Commodity Corner: Morning Comments

Good morning,


DXZ9  97.890  +0.148               GCZ9  1472.0  -2.3                                                      ESZ9  3111.25  -7.25                CLF0  55.75  +0.40


Crude oil grabbed the headlines yesterday, dropping 3.2% on concerns about global demand.  The demand concerns arose when the UIS Senate passed legislation supporting the Hong Kong protestors, which was bound to upset China and throw yet another roadblock into the trade talks.  In addition, there has been a steady increase in US production and inventory build, and the markets were under pressure ahead of this week’s data.  Late in the afternoon yesterday, the API reported US crude inventories grew by 5.95m barrels last week.   The market is expecting to see stocks rise by approximately 1.6m barrels.  Interestingly, oil prices are slightly higher this morning, suggesting the strong API data had already been priced into the market.  As prices move back down towards the lower end of the recent trading ranges, it brings into even more focus the OPEC+ meeting in early December, and the production conversation amongst its members. 


Gold prices having been hovering around unchanged for most of the evening, as the ongoing situation in Hong Kong, resulting in potential further delays on trade, keeps equity prices on the defensive and an underlying bid to gold.  Gold has had over a $100 correction in the past couple of months, and with a good degree of uncertainty clouding many markets, should hold to maybe have a slow leak down.  As mentioned yesterday, the next true barrier to watch on the downside will be the 200 day moving average, which today comes in at 1408.4 for GCZ9. 


Coffee futures had another big day down yesterday, as positioning into first notice day for the December contract is weighing on prices.  With liquidity sparse in the December contract, the selling there is impacting the spreads and driving all prices down.  Also pressuring prices lower has been a return of rains in South America, following drier than normal September and October.  The recent rains have brought the moisture levels of the regions back to more in line with normalcy, hopefully aiding the crops. 


The grain markets are mixed today, with corn under a bit of pressure and soybeans up slightly.   Wheat, which has been the strongest in the complex of late, is undergoing a light correction down today.  Wheat’s bid of late comes from the recent cold weather potentially causing stress to the crops.  Underlying support for corn can be found from the export wires, where the US sold 191k tons of corn to unknown (presumed China) and have sold more than 300k this week.  Soybeans also have been receiving some support via the export arena, as China has been a good purchaser over the past month or so, in part good faith as the trade talks continue.  Harvest activity should be drawing to a close (weather permitting) for corn and soybeans. Over many recent years, the low prices of the recent trading ranges are put in as harvest concludes.  The caveat this year, of course, will be any trade related matters that pop up.  The cotton market, which rallied post WASDE on the production projections, has been coming off of late, again due to the slow trade discussion process.     


Two points worth noting for many markets. 


-)  December options expire this Friday for many products.  Given the relatively quiet trade that is being observed, given the waiting for “trade bombs” and any other news, such as Hong Kong or Impeachment, large positions in certain strikes can cause the price action to gravitate towards the strike, to squeeze the short holders of those particular options.  In any product you are trading, a quick peek at outstanding open interest may be worth your while for the trade over the remainder of this week.


-)  Next Friday, Nov 29, is First Notice Day for many December futures contracts.  It also happens to be the day after Thanksgiving.   All long December futures positions should be rolled to another contract, or liquidated, by the close of business on Wednesday, Nov 27 (keep in mind some markets may have different closing times, due to the holiday), to avoid any risk of receiving a delivery notice.  Liquidity is likely to be thinner than usual next week with the holiday, so addressing any open December positions (especially longs) this week might be a good plan.    



Technical Moving Averages:

Product               50 day                100 day               200 day

SF0                       925.50                   912.25                   918.25

CZ9                      381.50                   392.50                   399.25

WZ9                     502.25                   497.75                   499.50    

KWZ9                  416.25                   424.00                   451.25

MWZ9                 529.25                   528.25                   548.00

SMZ9                   303.0                     304.1                     310.8

BOZ9                   30.27                     29.50                     29.49

CLF0                     55.55                     55.73                     57.46

GCZ9                    1496.5                   1486.9                   1408.4

LHG0                   74.590                   74.090                   76.025

LCG0                    118.880                 116.270                 117.695

KCH0                    104.20                   105.40                   106.55

CCH0                    2493                       2431                       2399

CTH0                    63.95                     63.08                     67.87

SBH0                    12.44                     12.60                     13.16

JOF0                    101.40                   103.85                   111.20

HGZ9                   262.95                   263.40                   273.30





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC