Commodity Corner

Good morning,


DXZ0  93.555  +0.628                GCZ0  1886.0  -25.9                       ESZ0  3330.50  -52.50                 CLZ0  37.71  -1.86




As most of Europe moves towards permanent lockdowns, and the coronavirus rates in the US are undergoing a serious uptick, markets finally are facing the reality of a second major roadblock to global economies is virtually upon us.  It’s a sea of red across most of the markets, with the exception being the safe havens, the US dollar index and fixed income markets.  Gold, the usual safe haven asset of choice, has also come under pressure in the overnight trade.  The most logical explanation is that gold is being sold in an effort to raise cash for increased margin calls which are inevitable with some substantial moves down in numerous markets. 


The commodity sector has been a major attraction for the past couple of months.  Speculative funds have been playing many of these markets from the long side, as the combination of increased inflation risks, hopes of economic recovery, and supply/demand balances shifting to the demand side.  China has been an aggressive buying of necessary commodities, trying to secure resources ahead of any logistical issues that evolve from a second wave of the pandemic sweeping across the world. 


Many commodities had positive fundamental stories of their own, in addition to what is mentioned above, and this drew the funds to them.  These markets observed significant rallies, and were poised to push even higher, in part driven by additional US stimulus picking the economy up by the bootstraps.  Well, the stimulus doesn’t appear to be anywhere on the horizon, and now the market is facing the drama of the most likely drawn out US election outcome.  The Federal Reserve meets next week, and with no fiscal stimulus arriving, many in the market are questioning if the Fed will consider additional monetary stimulus to assist.  This week’s actions taken in Europe, and in the US at the state and local levels to prevent virus spread will give the Fed members more evidence to ponder the need to be more aggressive, in an attempt to keep the economy alive. 


All this being said, fund long positioning, as seen in the COT reports from the CFTC, have grown throughout this autumn.  With the growing unknown facing the world again from “wave 2”, taking a profit and getting positions pared down or even flat appears to be the general theme across these markets.  This Friday being month end most likely intensifies this selling pressure.  It’s difficult to argue with this mentality, is the world is potentially going to stop again.  Thus looking at most markets today, the story will be economic stoppage impacting demand.  Oil, copper, grains and most markets are under pressure, and could remain so throughout the week.      


Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                       1004.00                 944.75                   914.00

CZ0                      375.25                   356.25                   359.50

WZ0                     569.50                   543.50                   546.50

KWZ0                  500.25                   476.50                   486.00

MWZ0                 542.25                   535.50                   545.50

SMZ0                   337.4                     316.7                     310.2

BOZ0                   33.19                     31.45                     30.36

CLZ0                    40.88                     40.96                     40.38

GCZ0                    1928.0                   1897.3                   1780.5

LHZ0                    62.435                   57.335                   57.975

LCZ0                     110.000                 108.750                 107.940

KCZ0                    116.15                   111.55                   113.05

CCZ0                    2516                       2403                       2425

CTZ0                    66.68                     64.22                     62.76

SBH1                    13.57                     13.17                     12.93

JOF1                     117.25                   121.85                   118.75

HGZ0                   303.30                   292.40                   269.50

HOX0                   117.47                   122.02                   127.98

XBX0                    117.25                   114.92                   110.71

NGX0                   2.792                     2.603                     2.483





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC