Good morning,

 

DXZ9  97.625  +0.101              GCZ9  1488.8  -7.0                            ESZ9  3033.25  -3.00                CLX9  55.09  -0.72

 

Today begins the 2 day Federal Reserve meeting on monetary policy, where a reduction of 25 basis points to short term rates is the general expectation.  Equity markets, while a touch softer this morning, continue to march higher, led by continued trade optimism and overall hope for the economy.  The gold market is rotating down today, as a US cut is priced in, and the belief there could be a signal of a pause to the cuts.  Gold still remains within spitting distance of $1500, and it wouldn’t take much to pop back above.  

 

The dollar is recovering a bit today, following yesterday’s decline.  As the Brexit discussions continue, the most interesting topic for FX yesterday was the election in Argentina, as the socialist party defeated Macri, but not by as much as was expected.  The new government takes power on Dec 10.  In front of the election, the peso has devalued by 70%, and the government has issued currency controls to attempt to protect the peso.  In the past, you could convert $10k a month from pesos to dollars, and now that has been reduced to $200 a month.  Inflation is the big concern here, and the fear is that it will get worse.  This will have a huge impact on the ag producers, who collect dollars for their goods.  The concern comes from when they need to buy inputs for the next season, which they pay for in pesos.

 

Oil futures have slipped back below $55 in this morning’s trade.  It has been a fairly lethargic range trade the past few sessions, as the oil market waits for the next event to take place, whether that be another incident in the Middle East or news about production levels, specifically form OPEC+.  The decline this morning is thought to be led by anticipation of seeing another stock build in the data from last week for US crude. 

 

In the grain markets, corn and soybeans are lower this morning, as yesterday afternoon’s crop progress data showed harvest continuing to move along, yet still behind last year and the yearly averages.  The could be some pressure on the grains coming from South America, where producers want to move inventory ahead of any potential taxation or other legislative measures form the new from the new government in Argentina.  The wheat market has a small bid today, ahead of another purchase tender from Egypt.  Last week, 405k tons of wheat was purchased from the Black Sea and France.  More of the same is expected today, especially as European wheat exports are up this year, and Black Sea exports are down a touch.  Hope always remains the US can work its way into the mix.

 

Other commodities were higher yesterday with the decline in the dollar.  Some short covering took place in sugar and coffee yesterday.  There are some dry areas of the coffee growing region that is keeping traders on edge.  Sugar saw a big increase to the spec short positioning, as reported in the COT report released last Friday, and some modest covering seemed to be in order there.  Cotton futures had a slight correction lower in yesterday’s trade, but have resumed higher today.   Trade progress is thought to be keeping a bid in the cotton market. 

 

Most of the market’s focus for the next couple of days will be on the decision from the Fed, and the press conference that follows.  Thursday is month end, which could bring some profit taking or window dressing into the market.  On Friday, a fresh look at the US employment picture comes, where an increase of 85k is expected for nonfarm payrolls, compared to +136k last month.  The Unemployment Rate is expected to uptick to 3.6% from 3.5%.  A precursor to this data comes tomorrow, with the ADP Employment Index.             

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      897.00                   899.75                   909.75

CZ9                      377.00                   404.25                   401.00

WZ9                     489.25                   503.00                   502.75

KWZ9                  408.25                   435.50                   461.50

MWZ9                 525.00                   537.25                   554.75

SMZ9                   301.1                     307.8                     312.5

BOZ9                   29.51                     29.09                     29.46

CLZ9                    55.17                     55.54                     57.35

GCZ9                    1511.8                   1471.3                   1396.4

LHZ9                    66.425                   68.890                   71.445

LCZ9                    108.160                 109.710                 113.655

KCZ9                    98.05                     101.95                   103.80

CCZ9                    2381                       2412                       2374

CTZ9                    61.16                     62.39                     67.82

SBH0                    12.34                     12.76                     13.28

JOF0                    102.90                   105.60                   113.45

HGZ9                   260.45                   263.80                   273.85

 

Thanks,

Mike

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404