Good morning,

 

DXZ9  97.055  -0.384              GCZ9  1508.8  +12.1                             ESZ9  3038.50  -9.25               CLZ9  54.54  -0.52

 

The Federal Reserved delivered the 25 basis point cut to short term rates that was widely expected by the market.  The market interpreted Chairman Powell’s comments in the press conference as suggesting the Fed was ready to take a fairly substantial pause on any changes to monetary policy going forward.  In fact, Chairman Powell said the Fed will remain dependent on numerous inputs, such as economic data and trade progress, so it may not be as lengthy of a pause as the market thinks.  On the economic front, tomorrow brings the latest reading on employment in the US, where nonfarm payrolls for October are expected to have gained 85k vs last month’s 136k.  The Unemployment Rate is expected to uptick to 3.6% from 3.5%.  Not exactly numbers suggesting a robust economy.  On the trade front, the cancellation of the APEC meeting in Chile next month, where it was thought the US and China would meet and possible put the finishing touches on some form of a trade deal, casts a wrench into those thoughts.  So, there will be plenty of things/events/data for the Fed to ponder going forward. 

 

Gold has a strong showing today, having punched through the magical $1500 level by a respectable amount.  The bid came from a story that hit the market in the early European trade, citing Chinese officials as casting doubts on whether a long term trade deal can actually get put in place, as China is not willing to budge on the thorniest issues.  Prior to this headline, the news was that the US was considering extending waivers on some of the tariffs beyond the Dec 28 expiration.  Separately, North Korea fired 2 missiles last night, which fell in waters close to Japan’s territory.  Given the continuing unknowns, regarding trade, monetary policy and geo-political, along with the Brexit deal not taking place today, but rather the UK now holding an election on December 12, brings back the safe haven plays for gold. 

 

The oil market is bouncing around the $55 area today, as yesterday’s data showing another build to US inventories knocks prices down from levels observed earlier in the week.  There are some concerns about Russia adhering to the agreed upon production cuts with OPEC+ going forward, and the question in the market is how will Saudi Arabia respond if Russia ramps up output.  The questions about trade are also putting a negative impact on oil prices today, as no deal is viewed as bad for global growth. 

 

The grains and other commodities are softer today, in part attributed to the fresh concerns about trade.  The dollar index is down a decent amount today, with the Fed apparently not moving as close to neutral as what the market expected.  The comments about continuing to watch economic developments, when the data has carried a softer tone, leads the market to interpret the Fed as still leaning towards easing if anything.  This puts pressure on the dollar, which should be supportive for commodities.  Along with the trade concerns, the potential for a slowing economy is weighing on prices today.  For grains, the current cold temperatures and snowy conditions, which are causing delays to the remainder of harvest, do not seem to be a great issue for prices, as they continue to leak lower.  For wheat, the additional precipitation bodes well for the winter wheat crops already planted.  One additional note for soybeans, open interest declined by over 22k yesterday, which is most likely attributed to today being first notice day for the November futures contract, which is on the newest crop of beans.

 

Today is month end, which could bring some position closing or window dressing into the price action.  With the Fed behind us, and key economic data up tomorrow, the market could be bound to a range type of trade, which may allow for some month end flows to move prices around a bit more than usual.      

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SF0                         913.00                   913.75                   921.00                               

CZ9                      317.75                   403.25                   401.00

WZ9                     491.00                   502.75                   502.25

KWZ9                  408.75                   434.25                   460.25

MWZ9                 525.25                   536.00                   554.00

SMZ9                   301.3                     307.4                     312.3

BOZ9                   29.59                     29.15                     29.47

CLZ9                      55.17                     55.56                     57.37                 

GCZ9                    1511.0                   1474.2                   1398.1

LHZ9                    66.490                   68.630                   71.470

LCZ9                    108.690                 109.850                 113.655

KCZ9                    98.20                     101.80                   103.65

CCZ9                    2393                       2412                       2375

CTZ9                    61.40                     62.39                     67.73

SBH0                    12.34                     12.74                     13.26

JOF0                    102.85                   105.30                   113.15

HGZ9                   260.80                   263.90                   273.90

 

Thanks,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404