Commodity Corner: Morning Comments

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





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC