Good morning,
DXZ9 97.985 +0.166 GCZ9 1509.8 -3.6 ESU9 3000.50 -5.00 CLV9 58.85 -0.49
Federal Reserve monetary policy announcement day! The market is expecting a cut of 25 basis points to short term rates today. The real question is what follows down the road. The market will be paying close attention to the press conference after the announcement, to gauge future policy intentions/concerns. Volumes have been light overnight, ahead of this meeting. The US equity market is down at touch, but S&P’s remain just above 3000. Gold gapped open lower from yesterday’s settle, and has also been confined in a narrow range. Oil futures once again have the most interesting trade taking place.
After yesterday’s sharp break lower, on the news that Saudi Arabia is quickly restoring its production capabilities from the damage caused by the drone attacks. While the market was expecting a production halt of a month or 2 in the morning yesterday, the news that the halt may only last a couple of weeks propelled prices down. Then, adding to the selling pressure, was the afternoon data from API, showing crude stocks rose by 592k barrels last week, where a decline of 2m barrels was expected. It is worth reminding all that on the CLV9 intraday chart, there is a gap in the price action down to 55.68. Sunday night’s low was 58.77, which was taken out in the overnight trade (58.63 low). As the market attempts to fill the gap, it will come up against 3 key moving average levels, which could impede to progress towards closure. 57.29 (100 day); 57.08 (200 day); 56.23 (50 day) all should serve as support if the market continues to correct down. Failure to close the gap will be viewed as bullish. Today brings more updates on production and inventories from the DOE. Any surprises from the Fed today can have a big impact on the dollar, which could influence oil prices and many other commodities as well.
Grain prices are slightly higher today, being led by wheat. Egypt announced another purchase tender for today. Once again, it is expected the Black Sea will dominate the trade on this. There is always hope the US may find a way to get involved, which may be what is supporting the price this morning. Most likely, the US will find itself unable to compete.
Cotton prices were sharply lower yesterday, and are lower some more today. The slight improvement in the dollar, along with concerns about demand for this season’s crops, given the trade deal delay, weigh on prices. In spite of the USDA revising lower its projections for the size of the cotton crop, a decent sized crop is still expected. Hog futures were limit down yesterday, as the expected improved demand from China, given ASF, is hindered by the trade obstacle. Coffee futures were down sharply yesterday, with the improving oil situation pushing oil prices down, along with the other commodities coming off as well, getting credit for the reason. In Brazil, CONAB revised down its projections for the size of the harvest this season, but this had little impact on the price action. As coffee futures took out some key support areas on the break, the selling was exacerbated by sell stops and algo trading signals. Cocoa futures continued to grind higher, in a short covering trade, as the weather in West Africa, causing stress to the crop has the trade concerned about the amount of available supply. Opposite of coffee, cocoa futures took out key resistance levels on the move up, bringing in buy stops along with the algo traders getting buy signals there.
Outside of any new developments on the Saudi attack story, the market will be waiting for and trading cautiously ahead of the Fed result.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 884.50 886.25 914.50
CZ9 397.00 409.75 403.50
WZ9 489.25 499.00 510.25
KWZ9 425.75 448.25 482.00
MWZ9 522.75 541.50 563.75
SMZ9 303.8 309.8 315.7
BOZ9 28.84 28.55 29.41
CLV9 56.23 57.29 57.08
GCZ9 1486.6 1414.7 1366.2
LHZ9 67.360 72.540 70.630
LCZ9 108.375 110.010 114.440
KCZ9 101.90 102.55 106.40
CCZ9 2341 2387 2356
CTZ9 60.79 64.48 69.72
SBH0 12.63 13.01 13.45
JOX9 103.40 105.00 116.25
HGZ9 263.55 267.95 275.45
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404