Good morning,
DXZ9 97.720 +0.057 GCZ9 1468.3 -3.6 ESZ9 3129.00 +7.25 CLZ9 56.50 -0.55
Trade prospects, positive and negative, continue to drive the markets. As witnessed yesterday morning, trade pessimism from China due to President Trump not willing to roll back some of the tariffs quickly turned equities negative and brought a quick bid into a declining gold market. However, the news of the meeting between President Trump, Fed Chairman Powell and Treasury Secretary Mnuchin quickly restored the positive vibe, which has carried on through the evening trade. With the impeachment hearing likely to capture a portion of the market’s attention today, the markets will always be at risk for any trade blasts.
With trade the dominant theme behind most trading, including the commodities, I’ll just attempt to take a quick spin around some of the markets.
The grain markets are up a touch today, following renewed trade hopes and crop progress data yesterday showing a continued lag, although not bad, on the harvest pace. With the colder temperatures and snow having pushed through, and now with rain systems moving in, harvest completion could be challenged. The grain markets have digested the latest WASDE report last week, showing larger than expected projections for production and inventories in corn and soybeans. If harvest can’t be completed, there could be some pullback here. The wheat market has been trading well of late, as the inventory data in WASDE was less than expected, and some of the recent weather is posing a risk to winter wheat crops that have yet to hit dormancy.
Aggressive short covering has been the theme in some of the other soft commodities, as concerns about supply shortfalls heading into next year have created a sharp bid to prices and forcing the hand of the short community. Over the past few weeks, there has been a sharp decline in the size of the short position reported in the COT report from the CFTC. Coffee, sugar and cocoa have all been in uptrends of late. Using a more minute lens for coffee, prices were lower yesterday, and could remain under pressure through tomorrow, which is first notice day for the December contracts. Cotton has come off the past few sessions, following trading up last week on trade prospects and the WASDE report showing a reduction in production and inventories, in part created by increased export expectations. Cotton, along with the other softs, will have a similar fate to its price action from any meaningful trade rhetoric.
The oil market continues to chop around, as we now are getting close to the next OPEC+ meeting, on Dec 5-6, where production quotas are certainly to be a hot topic. WTI prices were flirting with $58 yesterday in the early trade, on the trade hopes, only to get knocked back when the trade pessimism out of China hit the tapes. In addition, the weekly US production and inventory data continue to show a sharp build to stocks, which put some additional pressure on prices yesterday. As has been the case for the better part of the past 6 months, you can expect to see some very aggressive, choppy price action in the oil markets, but it always seems to find its way back to the $54 to 56 median.
There really isn’t any need of a deep explanation for the gold market. Given all of the uncertainty that has been out there over the past 6 months, from monetary policy, to geo-political risks, to trade and global economic growth, gold has been the safe haven, and an asset which saw large inflows. As the market begins to feel more comfortable with other assets, the unwind of the safe have trade has been weighing on gold prices. In addition, funds which caught the move from the long side have been getting out as well. It is still a ways away, but the $1407.8 price level in GCZ9, the 200 day moving average should be a key support area. Obviously, this number will change daily, but keep the concept in the back of your mind if gold prices keep declining.
This Friday is December options expiration for many markets. Excessively large open interest in a particular put or call strike can tend to cause prices to migrate in that direction, in relatively quiet markets. This is a fairly light economic calendar week, and with the impeachment hearings and waiting for the next trade blast possibly muting trading activity, options expiration could come into play. If you are trading in a particular market, you may what to take a glance at the size of some of the options positions, as it might provide a clue for what the risks are for the price action this week.
Technical Moving Averages:
Product 50 day 100 day 200 day
SF0 925.00 912.50 918.50
CZ9 381.25 393.25 399.50
WZ9 501.75 498.00 499.75
KWZ9 415.75 424.50 451.75
MWZ9 529.25 528.75 548.50
SMZ9 302.9 304.4 310.9
BOZ9 30.22 29.48 29.50
CLZ9 55.59 55.76 57.47
GCZ9 1497.0 1486.5 1407.8
LHG0 74.580 74.155 76.015
LCG0 118.550 116.160 117.665
KCH0 104.20 105.50 106.60
CCH0 2486 2429 2397
CTH0 63.84 63.09 67.93
SBH0 12.42 12.61 13.17
JOF0 101.55 104.00 111.35
HGZ9 262.90 263.50 273.35
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404