter. Also hurting stock futures was the forecast from the Organization for Economic Cooperation and Development lowering its 2007 growth estimate for the U.S. to 1.9%, down 0.2% from the previous forecast. In early trade, September e-mini S&P 500 futures were trading at 1479.50, down 10.00.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, September 5, 2007
(All times in U.S. Central Time)
U.S.
9:00 AM: Pending Home Sales for July
1:00 PM: Fed Beige Book

Ten-year Note futures continue to climb, with cash yields falling to 5-month lows today in the wake of another weak U.S. housing figure and concerns that August employment data will be weaker than anticipated. The National Association of Realtors reported that pending home resales fell by 12.2% to 89.9, far more severe than the pre-report estimate of a 2.5% decline. ADP Employer Services came out with its estimate for private sector jobs in August this morning, stating that only 38,000 jobs were created last month, as layoffs in the financial services sector – specifically the mortgage industry – hurt the employment picture. Analysts are looking forward to Friday’s Non-farm Payrolls report with renewed interest, as a soft number may bolster the belief that the Fed will cut rates at its September 18th meeting. Current expectations are for August payrolls to increase by 110,000 jobs and the unemployment rate to remain steady at 4.6%. 110-000 is seen as the next resistance point for December 10-year Notes, with support found at 108-245. December 10-year Notes closed at 109-230, up 0-215.

Copper futures ended the session on a down note, falling to 1-week lows, as middling U.S. housing figures overshadowed a drawdown in Copper stocks. Pending home resales fell to their lowest level since September 2001, drawing concerns that U.S. economic growth will slow – a negative for base metals. Today’s sell-off overshadowed a 2,625 metric ton drawdown at LME warehouses and a weak U.S. Dollar against the Euro. Technical traders noted that prices closed below the 20-day moving average, which may have contributed to momentum-based selling this morning. 320.00 is seen as support for December Copper, with resistance found at 338.80. December Copper closed at 326.30, down 4.30.

Mike Zarembski, Senior Commodity Analyst

Many traders in the precious metals sector were caught off guard over the past few weeks, as the expected “flight-to-quality” buying did not materialize when world stock markets posted steep sell-offs in the wake of recent credit crunches. In fact, Gold prices fell as large investors and speculators unloaded their positions to meet margin calls or to get “liquid” during the height of the stock sell-offs. This week, however, Gold has started to shine, as prices hit 6-week highs in Asia overnight. Strong physical demand is still seen out of India, and European Central Bank selling has been lighter than expected so far this month. Expectations that the Federal Reserve will cut rates at the September 18th meeting may also be a factor in the recent bullish interest for Gold, as any signs that the Fed has shifted its focus from controlling inflation could hurt the U.S. Dollar and therefore help support Gold prices. With the $700 level coming into view for the December futures contract, it might be a tempting target for Gold bulls. And if short-covering buy-stops lie ahead, this could provide further fuel to keep Gold prices moving higher.

Looking at the daily chart for December Gold, we notice prices holding well above the major moving averages. Momentum as measured by the 14-day RSI has moved into overbought territory, however, with a current reading of 75.96. The July 24th highs of $701.00 appear to be the next resistance point for December Gold, with current support found at this week’s lows of $680.10. In early trade, December Gold is trading at $695.10, up $4.40.

Mike Zarembski, Senior Commodity Analyst

Gold futures surged past the $700 level in the most active December contract this morning, as commodity fund buying, short-covering, and a weaker U.S. Dollar all supported prices on the day. Technical traders noted prices accelerating to the upside once the December contract moved above the recent highs of $701.00. Concerns that the Federal Reserve will lower interest rates at its September 18th meeting was deemed supportive to Gold futures, as lower rates would be a negative for the Greenback, making Gold more attractive to non-Dollar buyers. In addition, any signs that the Fed is moving away from its focus on keeping inflation in check would only add to Gold’s luster as an investment. The May 7th highs of $713.50 are now seen as the next major resistance point for December Gold, with support now found at $701.00. December Gold closed at $704.60, up $13.90.

After hitting a recent high of 112-13 in the December contract, Treasury Bond futures succumbed to a bout of profit-taking selling, as traders begin to square positions ahead of the August Non-farm Payrolls report due at 7:30 AM Chicago time Friday. Current estimates call for a gain of 112,000 jobs in August, according to a poll conducted by the Dow Jones Newswire – this is up slightly from the 92,000 jobs gain in July. The unemployment rate is expected to remain steady at 4.6%. This report is especially important given the recent expectations that the Fed will be forced to lower interest rates due to the recent fallout in the credit markets tied to the subprime loan situation. Should the employment picture appear better than expected, it may lessen the chances of a Fed rate cut in September. 112-24 is seen as the next resistance point for December Bonds, with support found at 111-05. December Treasury Bonds closed at 112-02, down 0-05.

Mike Zarembski, Senior Commodity Analyst

Stock Index Futures: September e-mini S&P 500 futures are lower in early morning trade, as traders gear up for this morning’s release of the August U.S. jobs report. Job growth is expected to show a slight rise from July, despite the recent U.S. housing slump and credit crunch. The majority of estimates range from between 90,000 and 110,000 new jobs created in August versus 92,000 in July. Meanwhile, the unemployment rate is expected to remain at 4.6%. The Labor Department will release the data at 7:30 AM Chicago time. In early trade, September e-mini S&P 500 futures are trading at 1474.25, down 5.25.

Treasury Futures: Financial traders also await this morning’s NFP report. A weaker-than-expected increase in jobs last month just might be the final key to unlock the Federal Reserve’s tightening bias and convince Fed Governors that the markets are correct in their assessment that a rate cut is necessary at the September 18th meeting. In quiet early morning trade, the December Ten-year Note is trading at 109-180, up 0-020, and the December Two-year Note is trading at 103-0700, down 0-0175.

Gold: The yellow metal rose to highs not seen since mid-2006, as investors and traders are now starting to return to Gold as a “safe haven” investment in the wake of increased volatility in the stock and bond markets due to turmoil in the credit markets. In addition, the belief that the Fed will cut interest rates by at least 25 basis points this month could hurt the U.S. Dollar, but would benefit Gold. In early trade, December Gold is trading at $706.60, up $2.00.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, September 7, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Non-farm Payrolls for August (Consensus 110,000)
7:30 AM: Unemployment Rate for August (Consensus 4.6%)
7:30 AM: Average Hourly Earnings for August (Consensus 0.3%)
9:00 AM: Wholesale Inventories for July (Consensus 0.5%)

What a way to end a holiday-shortened week, as traders brush off the “unofficial” end of summer and face a shockingly weak Non-farm Payrolls report for August. This morning the Labor Department reported that payrolls for August fell by 4,000 jobs versus pre-report expectations of a rise of between 90,000 and 110,000 jobs. As if that were not enough to send shivers through Fed officials, job creation figures for July were also revised down from the 92,000 originally reported to only 68,000, and June payrolls were lowered from 126,000 jobs to just 69,000. Once again, manufacturing jobs suffered, falling by 46,000 jobs last month – the sharpest drop in over 4 years. The slump in the U.S. housing market is starting to take its toll on the labor market as well, with the construction sector shedding 22,000 jobs. Not even government could help the labor market, as public sector jobs fell by 28,000. Service sector hiring was one of the few bright spots in today’s numbers, posting a fairly modest 60,000 jobs gain. The unemployment rate held steady at 4.6%, and average hourly earnings met expectations, rising by 0.3%.

Short-term interest rate futures were the biggest gainers on today’s news, with December Fed Funds futures pricing in a 4.25% Fed Funds rate by end of the year and a 50% chance that rates could be cut to 4%. The Fed Funds rate currently stands at 5.25%. The long end of the yield curve was also in a bullish mode, with December 30-year Bonds moving up by over one full point at the day’s peak. Stock indexes were down sharply across the board, with the Russell 2000 and S&P 400 mid-cap futures among the hardest hit. The U.S. Dollar plunged as traders continued to price in further interest rate cuts by the Fed, especially against the Japanese Yen and the Swiss Franc. So called “carry trades” were being unwound, with the Aussie/Yen and Kiwi/Yen combos bearing the brunt of the punishment. The metals complex had mixed messages for traders, with the precious metals – especially Gold – performing well, as investors move some assets over as a hedge against the volatile stock and bond market activity seen during the past few weeks. Meanwhile, base metals were weaker, with Copper falling moderately on concerns that a slowdown in the U.S. economy may turn into a recession that would adversely affect industrial activity. Today’s figures put an even bigger spotlight on the Fed’s next meeting scheduled for September 18th, as traders and economists look at not only what the Fed will do with interest rates, but how it views the overall health of the U.S. economy given recent economic data and events.

Mike Zarembski, Senior Commodity Analyst

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

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

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

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

Mike Zarembski, Senior Commodity Analyst

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

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

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

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

Mike Zarembski, Senior Commodity Analyst

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

Gold: Continued U.S. Dollar weakness and near-record high Oil prices have traders and investors flocking to the Gold market, with spot Gold hitting 27-year highs in Asia this morning. The run-up is causing fresh buying in Gold futures, with the December contract trading as high as $747.10 in early morning trade. With traders still looking for further interest rate cuts by the Federal Reserve this year, speculation that inflation will accelerate is helping the cause of Gold bulls. Currently, December Gold is trading at $743.60, up $3.70.

Platinum: October Platinum soared to nearly 2-month highs during trade in Tokyo, as a weak U.S. Dollar makes Platinum more affordable for non-Dollar buyers. Johnson Matthey Plc. reported that world Platinum demand has risen by 1.2% so far this year, with Europe accounting for just over 1/3 of global demand. In early trade, October Platinum is trading at $1338.50, up $9.90.

Orange Juice: November Orange Juice futures rallied to highs not seen since mid-August, as traders begin to cover short positions before next month’s first official estimate of Florida orange production. Low FCOJ stocks and a declining tree count in Florida are also supportive to prices. However, slack retail demand is keeping a lid on further gains. In early trade, November Orange Juice is trading at 126.20, down 0.20.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, September 21, 2007
(All times in U.S. Central Time)

U.S.
None

Canada
7:30 AM: Retail Sales for July (MoM) (consensus 0.0%)

Sugar: Sugar futures are moderately higher this morning as speculation that Russia will raise import duties this week is sparking a bid on raw Sugar futures. This news may be enough for October Sugar futures to finally move above stiff resistance at 10 cents per pound before the October contract expires on Friday. In early trade, October Sugar is trading at 9.92, up 0.04.

Precious Metals: Both Gold and Silver futures are trading sharply lower this morning, as a moderate rally in the U.S. Dollar and lower Oil prices have traders taking profits in the metals sector. In the past six weeks, December Gold has gained nearly $100 per ounce, so a moderate correction is not surprising. In early trade, December Gold is trading at $730.40, down $8.90, and December Silver is trading at $13.395, down $0.245.

Orange Juice: November FCOJ futures continue their climb, hitting six-week highs in early trade as speculative buying and weather concerns have supported prices. Traders are watching two tropical disturbances – one near the Windward Islands, the other near the Cape Verde Islands – for possible tropical storms formation. Orange juice stock in cold storage fell to 760.37 million pounds in August, down from 888.84 million pounds last year. In early trade, November Orange Juice was trading at 132.50, up 1.75.

Mike Zarembski, Senior Commodity Analyst

Gold: Lead month December Gold looks poised to end the week on a high note, with a weaker U.S. Dollar, near record high Oil prices, and concerns that continued weakness in the U.S. housing market will force the Fed to continue to cut interest rates all supportive factors for the yellow metal. Gold futures are trading at their highest levels since 1980 on the monthly continuous charts. In early trade, December Gold is trading at $745.00, up $5.10 per ounce.

Platinum: January Platinum futures continue to climb, moving closer to the $1400 per ounce level, as traders are looking for increased purchases by investors as well as automakers in the coming months. A London traded Platinum ETF continues to gain in popularity, with investment up 16% this month according to the issuer. Today is the first notice day for the October Platinum contract, so spread trade is expected to be active as traders switch their positions over to the January contract. In early trade, January Platinum is trading at $1383.00, up $10.00.

Copper: A potential strike by workers for Southern Copper Corp. in Peru are keeping Copper prices buoyant going into the final trading day of the third quarter. The strike scheduled to begin on October 2nd, is expected to shut production from the fifth largest Copper producer in the world. The strike comes at a time when world Copper stocks are tight, with exchange stocks at the three major Copper exchanges in London, Shanghai, and New York totaling less than 5 days of global consumption. In early trade, December Copper is trading at 368.10, up 3.30.

Mike Zarembski Senior Commodity Analyst

Copper: A potential strike at Southern Copper Corp. in Peru has sparked a rally in Copper futures this morning, as traders fear a slowdown of production if workers do indeed walk off the job tomorrow. Copper demand continues to outpace production, as demand from China – the world’s largest consumer of the red metal – continues unabated. The London Metal Exchange reported Copper stocks fell by 100 metric tons to stand at 130,675 mt. In early trade, December Copper is trading at 366.40, up 2.40.

Coffee: Traders awoke to the smell of a Coffee rally to start the quarter, as both London and New York Coffee futures were trading sharply higher on fears of potential crop damage in Brazil due to dry weather. Recent weather forecasts have taken rain out of the picture for the main Coffee-growing regions of Brazil this week. In early trade, December Arabica Coffee is trading at 134.55, up 5.90.

Japanese Yen: December Yen futures are on the defensive this morning, as higher world stock indexes over the past several sessions are providing confidence for traders to re-establish Yen carry trades. The Yen is especially weak against the New Zealand Dollar, as the wide interest rate differentials make this pair a favorite for carry trade speculators. In early trade, December Yen futures are trading at 0.8730, down 0.0067.

Mike Zarembski, Senior Commodity Analyst

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

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

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

Mike Zarembski, Senior Commodity Analyst

Cocoa futures were pummeled this morning, as overall weakness in the commodity sector in the wake of a rebound in the U.S. Dollar inspired speculative liquidation in the Cocoa market. A weaker British Pound against the U.S Dollar led to arbitrage selling in the New York market to start the session. Trade and origin selling followed, moving the market through support points at $2000 and $1980, and triggering speculative sell-stops along the way. Buyers were scarce as prices fell, with major support at the 100-day moving average of $1948 giving way to spark fresh short-term momentum-based selling. Buyers were found just above the $1900 area in the December contract, which put an end to the day’s losses. $1900 is seen as psychological support for December Cocoa, with resistance found at $1948. December Cocoa closed at $1917, down $113.

After hitting 27-year highs yesterday, Gold futures were ripe for a correction – and correct they did. Gold prices fell over $20 during the worst stretches of the session, as a commodity-wide sell-off hit Gold and the precious metals sector particularly hard. A rebound in world equity markets and a recovery in the U.S. Dollar made Gold investments less attractive to non-U.S. buyers. Moderate sell-stops were seen being triggered below support at $740.00. Despite the heavy selling seen today, technical damage was minimal, with the widely watched 20-day moving average holding and the long–term uptrend remaining intact. Continued speculation that the U.S. Federal Reserve is in an easing mode is fanning fears of rising inflation, which if uncovered in economic data going forward would be supportive to the precious metals sector, and Gold in particular. The next support point for December Gold is seen at $727.00, with resistance found at $747.00. December Gold closed at $736.30, down $17.80.

Mike Zarembski, Senior Commodity Analyst

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

Ten-year Notes: Interest rate traders are focused on tomorrow’s September non-farm payrolls report, but will have to digest what is expected to be a weak U.S. factory orders report first. The Commerce Department is expected to announce that factory orders in August fell 2.8%, according to a Bloomberg survey of economists. This compares to a 3.7% rise in July. In early trade, December Ten-year Note futures are trading at 109-105, down 0-045.

Copper: After a run to contract highs yesterday, December Copper is giving back some of its recent gains this morning, as officials of Southern Copper Corp. agreed to meet with workers at its Peruvian mines to try to settle the strike that started on October 2nd. Traders should expect trading to remain light in coming days, with China – the world’s largest consumer of Copper – on a weeklong holiday. In early trade, December Copper is trading at 373.20, down 2.15.

Euro Currency: December Euro Currency futures are little changed, as traders await an announcement by the European Central Bank on interest rates. The ECB is expected to leave rates steady at 4%, dashing hopes for a 25 basis point increase due to credit market concerns. In early trade, December Euro Currency futures are trading at 1.4127, up 0.001.

Mike Zarembski, Senior Commodity Analyst

Energy futures ended the session sharply higher – led by Gasoline and Heating Oil – as traders reacted to yesterday’s EIA energy stocks report. Both Gasoline and Distillate stocks declined last week, contrary to expectations of storage builds in both categories. This set the stage for sharply higher prices for energy products, as U.S. inventories remain tight going into the winter. Energy traders are also watching the weather, as a large thunderstorm system moving towards the Bahamas has the potential to become a tropical storm by early next week, and some forecasters expect the system to eventually move into the U.S. Gulf Coast area. Today’s rally in Crude Oil kept prices above the 20-day moving average by the close, which may spark further momentum buying. Support for November Crude Oil is seen at $78.44, with resistance found at $82.02. Support for November Gasoline is seen at 1.9450, with resistance seen at $2.0837. Support for November Heating Oil is seen at $2.1452, with resistance seen at $2.2502. November Crude Oil closed at $81.50, up $1.56, November Gasoline closed at $2.0522, $0.0563, and November Heating Oil closed at $2.2313, up $0.0526.

Gold bulls started flexing their muscles this morning, as an attempt by bears to move the market below $730 was met by aggressive commodity fund buying. In addition, a weaker U.S. Dollar and a sharp recovery in the energy sector were deemed supportive to the Gold market. This morning’s weaker-than-expected U.S. factory orders report for August gave further credence to the belief that the Federal Reserve will lower interest rates once again before the end of the year. Support for December Gold is seen at $725.00, with resistance found at $747.10. December Gold closed at $743.80, up $8.10.

Mike Zarembski, Senior Commodity Analyst

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

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

Mike Zarembski, Senior Commodity Analyst

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

Copper: Copper futures are bucking negative news this morning to move higher in early trade. Workers for Southern Copper Corp. ended their weeklong strike after agreeing to let the government set wages. In addition, LME Copper stocks rose by 1,775 metric tons this morning. However, fund buyers took advantage of an earlier price dip to purchase Copper. 3-month Lead futures made a new all-time high of $3,860 per ton this morning. In early trade, December Copper is trading at 366.75, up 4.35.

Two-year Notes: Yields on Two-year Notes continue to rise, as the risk premium for buying Treasuries wanes. Also affecting yields was the reaction to the release of the Fed minutes from its September 18th meeting, which gave no indication that interests rates will be cut again after the 50 basis point reductions last month. In early trade, December Two-year Note futures were trading at 103-0600, down 0-0100.

Japanese Yen: December Yen futures continue to hover near 8-week lows, as traders re-establish so-called “carry trades.” Risk appetites appear to have increased, as traders look for higher-yielding assets in which to invest their borrowed funds. However, Yen futures continue to hover just above the 100-day moving average at 0.8556, which should act as support. In early trade, December Japanese Yen futures were trading at 0.8584, down 0.0020.

Mike Zarembski, Senior Commodity Analyst

Silver – Silver futures are higher in early trading, sparked by weakness in the greenback. Precious metals have gotten a lift recently with petroleum prices skyrocketing and inflation fears mounting. Silver, as a dual-use metal, has also benefited from strengthening industrial metal prices. Friday's PPI number was mixed for precious metals traders – the overall figure was inflationary, but core PPI was tamer than forecast. Traders should have a better overview of inflation following Wednesday's CPI data. Crude Oil is trading at record levels once again this morning and if prices do not reverse course, the likelihood of higher inflation spilling over into the economy would likely increase. December Silver is trading above resistance of $14 this morning, which could lead to further technical buying. Momentum is beginning to show slight divergence from RSI, which could temper some enthusiasm for the metal, especially with resistance at 14.200 coming into the picture. Momentum remains strong overall, coming in at +1.210, but the RSI comes in overbought at 75.5 percent. A solid close above critical resistance at 14.200 could send prices soaring to levels not seen in quite some time. Support can be found at 13.600 and 13.250, and, in addition to 14.200, resistance comes in at contract highs of 14.565.

Crude Oil – November Crude Oil is trading just below $85 after setting a record close on Friday. While bullish inventory numbers aided prices last week, political tensions are sending prices jumping this morning. The Turkish parliament is voting this week on whether to attack Kurdish bases within Iraq to counter their domestic Kurdish insurgency. A larger-scale military conflict between Iraq and Turkey would interfere with petroleum production and exports, and would threaten to destabilize the region. Given the tendency for Crude traders to immediately pump in a “war premium” in response to any geopolitical tension, prices may skyrocket if and when the first shots are fired. November Crude is currently in uncharted territory, giving traders a difficult time locating resistance areas. Friday's close was a breakout above previous highs of 83.42, which would be seen as support with a few solid closes above this area. Momentum is beginning to lag a bit behind the RSI, which could lead to some consolidation. Support comes in at 82.34 and 79.00, while the market may find some resistance at the 85.00 and 87.00 areas.

Wheat – Wheat traders were disappointed by Friday's USDA data, but the underlying fundamentals remain strong. Traders may want to keep in mind is that this was not really a Wheat report – the main focus was on Corn and Soybeans. With Corn finally finding some solid footing, traders began liquidating the long Wheat / short Corn spread, which sent the market into a tailspin. Overall, fundamentals remain strong, with world carryout expected to be at its lowest levels since 1948, cuts to the U.S., European and Australian Wheat crops, and increased exports offsetting lower feed use. Technically, the picture for December Wheat is not as rosy. The market is very close to breaching the key 830 area, which could trigger a substantial sell-off. Momentum remained positive despite closing limit down to come in at +11.50, and the RSI is neutral at 38 percent. In addition to 830, support can be found at 815 and 760, while resistance comes in at 895 and 911.25.

Rob Kurzatkowski, Commodity Analyst

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

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

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

December Gold climbed as high as 769 today before retreating to the 759 level in the afternoon. Since breaking through resistance at the 720 level in early September, Gold has been on a major uptrend, soaring more than 5% in less than a month. This rapid pace has put Gold above both its 15-and 25-day moving averages.

On the economic front, core CPI came in right at expectations. With Gold usually viewed as a hedge against inflation, today's pullback may be the result of some profit-taking in long positions. Gold hasn’t seen prices like this since last May when it flirted with the 800 mark – the next level of major resistance which is still miles away at this point. For now, this is very much a momentum trader’s market.

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

Gold finished today in the red, with the December Comex contract shedding more than 10 points after setting highs last Friday at 774. Despite today's setback, Gold is on a serious uptrend over the last few weeks. Both the 15- and 25-day moving averages are still below today’s close, though the 15-day average was touched at 752 this afternoon.

Several fundamental factors also may have had a hand in today’s sell-off. Long Crude Oil traders are in profit-taking mode, pushing prices down to 87.56. Though not low by any means, this is nevertheless a bit of a retracement from the lofty 90 level. The Dollar Index also had a positive day, with the December contract increasing to 78. With more bullish interest in the Dollar and Crude pulling back a bit, Gold traders may have found a reason to “flee from safety” today.

Mike Tosaw, Director of Education

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

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

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

Rob Kurzatkowski, Commodity Analyst

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

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

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

Rob Kurzatkowski, Commodity Analyst

Crude Oil – Today figures to be a volatile day for the Crude Oil market, as traders await weekly petroleum inventories figures and the Fed rate decision. Crude inventories are expected to show a weekly gain of 600,000 barrels, but Distillates and Gasoline are expected to show a draw of 1.1 million and 300,000 barrels, respectively. Two conflicting reports by tanker tracking companies regarding OPEC making good on its promise to increase exports by half a million barrels a day starting November 1 has led to some confusion among traders. The Fed has stuck with its forecast of moderate growth next year, which is favorable for petrole