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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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Is Gold a Victim of Its Own Success?

In the past, investors looked to Gold as a safe haven investment, especially in times of financial and economic crisis. Gold is particularly valued for its liquidity and universal acceptance as a store of value. In light of recent dire news concerning the U.S. subprime loan situation and weakness in the U.S. stock market, it would stand to reason, then, that investors would rush back into Gold until the dust settles. However, Gold prices have been falling in recent days, as large speculators are using the liquidity it offers as a means of raising funds to meet obligations for losses in other sectors of the market. In addition, many analysts look for European central banks to continue to sell Gold, with the possibility of hitting the 500-ton ceiling by September. The Central Bank Gold Agreement runs from September to September, and allows sales of no more than 500 tons per year. Traders estimate that just over 100 tons of Gold may still come on the market from central banks by the end of September, and this is acting as a cap on recent price rallies.

Looking at the daily chart for December Gold, we notice prices continuing to trade under both the 20- and 100-day moving averages. The 14-day RSI has turned lower, with a reading of 40.73. Yesterday’s highs at $680.90 look to be near-term resistance for December Gold, with a close above this level setting up a test of $691.50. Support is found at last week’s lows of $665.30. In early trade, December Gold is trading at $674.00, down $5.30.

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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

Platinum’s Predicament!

Platinum traders have been on a wild ride of late, with prices hitting a 2-month high on July 20th at $1349.80, followed by a steep price decline the following week. That drop culminated in a more than $40 decline on July 27th, when Nissan Motor Company announced its new technology for catalytic converters that will use half the amount of Platinum, Palladium, and Rhodium currently necessary. This breakthrough could sharply curtail demand for Platinum, especially if other automakers are able to adopt the technology. Meanwhile, workers at Impala Platinum Holdings Ltd. of South Africa have averted a strike, accepting the company’s latest offer for higher wages. Since Impala is the second largest producer of Platinum in the world, the end of the strike threat is also deemed bearish for Platinum. The most recent Commitment of Traders report shows both large and small speculators holding net-long positions in platinum currently totaling over 14,000 ounces. However, the report only covers the period through July 24th, three days before the $40-plus price drop. Traders will be carefully watching tomorrow’s COT report to see how many of these long positions were liquidated in the recent sell-off to gauge the extent of possible further speculative selling should recent support fail.

Looking at the daily chart for October Platinum, we notice how quickly the nearly 3-week rally that started in late June was wiped out once the Nissan news came out. Though the market has recovered somewhat from the recent lows at $1,271, prices still remain below several key moving averages, especially the 100-day MA. The 14-day RSI remains weak, with a reading of 37.62. Bulls would need to see a weekly close above the 100-day moving average currently at $1300.30 to regain control of the market. Bears will be looking for a weekly close below the lows of $1271.00 to keep the momentum in their favor. In early trade, October Platinum is trading at $1296.00, up $5.10.

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All Eyes on Today’s Payrolls Report!

Treasury futures: September 10-year Note futures are down slightly in early trade this morning, as traders gear up for the Non-farm payroll figures for July. Estimates are for payrolls to have increased moderately with approximately 135,000 new jobs created. The unemployment rate should continue to remain steady at 4.5%, and average hourly earnings are expected to increase by 0.3%. In early trade, September 10-year Notes are trading at 107-135, down 0-015.

Stock index futures: Can we end the week on a high note? That is the question on stock index traders’ minds this morning after a wild trading week. The focus today will initially be on this morning’s jobs report, as steady job growth and moderate wage inflation are the expected outcome of today’s Labor Department report. However, concerns about the subprime loan situation will continue to garner attention. In early trade this morning, September e-mini S&P 500 futures are trading at 1479.50, down 2.25. Volume is a moderate 54,825 contracts as of 6:27 AM Chicago time.

Gold: December Gold futures look to end the week in positive territory, as moderate U.S. Dollar weakness and a continuing strike threat at three of South Africa’s biggest Gold producers is underpinning prices this morning. However, the China Gold Association announced yesterday that China’s Gold production was up 15% in the first half of 2007, producing 122.5 metric tons. In early trade, December Gold is trading at $677.00, up $0.40.

Economic reports out today:

(All times are U.S. Central Time)

7:30 AM: July Non-farm payrolls (Consensus +135K)
7:30 AM: July Unemployment rate (Consensus 4.5%)
7:30 AM: July Average hourly earnings (Consensus +0.3%)
9:00AM: July ISM Non-Manufacturing Index (Consensus 59.5)

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Copper Tumbles to 1-Month Lows!

Weaker-than-expected U.S. payrolls for July combined with higher exchange stocks to drive Copper futures to 1-month lows this morning. September Copper started the session in the red, as the London Metal Exchange (LME) reported exchange inventories rose by 2,225 metric tons to stand at 105,650 mt – the highest level since July 5th. In addition, Copper stock at the Shanghai Futures Exchange rose by 1,474 mt this week to stand at 91,563 metric tons. Further weakness was seen in the red metal after the U.S. Labor Department reported that Non-farm payrolls for July rose by a lower-than-expected 92,000 jobs and the unemployment rate rose to 4.6%. Speculative liquidation accelerated once the September contract fell below key support at 350.00. Sell-stops were triggered and prices fell to a low of 347.00, very near the 50-day moving average of 347.55, before light buying was found. Copper was not the only member of the base metals complex to sell off today, with Aluminum futures falling over 3% and Zinc dropping nearly 4% on the LME. The 100-day moving average at 343.00 is now the next support point for September Copper, with resistance at the 20-day moving average of $359.30. September Copper closed at 347.90, down 9.40.

Soybean futures ended the week on a high note, as weather forecasts calling for hot, dry weather in the key growing states of Illinois and Iowa have traders concerned about the condition of the crop. August is the most important month for bean development, with ample moisture key for yields. Traders largely shook off a crop estimate from private forecaster Informa calling for U.S. Soybean production of 2.700 billion bushels, up from the most recent USDA estimate of 2.625 billion bushels. A yield estimate of 42.7 bushels an acre is also 1.2 bushels higher than recent USDA estimates. The next USDA crop production and supply/demand report is due on Friday, August 10th at 7:30 AM Chicago time. The 20-day moving average of $8.75 ½ is seen as the next resistance point for November Soybeans, with support found at the recent lows of $8.33 ¼. November Soybeans closed at $8.60 ½, up 6 cents.

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Crude and Copper Crumble; Ten Year’s Tank!

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

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

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

Economic Data Scheduled for Wednesday, August 8, 2007

(All times are U.S. Central Time)

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


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No Soft Landing for Cotton Today!

December Cotton fell to lows not seen since June 27th, as weaker-than-expected USDA export estimates overshadowed a cut in U.S. production. The USDA cut its estimate for the U.S. Cotton crop to 17.35 million 480-pound bales, down from 17.5 million bales in the July report. However, the USDA cut its estimate for U.S. Cotton exports by 300,000 bales, which was seen as a sign of weaker world demand, as well as the rise in world ending stocks to 51.52 million metric tons, up from 50.78 million in July. Today's sell-off sent prices through the 50-day moving average, with triggered sell-stops below this level. 6007 is seen as the next support point for December Cotton, with resistance found at 6235. December Cotton closed at 6124, down 118.

Gold and Silver futures had a wild ride today, with prices initially in the red as continued fund liquidation roiled the commodity markets. However, the fresh influx of funds to the financial system throughout the world by Central Banks and some moderate flight-to-safety buying by speculators caused a sharp rally in the two major precious metals. A weaker U.S. Dollar versus the Euro also was supportive to the metals complex. Today's rally in Gold sent prices back above both the 20- and 50-day moving averages, which triggered fresh momentum buying. Silver futures found some support after hitting 1-month lows $12.605, but prices remained below the widely watched moving averages at the close of the day session. Support for December Gold is now seen at $665.30, with resistance found at $688.10. Support for September Silver is seen at $12.635, with resistance at $13.440. December Gold closed at $681.90, up $9.10, and September Silver closed at $12.870, up $0.165.

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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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Are Energy Markets Starting to Heat Up?

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

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

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

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, August 15, 2007

(All times in U.S. Central Time)

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

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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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Not So Calm Before the Storm?

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

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

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

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Monday, August 20, 2007

(All times in U.S. Central Time)

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


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Can Copper’s Recovery Continue?

Copper futures were sharply lower last week, with traders in heavy liquidation mode due to continuing credit concerns and sharply lower world stock indexes. However, there are signs that the Copper sell-off may be through for the near-term. Prices are moderately higher this morning, as a strike at Grupo Mexico SAB’s San Martin mine continues after a Mexican court refused to issue a halt to the work stoppage. In addition, a rebound in other members of the base metals group this morning – mostly on bargain hunting buying – is also supporting Copper prices, despite a moderate rise in LME Copper stocks, which increased by 475 tons this morning to stand at 121,025 mt. Nevertheless, Copper stocks are still down nearly 35% for the year. Should the recent liquidity crunch come to an end and calm return to the financial markets, Copper futures have the potential to recover recent losses, as traders dismiss the panic selling that has gripped the commodity markets and once again focus on the fundamentals.

Looking at the daily chart for December Copper, we notice the sharp rebound in prices from Thursday’s lows at 304.70. Though still weak, the 14-day RSI has rebounded from oversold territory, with a reading of 32.90. After Thursday’s steep sell-off, the next resistance point remains well above current prices, with near-term resistance seen at Thursday’s highs of 332.00. Support comes in at the Thursday lows of 304.70. In early trade, December Copper is trading at 320.80, up 6.05.

Mike Zarembski, Senior Commodity Analyst


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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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Good as Gold!

Gold futures ended the month on a high note, climbing to highs not seen since August 10th, as traders reacted to both Federal Reserve Chairman Ben Bernanke’s speech, as well as President Bush’s plan to help out delinquent homeowners. Both pieces of news were seen as supportive to the Gold market, as traders became convinced that the Fed will lower rates this year and hopefully keep the economy buoyant. In addition, lower rates may hurt the Dollar, which would be further supportive for Gold prices. Traders noted fresh buying emerging once the December contract moved above the recent highs of $679.00. $688.10 is seen as the next resistance point for December Gold, with support found at $670.20. December Gold closed the month at $681.90, up $8.00.

Lean Hog futures were weak to close the month, despite hints that China may still need to import pork from the U.S. Today’s trade was quiet overall, as most of the focus was on position squaring ahead of the long Labor Day holiday. Spread trading was moderate, as traders position themselves ahead of the start of the “Goldman Roll.” Cash Hog markets were generally quiet, as packers have already obtained adequate supplies in light of meat-packing plants being closed on Monday. Support for October Hogs is seen at the August 16th lows at 65.67, with resistance found at 68.57. October Hogs closed at 66.82, down 1.02.

Mike Zarembski, Senior Commodity Analyst


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Gold Futures Eyeing $700!

Fears of higher inflation down the road have helped boost Gold futures this afternoon, as traders look for the Federal Reserve to focus less on fighting inflation and more on keeping the U.S. economy out of recession. In addition, a stronger U.S. stock market is also supporting Gold prices. Technical traders noted December Gold rose above the key 100-day moving average, which many traders use to determine if a market is bullish or bearish as a trigger for fresh buying by momentum traders. Buy stops were triggered above the recent highs of $688.10 and psychological resistance of $690.00. This morning's release of the ISM manufacturing index for July came in at 52.9, down from 53.8 in June but still above a reading of 50, which signals expansion. This was also deemed supportive to Gold futures, especially in light of the anticipated rate cuts by the Fed. The next resistance point for December Gold is seen at the July 26th highs of $695.50, with support found at $679.00. December Gold closed at $691.50, up $9.60.

Surging Wheat futures helped buoy the entire grain complex, with Soybean and Corn futures posting sharp gains to start the week. November Soybeans reached highs not seen since July 16th, closing above the $9.00 level for the first time in seven weeks. Coupled with the potential for declining U.S. Soybean crop estimates due to hot, dry weather in the southern Soybean growing regions in August, the limit-up move in Wheat futures is seen as a major factor in today's sector-wide price rise. December Corn rose to 1-week highs, moving above both the 20- and 50-day moving averages and sparking fresh commodity fund buying. However, prices closed well off the day's highs as this morning’s report on U.S. Corn export inspections for last week were below the previous week's totals. Corn export inspections totaled 35.634 million bushels for the week ending August 30th versus 36.514 million bushels the previous week. November Soybeans closed at $9.07 1/2, up 25 cents, and December Corn closed at $3.53 1/4, up 13 1/4 cents.

Mike Zarembski, Senior Futures Analyst


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Gold Can't Hold Above $690!

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

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Ten-year Yields Fall Below 4.5%

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

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Gold Going Its Own Way

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

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$700 No Match for Gold Bulls!

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

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Financial Markets Await This Morning’s NFP Report

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%)

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August Jobs Data Sends Shockwaves Through the Financial Markets!

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

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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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Oil Traders Await OPEC’s Decision on Production Quotas

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

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

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

Mike Zarembski, Senior Commodity Analyst

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

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

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

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

Mike Zarembski, Senior Commodity Analyst

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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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Traders Getting Juiced Up Over Metals

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%)


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Russian Tariffs May Sweeten Sugar Bulls’ Outlook

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


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Traders put their investment pedal to the metals

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

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Happy Fourth Quarter Everyone!

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

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Commodity Prices Tumble as Stocks Come Back in Vogue

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

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

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

Mike Zarembski, Senior Commodity Analyst

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Commodities Crack

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

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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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Factory Orders Peak Traders’ Interest Ahead of Tomorrow’s Payrolls Report

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

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Re-energized!

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

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Gas Glut

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

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

Mike Zarembski, Senior Commodity Analyst

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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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What Credit Crunch?

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

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Sterling Silver

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

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Golden Age

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

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

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

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Bears Get a Hint of Gold Fever

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.

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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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Gold Takes a Breather

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

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Treasury Safety Net

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Oil's Perfect Storm

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

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

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

Rob Kurzatkowski, Commodity Analyst

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FOMC Decision – Trick or Treat?

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Gold Sparkles

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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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Dollar Drops, Crude Pops

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Dollar Sinks as China Bails

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

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

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

Mike Tosaw, Director of Education

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Profit-Taking Tarnishes Gold

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Profit-Taking Continues to Take Its Toll

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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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Gold Fever Cools a Bit

After yesterday's 15+ point gain in the December Comex contract (GCZ7), Gold gave it back and then some with a loss of 25 points in today's session to close at around 789. The low on the day was 783 before buyers came in around noon to bring the close up to the higher level.

On the chart, we see that today’s close is almost even with the 25-day moving average, as buyers came in below this line. Gold remains below the 15-day MA, showing that we have a quick market to the downside based on the downward action on November 12th. The fast stochastic indicators are right around the 20 mark. If this turns out to be a short-term reversal forming, it has three supporting factors – stochastics, the 25-day MA, and a little bit of support left over from late October. If the market goes to the downside, the next level of support is around the 770 area and below that, 730.

In the news, both CPI and core CPI came in right at expectations, initial jobless claims came in above expectations at 339,000 (325,000 forecast), and Crude inventories rose by a surprising 2.8 million barrels.

Mike Tosaw, Director of Education

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Gold and Oil Take a Turn to the Upside

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

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

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

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

Mike Tosaw, Director of Education

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Stocks Jump on Strong Black Friday Sales

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Sour Crude

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

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

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

Rob Kurzatkowski, Commodity Analyst

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OPEC Leaves Production Unchanged

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Stocks Rally on Subprime Bailout Plan

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Fed Day

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Gold Goes Below $800

The February Comex Gold contract (GCG8) took a turn to the down side today with a 2% drop. The low of the day was at 797, but Gold had fought back to 802 by the time of this writing. Elsewhere, the Dollar Index gained some ground against the world's currencies, with a high of 76.75 and a close around 76.56.

On the Gold chart, we see short-term highs becoming lower and lower during the last three periods. This has been the case since the beginning of November. There seems to be a bit of consolidation going on, with the lows getting higher as well. In the short term, trade is becoming more and more range-bound, which may be a sign of a breakout to either side with traders getting ready to ride the momentum either way. If it is to the upside, the highest level of resistance is around the 850 level while the downside shows a lot more room before support. If this is a top, it could be a long way down.

Tomorrow, we look forward to CPI data.

Mike Tosaw, Director of Education

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Indecision Caps a Wild Week

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

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

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

Rob Kurzatkowski, Commodity Analyst

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New Year, Same Old Worries

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

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

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

Rob Kurzatkowski, Commodity Analyst

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And the Market Volatility Continues

Dow – The Dow almost let early gains slip away in yesterday’s trading session, but in the end managed to post a modest gain of almost 13 points. The afternoon plunge was led by disappointing auto sales figures for the month of December. The battered U.S. auto industry was hit hard by tighter lending standards and the rising price of gasoline. Stock traders have been gun shy over the past few trading sessions on worries that the rising cost of petroleum could further dampen the U.S. economic outlook and negate any positive impact that could result from the recent rate cuts. Today’s focus will shift to the labor market after the release of non-farm payrolls at 7:30 AM CST. The report is expected to show the labor market slowing and adding only 75,000 jobs in December, down from November’s 94,000 new jobs. The unemployment rate is forecast to rise to 4.8 percent and hourly earnings are expected to fall to 33.6 from 33.8. The tight labor market and rising cost of gasoline may curb American consumers’ appetites for non-necessities like electronics. Right now, the long- and short-term outlooks on the Dow chart give vastly different views. The spinning top candlestick formed by yesterday’s price action indicates that the market may bounce in the near-term. But the weekly Dow chart (see cash index chart below) shows a more ominous outlook, as the market may be in the midst of forming a head and shoulders reversal pattern. The neckline of 12,787 has acted as support the last three times the market traded down to it, but a violation of this area could spark sell-offs to Fibonacci retracement support near 11,515. Momentum is showing bearish divergence from the RSI, setting a short-term negative bias. Support comes in at 13083, 13022 and 12967, while resistance can be found at 13198, 13254 and 13314.

Sugar – Sugar futures surged on reports that Indian production of the sweetener will fall well short of lofty expectations. Bullish sentiment in commodities as a whole and a bullish petroleum inventory report fueled strong speculative buying. Index funds are expected to step up their buying over the next week to mimic the DJ-AIG Commodity Index, which suggests that spec buying could remain strong in the near-term. The fund activity resulted in shorts getting squeezed out of the market and triggered a large number of buy stops. Today’s bias may shift to the bears, as the market has already run through a good number of buy stops and new buyers may be hesitant to enter the market without some pullback. Longer-term fundamentals have improved on a recent increase in South American demand and lower-than-expected Southeast Asian production, but overall the market remains well-supplied. The March Sugar chart shows a breakout from the recent congestion pattern on late buying. The March contract seems to have established 10.70 as near-term support, springing higher after violating the area briefly yesterday. The momentum indicator is outpacing the RSI, pointing to a possibly bullish short-term bias. Support comes in at 10.90, 10.54 and 10.35, while resistance can be found at 11.45, 11.64 and 12.00.

Gold – Gold continued its historic march to new highs yesterday, bolstered by stronger commodity prices and a slumping Dollar. Traders are beginning to talk about the Fed being backed into a corner, almost forced to lower rates despite inflationary pressures. Commodity prices have rallied over the past several years, mainly due to forces outside of the U.S. economy, such as China’s explosive growth. Prices of raw materials may continue to climb in the event of a U.S. recession, sparking global inflation. In this scenario, Gold and other precious metals may begin to appreciate at an even quicker pace than energy prices. This view could be tempered by the opinion that a U.S. recession could easily spill over into the global economy, trimming the demand for raw materials in the very same developing economies that have been driving the commodity bull market of late. The February Gold chart remains bullish, but oversold. The market has almost reached its objective price of 890 after breaking out of the wedge consolidation pattern on the daily chart. Support comes in at 866.20, 859.50 and 843.00, while resistance can be found at 875.80, 882.50 and 892.20.

Rob Kurzatkowski, Commodity Analyst

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Small Caps Feel the Heat

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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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OPEC Comments Keep Crude Market in Check

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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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Market slides after with Bernanke's comments

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Panic Rocks Equities

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

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

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

Rob Kurzatkowski, Commodity Analyst

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There’s Gold in Dem Der Markets!

Gold closed above the 900 mark for the third time this month after spending most of the day in a channeling pattern. At around 1:30 PM CST, however, the bulls took control and drove the price to new highs for the day. The close gave us an increase of 3.4% on for the February contract (GCG8).

On the chart, we see that we Gold is in “new high” territory after failing the 900 test earlier this month. A few important things to mention are the fact that there is no resistance beyond this price level, while there is support from this month near the 880 area. Although it isn’t strong, it is something to work with on this chart.

Also, the stochastic indicator check is at around 80, which typically connotes an oversold environment. However, it took gold until 90 to reverse its course a few days earlier when the price was around this level. We are significantly above the 25-day moving average at present, but fairly close to the 15-day.

Mike Tosaw, Director of Education


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Good News from Redmond Lifts Markets

S&P – Stocks continue the recent recovery rally, aided by strong earnings news from Microsoft. The tech giant beat the Street estimate and gave a more upbeat forecast for future revenues, infusing the market with some early good news upon which to build. It is beginning to look like the panic rocking the markets earlier this week was fueled, at least in part, by French bank Société Générale liquidating long FTSE futures established by a rogue trader. Companies that do not have a direct link to consumers or banking have reported solid earnings and attracted widespread value buying, while firms relying directly on consumers will have the toughest time rebounding, as financial stocks figure to benefit quickly from the Fed rate cuts. March e-mini S&P’s have given an indication that this recent reversal may spark further rallies, although plenty of resistance still lies ahead. Momentum has moved higher, but remains at a bearish -120. Support comes in at 1338, 1323.50 and 1314, while resistance can be found at 1362, 1371.50 and 1386.

Gold – February Gold made new all-time highs today, despite a stronger Dollar and higher equity prices. After taking profits last week, Gold bulls have been buying with great zeal over the past two sessions. The emergency rate cut earlier this week, along with speculation that the Fed will once again cut rates next week, has led many traders to believe that a greenback recovery will come later rather than sooner and could ultimately create a highly inflationary situation in the U.S. Commodity prices were higher across the board yesterday and this morning, suggesting money is moving back into futures markets from the sidelines. If February Gold is able to hold these gains, it would signal a new breakout and possible push toward the $1000 mark. Momentum remains very bullish at the moment and the RSI is quickly approaching overbought levels. It will be interesting to see how the February contract behaves when we approach overbought levels, as the market tends to pick up steam at 70-75 percent in a strong bull market, and strong selling pressure may be an indication of choppy sessions ahead. Support comes in at 892, 878.30 and 867.30, while resistance can be found at 916.80, 927.90 and 941.60.

Rob Kurzatkowski, Commodity Analyst

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Gold Continues to Shine in 2008

Gold – The Gold market continues to trade near record highs, buoyed by weakness in global equity markets and the U.S. Dollar. South African mines were forced to shut down in response to the country's largest utility threatening to cut power to miners, sparking a new wave of buying. The shutdown is only expected to close several mines completely for a day, but what is not known is how long it will take miners to get back to full capacity. The market has been on such a tear recently that almost any news on the U.S. economic front can be seen as bullish. If the economy sputters, traders can argue that the Fed will continue lowering rates, devaluing the greenback and opening the door for future inflation. On the other hand, if indicators pick up, the argument can be made that inflation will kick up sooner rather than later and make precious metals a good hedge opportunity. If the FOMC defies the markets and leaves rates unchanged later this week, it could adversely impact the precious metals market in the near term. April Gold broke out to a new contract high close on Friday, but traders would like to see a close above the previous high of 922.50 to offer further confirmation. Momentum is outpacing the RSI, which is bullish in the near term. The 9-day RSI and stochastic indicators are now at overbought levels, so it will be interesting to see how the market behaves in the near term. Support comes in at 908.60, 901.00 and 890.50, while resistance can be found at 926.70, 937.20 and 944.80.

Dow – Stock index futures are poised to open lower as a result of a sharp sell-off in European shares. Banks have been hit especially hard on the heels of the Societe Generale rogue trader fiasco. The scandal hit at a time when portfolio valuations are still difficult to calculate due to the continuing subprime crisis, which has caused another exodus in financials. Additional rate cuts by the Fed later this week have become less certain now after the surprise cut last Tuesday, which has impacted trading. Oil company shares have been impacted in European trading due to price weakness in the commodity and fears that the slowing economy may keep demand in check. Today's new home sales figures are expected to show a decline to 645,000 in December from the November figure of 647,000, according to median estimates. It would not at all be surprising to see the number come in closer to the 635,000-640,000 range. March Mini Dow futures continue to trend lower, and a close above 12,500 may be needed to renew bullish sentiment. Momentum is outpacing RSI, suggesting the market may begin to find some strength in the near term. Support comes in at 12,120, 12,005 and 11820, while resistance can be found at 12,420, 12,605 and 12,720.

Sugar – The Sugar market has rallied sharply in early morning trading, defying a statement by the chief of the International Sugar Organization (ISO) that prices will remain depressed. The group forecasts another year of record production from Brazil, but this may be at least partially offset by indications that the EU and India will trim production. The market is moving higher despite weaker Crude Oil and Corn prices, both of which are key outside markets for the sweet commodity. Today's rally may be a result of short covering after March futures held key technical support levels last week. The daily chart appeared to be forming a technical reversal before holding the key 11.30 mark. A move above the recent high close of 12.45 may result in a continuation of the uptrend. Support comes in at 11.54, 11.13 and 10.86, while resistance may be found at 12.22, 12.49 and 12.90.

Rob Kurzatkowski, Commodity Analyst

Gold Continues to Make New Highs

Coupled with a big day in the U.S. stock markets, Gold today hit an all-time high, closing with a price of $929 on the February contract (GCG8). Gold bulls have been on a monster run of late, with no resistance in sight at this level.

To the downside, the nearest level of support is around the 900 level. That can act not only as a chart support level, it can also act as a numeric support since that was a benchmark number. Below that, the next strong level of support is around the 800 level, with the same effect one would find at the 900 level – the 800 number has acted as numeric support as well.

Both the 15- and 25-day moving averages have been left in the dust in of this pricing action. Although the slow stochastic indicator has declined a bit in the last week since Gold hit lows in the mid-800’s, the market has not followed suit, posting one significant increase after another.

Today's news was the decline in new home sales, but the big difference-maker this week is the Federal Reserve announcement on Wednesday.

Mike Tosaw, Director of Education

Gold Loses Luster on Profit-Taking

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

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

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

Rob Kurzatkowski, Commodity Analyst

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A Platinum Record

Platinum – April futures are up another eye-popping 54 dollars in early trading on worries that supplies will remain tight. South African utility company Eskom will limit electricity use to 90 percent for mines through 2012, setting up a potentially significant supply squeeze considering world stocks are already at historically low levels. Palladium futures may also get a lift from the news, as industrial users of Platinum may begin substituting due to the rocketing costs. The problem for the industrial consumers is that Russian exports of Palladium are inconsistent, forcing them to weigh the low cost benefit versus normally reliable supply from South Africa. Today’s release of the import and export price data suggests higher inflation, bolstering demand for precious metals as an inflation hedge. The Empire State Index showed a decline of 11.7 percent versus expectations of a 7 percent increase, which has sent equity futures tumbling and may lead to more inflows of funds into commodities. Technically, there is very little to say about the April Platinum chart. We continue to make new highs daily and, because the market is at historically high levels, it is difficult to gauge where resistance may come in. The RSI is extremely overbought at 90 percent, but is being outpaced by the momentum indicator, suggesting the trend is not weakening.

Copper – Copper futures did an about-face this morning, rallying almost 8 cents. Chinese imports of the yellow metal rose to 239,000 tons in January from 224,553 tons in December. LME warehouse stocks have been dwindling, but much of this inventory seems to have shifted to Shanghai, which showed a rise of 10,493 metric tons for the week. The weak Empire State Index reading was more than offset by the inflationary import and export prices. Base metal traders have largely taken their focus off of the U.S. economy – economic data is weak and the housing market is about as bad as it can get, so expectations are not very high. Rising aluminum prices due to the South African power situation have also offered outside market support for Copper. The March Copper chart continues to form a bull flag consolidation pattern, suggesting prices may test contract highs of 3.75. The market initially rejected 3.60, which sparked some technical selling, but did not do any major chart damage. 3.55 was the measured move objective for the inverted head and shoulders bottom, and 3.60 was previously the trigger line for the double top pattern in last October and a relative high made on October 29th, which is why this area has offered stout resistance. A solid close above the 3.60 mark may bring more buyers into the market and squeeze out shorts. Momentum continues to outpace the RSI indicator, suggesting a bullish near-term bias. Support comes in at 3.4350, 3.3825 and 3.3085, while resistance can be found at 3.5615, 3.6355 and 3.6880.

Coffee – The Coffee market has been a runaway train of late, breaking out of an extended slumber on supply concerns. The market opinion is that the upcoming crop year will be much less productive for growers, who will struggle to meet rising demand. Soft commodities have underperformed versus other commodity markets such as metals, grains and energies, leading many traders to believe that the sector has the greatest growth potential, especially with legitimate supply concerns in Cocoa and Coffee. After finally breaking through resistance at 146.25, it has been a straight rise in the May contract. The 9-day RSI is giving an extremely overbought reading of 90 percent, which could open the door for some profit-taking. Momentum continues to outpace the RSI, suggesting the trend has not weakened. Support comes in at 151.00, 146.25 and 142.00, while resistance may be found at 160.00 and 165.00.

Rob Kurzatkowski, Commodity Analyst

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Consumers Brace for Higher Fuel Costs

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Hedgers Nudge Gold to New Highs

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

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

Rob Kurzatkowski, Commodity Analyst

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Gold Rises on Dollar Slump

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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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Commodities a Mixed Bag

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

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

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

Rob Kurzatkowski, Commodity Analyst

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OPEC Keeps Supplies Steady

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Traders Nervously Await Non-Farm Data

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Gold Loses Some Luster

Gold – Gold is trading lower for the third consecutive session on heavy profit-taking. The Dollar strengthened against the Euro Friday and in early trading today, which may have sparked some selling from European traders. The lower Euro and lower energy prices have kept the precious metals markets from gaining any fresh upward traction. Coming on the heels of new highs just below the $1,000 mark, the sell-off may be a healthy sign for the market, as advances beyond this critical level followed by heavy selling would likely be a huge psychological blow for traders. Friday will be a big day for traders in both the equity and commodity arenas with CPI data on the horizon, as further confirmation of a rampant inflationary environment could bring strong buying. The recent selling has not caused any major chart damage yet, but declines beyond the 950.00 mark in the April contract could spark a more extended confirmation. The RSI peaked prior to Gold making record highs, which is a bearish signal over the mid-term. Momentum has dropped more sharply than prices, opening the door for further weakness. Support comes in at 966.60, 958.90 and 948.80, while resistance can be found at 986.30, 998.30 and 1005.90.

Cocoa – A broad sell-off in commodities – particularly softs – has sent the Cocoa market lower in early trading. Cocoa has not seen the solid buying coming on dips, as it had over the previous few weeks. Traders seem to have lost some of their enthusiasm for softs and grains in light of speculation that prices may have risen too much too quickly. Growing regions in Ghana and the Ivory Coast have gotten much needed rain of late, although only sporadically. The Cocoa market has not sold off as much as other soft commodities, signaling that many traders may believe fundamentals are still relatively strong. The May chart appears somewhat bullish, forming a sideways-to-lower consolidation pattern. Two rejections of the 1845 area do not bode well for the market technically, and advances beyond this level may be needed to bring buyers back. The RSI is only now starting to recover from technically overbought levels, underscoring the fact that the market may have risen too sharply in recent weeks. Momentum has dipped, although to a lesser extent that the RSI and prices. Support comes in at 2692, 2646 and 2617, while resistance can be found at 2767, 2796 and 2842.

S&P – Stock futures labored to stay near unchanged levels in overnight trading. Friday’s non-farm payroll number gives further confirmation that the economy is nearing recession, if it hasn't arrived there already. There were rumors circulating prior to the release of the report that the Fed would make another emergency rate cut if the report showed a contraction in the labor market. This did not materialize, but Fed Fund futures are now pricing in a high probability of a ¾ basis point cut. Banking stocks are once again feeling the bulk of the heat this morning on more reports of margin calls issued to major credit market players. A flurry of important economic data is scheduled for release on Thursday and Friday, with retail sales and Michigan consumer sentiment set to give traders a better idea of how the recent downturn has impacted the American consumer. Positive data could give the market a much needed lift on value buying from investors. Friday’s chart setup was a bearish continuation after confirming a bear flag pattern on the March e-mini S&P chart. Support comes in at 1277.00, 1261.50 and 1241.00, while resistance can be found at 1313.50, 1334.00 and 1349.75.

Rob Kurzatkowski, Commodity Analyst

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Crude Lingering Around 110, Gold Hits 1,000

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Flat CPI Surprises Traders

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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

Waiting

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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Buckshot in the Golden Goose?

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

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

Rob Kurzatkowski, Commodity Analyst

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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

Big Ben, IMF Report in Focus

Dow – Stocks posted strong gains yesterday, with the Dow recording a gain of over 300 points on a stronger-than-expected ISM number and signs that the subprime fiasco may be nearing an end. Futures have retreated in overnight trading on a lower growth forecast for the U.S. economy from the International Monetary Fund, which reduced its outlook to 0.5 percent for the year. More troubling than the U.S. outlook, however, is the fact that the IMF slashed its global growth outlook to 3.7 percent from 4.1 percent and suggested that there is a one in four chance of a global recession. Today's factory orders report is expected to show a drop of 0.8 percent, which is also weighing on the market early. Traders will focus most of their attention, though, on the testimony of Federal Reserve Chairman Ben Bernanke before the Joint Economic Committee, which is his first such engagement since the proposed financial oversight plan was laid out. The Fed has worked overtime to try to keep banks and the credit markets liquid and his testimony on these subjects will be keenly watched. June mini Dow futures broke out of a sideways-to-lower consolidation pattern on the daily chart and closed above the near-term relative high close. This suggests a possible test of the next relative high of 12722, with a close above this level possibly signaling a longer-term recovery. Support comes in at 12330, 12032 and 11870, while resistance can be found at 12790, 12952 and 13250.

Gold – Gold futures jumped this morning on the IMF report, which signals weakness in the global economy and makes the metal appealing once again as a “safe haven” investment. The report was especially skeptical of the U.S. growth outlook, sending the greenback lower and commodity prices higher. Gold has had its share of struggles recently due to the recovery in the equity markets, which along with a slight rebound in the Dollar has pulled capital away from commodities and led to a collapse in Gold prices. Failure to make further advances in the major stock indexes could result in a recovery in precious metal prices. If economic data continues to surpass analyst expectations and the U.S. economy shows signs of recovery, it could lead to a larger sell-off in Gold, as traders would continue to pull their funds out of commodities and buy equities. Also, this scenario could lead to a larger-scale recovery in the U.S. Dollar, resulting in overseas money leaving the precious metals market. The daily June Gold chart shows a bearish reversal from contract highs, but has not given an indication of bear market conditions to this point. Closes below 860 could signal that the bull run may be over, and sell-offs beyond 830 would signal a technical bear market. Support comes in at 867.50, 847.20 and 818.10, while resistance can be found at 916.90, 946.00 and 966.30.

10-Year Notes – Notes fell sharply yesterday, as money flowed into the equity markets at the expense of commodities and treasuries. The recent rebound in equity prices from lows has put some pressure on Note and Bond prices, leading to sideways congestion on the daily chart. Today's testimony by Bernanke will give traders better insight into the Fed's mindset and may give a clearer picture of what the central bank's interest policy may be in the near-term future. If the testimony is dominated by talk of inflation and recovery, it would likely be seen as bearish for interest rate instruments. On the other hand, if the session is marked by talk of economic uncertainty and the housing and credits crises, it would likely be seen as Bond and Note friendly. Yesterday's close below recent lows of 117-26.5 can be seen as bearish short-term, but June T-Notes have chart support at 117-14, 116-21 and 116-05 to buffer the downside. The 9-day moving average looks to be crossing the 18-day to the downside, which is a bearish signal short-term. Support comes in at 117-01, 116-11 and 115-10, while resistance can be found at 118-24, 119-25 and 120-15.

Rob Kurzatkowski, Commodity Analyst

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Crude Continues to Dance Around the Century Mark

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Metals Meltdown

Copper – Tumbling U.S. shares and a stronger Dollar have sent Copper futures sharply lower in early trading. Outside markets – namely precious metals and energies – and profit-taking have also weighed on Copper prices. Yesterday’s reluctance to break through the $4 mark, though not all that bearish technically, may have sparked some of the profit-taking. Despite last week’s somewhat positive economic data, many uncertainties remain for the U.S. economy, underscored by the terrible employment data last Thursday and Friday. The May contract remains bullish on the daily chart even though the market failed to break through the psychological $4 mark. A close below 3.87 may be seen as bearish near-term and could lead to further profit-taking. The market was overbought as of yesterday’s close and the slow stochastics crossed over to the downside, both of which can be viewed as negative in the near term. Support comes in at 3.94, 3.90 and 3.87, while resistance can be found at 4.01, 4.04 and 4.08.

Gold and Silver – The rebound of the greenback against the majors has weighed on the precious metals in early trading. Lower energy and food prices have cooled the inflation outlook, making precious metals less appealing as an inflation hedge. Fears of recession in the U.S. economy are not only pointing to tamer inflation, but may impact jewelry demand. If emerging economies like India and China that have caused an increase in jewelry demand falter, precious metal prices may feel more downside pressure. The IMF announcement that it is selling over 400 metric tons of Gold has dragged slightly on the market thus far and could potentially pressure prices to a much larger extent when the sale is made, especially if physical demand is weak at that time.

June Gold prices have rebounded after testing support at 880, but the chart indicates that the market is vulnerable after failing to hold advances beyond chart resistance at 930. Advances beyond 930 and 945 may be needed to attract buyers, but the near-term relative high of 959.60 may offer stout resistance. Support for June Gold comes in at 916.20, 905.70 and 896.90, while resistance can be found at 935.50, 944.30 and 954.80

The May Silver chart continues to show weakness, but the market’s ability to hold support at 16.850 is somewhat encouraging. After breaking down further than the double top’s measure, the market has twice closed below the $17 mark only to rebound in ensuing sessions. A close above the relative high close of 18.55 may shift the technical bias to the bulls, while a solid close below 16.85 could signal more downside, possibly even triggering moves below $15. Support comes in at 17.805, 17.49 and 17.25, while resistance can be found at 18.36, 18.60 and 18.915.

Rob Kurzatkowski, Commodity Analyst

China Sparks Raw Materials Rally

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

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

Rob Kurzatkowski, Commodity Analyst

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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

Pipeline Shutdowns Spark Crude

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

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

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

Rob Kurzatkowski, Commodity Analyst

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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

Oil Braces for EIA, Fed Announcements

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

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

Rob Kurzatkowski, Commodity Analyst

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Barreling Upward

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

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

Rob Kurzatkowski, Commodity Analyst

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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Under Pressure

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

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

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

Rob Kurzatkowski, Commodity Analyst

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Crude Continues to Climb

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

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

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

Rob Kurzatkowski, Commodity Analyst

Another Crude Milestone

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

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

Rob Kurzatkowski, Commodity Analyst

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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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Is Black Gold Losing Its Luster?

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

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

Rob Kurzatkowski, Commodity Analyst

Traders Looking for the Safety Net

Bonds – The meltdown in global equity prices has sent traders scrambling to the relative safety of U.S. treasuries. Commodity prices have been much lower for the most part over the past week, due to worries about the growth prospects for the global economy. Nonetheless, continued inflationary pressures may curb traders' appetites for treasuries, which typically underperform other investments in periods of high inflation. Going forward, the markets will likely take their cues from economic indicators to determine direction. If growth continues to slow in emerging markets, it could signal the current high inflation environment may moderate, making government debt attractive. On the other hand, if these markets are not cooling at the pace previously thought, investors may flock to commodities at the expense of bonds. The upward crossover of the 18 and 50-day moving averages and close above resistance at 116-26 can be viewed as a bullish for the September contract in the mid-term. Momentum continues to outpace both price and RSI, adding to the bullish sentiment. The RSI indicator is currently at overbought levels, which may temper some of this bullish enthusiasm. Support comes in at 116-20, 116-01 and 115-20, while resistance can be found at 117-19, 118-00 and 118-19.

Copper – Copper prices are slightly lower this morning, despite reports that workers at Freeport's Cerro Verde mining strip in Peru plan to strike at the end of this week. The market was sharply lower yesterday ahead of the news before a big rally. Today's lack of enthusiasm may be attributed to growing LME stocks and slowing Chinese demand. Outside forces – in the forms of lower Crude Oil prices and a stronger U.S. Dollar – also have depressed prices. The market will be monitoring the worker unrest at the Peruvian mine to determine what, if any, impact it would make on supply. At the moment, it appears that supplies are ample, but an extended strike may cause end users to begin hording the base metal to ensure supplies, which could drawdown LME stocks. Thus far, the market has been unable to build off yesterday's strong close, which put the September contract right at the 50-day moving average. Closes above the average and near-term resistance at 3.75 may be needed to reverse the recent slide, but a close above 3.85 may be needed to swing the market favor to the bulls. Support comes in at 3.67, 3.60 and 3.56, while resistance can be found at 3.78, 3.82 and 3.89.

Rob Kurzatkowski, Commodity Analyst

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Triple Threat

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

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

Rob Kurzatkowski, Commodity Analyst

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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

Dollar Doldrums

Dollar Index – The U.S. Dollar continues to trade near all-time lows on weakness in financial stocks. The fallout from Freddie Mac and Fannie Mae continues to hang over the markets and the situation may worsen for both troubled lenders before it gets better. Both companies have stepped up their purchases of non-guaranteed subprime securities in recent months, opening the door for even larger write-downs in the near future. Making matters worse, profits at American Express tumbled due to a higher volume of consumer defaults, indicating the economic growth probably has not yet bottomed out. The banking crisis and weak consumer spending will likely preclude the Fed from raising rates this year, which favors the Euro and other overseas currencies and dims the chances of a larger-scale recovery. Fresh lows may lead to further unwinding of U.S. Dollar positions. The September Dollar Index chart shows the market in a solid downtrend, unable to even rally above the 9-day moving average in order to gain a bit of short-term upside momentum. If the market is able to hold recent lows and rally beyond the July 17 high of 72.675, the market may see a short-term recovery rally. Momentum has stayed fairly steady, despite recent price action, indicating the market may see a short-term bounce. Support comes in at 71.99, 71.76 and 71.515, while resistance may be found at 72.465, 72.71 and 72.94.

S&P – Disappointing earnings from American Express, as well as diminished growth outlooks from Apple and Texas Instruments, have sent stock futures tumbling in overnight trading. Traders who may have gotten a bit ahead of themselves on surprisingly good earnings reports last week and might be brought back to reality by this data. While larger money center banks appear to be seeing the light at the end of the tunnel, the worst may be yet to come for credit card companies and mortgage lenders. The increase in consumer defaults, coupled with a decreased appetite for discretionary purchases, may put credit card companies in a much more dire financial position. Because the card companies are generally not seen as quite as important in the grand scheme of the financial system as banks and mortgage lenders, the possibility of a government bailout is virtually non-existent. Technology stocks may continue to suffer the effects of an economic slowdown due to higher prices for necessities and the decreased purchasing power of consumers. Yesterday's spinning top candlestick pattern on the daily September e-mini S&P chart hinted at today's reversal of the recent uptrend, and traders may be looking for a weak close today to confirm a short-term reversal pattern. Rallies beyond the 1275 area and, more importantly, the psychological resistance at 1300 could attract bulls back to the market. Support comes in at 1254.75, 1247.75 and 1240.50, while resistance can be found at 1268.75, 1275.75 and 1285.75.

Gold – The sell-off in equities and lower U.S. Dollar has driven Gold prices higher in the early going. With economic conditions both in the U.S. and overseas weakening, traders may continue to pour money into Gold futures and ETFs. More importantly for the precious metals market, prices have somewhat detached themselves from energies and other commodities. Even if inflation begins to moderate, traders may opt to split their assets between precious metals and debt instruments to hedge against another ramp-up in inflation. Last week's decline in the August contract did not affect the technical outlook for Gold, as the market was able to confirm support at the previous resistance area of 950. Support comes in at 956.60, 949.50 and 943.30, while resistance can be found at 969.90, 976.10 and 983.20.

Rob Kurzatkowski, Commodity Analyst