Good morning,
DXZ9 98.045 -0.361 GCZ9 1488.0 -12.9 ESZ9 2970.00 +29.00 CLX9 54.35 +0.80
Trade optimism continues to run rampant thru the markets in the overnight trade, keeping the push higher in equities alive and allowing for the correction down in gold. Oil, which also had a bid from this, received an additional boost from the news that an Iranian oil tanker was attacked by missiles near a port in Saudi Arabia. This is what caused the additional spike to oil prices overnight. The rise would have been greater, but the US continues to keep cranking on the production front, and the inventory build that was seen from this week’s data keeps severe supply shortage concerns at bay. Nonetheless this just reinforces the fact that geo-political risks remain high in this region. The dollar index is coming off sharply today, supporting commodity prices. The grain markets, receiving mixed news from yesterday’s WASDE report, are higher today on the anticipation of the trade deal. The same is true for cotton and other commodities. The theme form the trade today, ahead of a partial US holiday this weekend, will be trade headline watching, as President Trump is to meet with Vice Premier Liu He today.
For commodities, yesterday’s WASDE report was the main event. The data showed a slight increase to corn yields, a higher corn production number than expected, and increased inventories. Reductions to export expectations for both corn and wheat led to the higher ending stocks numbers for both. Thus, corn nose dived on the report, with funds jumping back in to the spec short positioning. Wheat dropped as well, but not nearly as much. Soybeans received friendly news on the report, with a drop to the anticipated yield and production numbers less than what the market was expecting. Ending stocks were also lowered for soybeans, in part due to the lowering of beginning stocks based upon the Sep 30 stocks report. Soybeans shot higher, but were unable to hold the gains and ended up with a small decline on the day. So, as the supply and demand information is digested in the market, the attention turns back to trade (where almost all the attention is today) and on the cold front ands snowstorm sweeping across the Midwest and Plains.
Cotton had a similar story from the WASDE report, with lower production and inventory numbers than what the market was expecting. This reduction to supply, coupled with hopeful increased demand from a deal with China allowed for cotton to trade higher early yesterday, but it was unable to hold the gains. It is taking another stab at trading higher today. Coffee had a huge break yesterday, as the fund community drove prices through numerous support levels, triggering sell stops and algo sell signals, enhancing the move. Prices are bouncing a bit today, in a corrective manner following yesterday’s wipeout. Sugar futures took a breather yesterday, but overall have been mired in a short covering rally on concerns about a supply deficit next year. They are up small today. Cocoa futures were up yesterday on the hopes of increased demand and on the hot and dry growing conditions in the Ivory Coast. The lower dollar is helping cocoa continue to trade up today, along with some of the other commodities. Us orange production was estimated to be a touch lower for 2019-20 than it was for 2018-19 by the USDA yesterday. However, the overall production level remains high, and in a market where consumer demands are shifting away, keeps concerns of a supply overhang in place. Prices traded down yesterday.
Copper prices had a strong move higher yesterday, as positive economic sentiment from the trade deal flew into the industrial metals sector. This market will continue to ebb and flow on the trade talks. Gold prices, as already mentioned, are experiencing a pretty strong downward correction today, as “risk on” sentiment prevails throughout the markets. The low from a few weeks ago is approximately $20 away, and should prove to be some support, if the swoon continues. I still contend, that once this liquidation is over, all of the risks the markets face are still in place for the most part, so prices should remain within spitting distance of $1500. Keep in mind that the markets have been caught up in trade deal head fakes numerous times over the past 16 months, so another disappointing result from this meeting can never be ruled out.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 883.50 894.00 910.50
CZ9 379.00 409.25 401.75
WZ9 481.75 503.00 504.50
KWZ9 408.00 443.25 469.00
MWZ9 521.00 540.75 557.75
SMZ9 299.6 309.4 313.7
BOZ9 29.16 28.80 29.39
CLX9 55.24 55.95 57.28
GCZ9 1513.2 1449.8 1385.7
LHZ9 65.435 70.275 71.140
LCZ9 106.865 109.310 113.855
KCZ9 98.80 102.95 104.95
CCZ9 2331 2406 2373
CTZ9 59.96 62.75 68.36
SBH0 12.44 12.87 13.35
JOX9 101.25 104.15 112.75
HGZ9 259.50 264.25 274.05
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404