Commodity Corner: Morning Comments

Good morning,


DXZ9  96.870  -0.514               GCG0  1475.8  +3.5                         ESZ9  3175.00  +7.00                CLF0  59.73  +0.55


Well, pretty obvious what transpired in the markets yesterday.  President Trump signed off on Phase 1 of the trade deal with China last evening, after the agreement was announced yesterday afternoon.  In addition, Boris Johnson had had a huge victory in the UK election and has signaled as January 31 as the target for Brexit.  Equities and many commodity markets, including oil, exploded higher on the big expectations for the global economy.  Gold, even with the “risk on” tone in the market, was drug higher in the euphoria as well. 


There is really not much to say beyond what has happened.  As markets quickly move themselves into technically overbought territory, the temptation will be there to attempt to pick tops in the markets.  Keep an eye on the 200 day moving averages in the products you are trading.  If they come into play, this could be a very good area to find support or resistance.  It might be a good idea to keep a fairly tight stop in place, as price action that pushes through these levels with some momentum can generate an additional move in the same direction from stop loss trading and from the algo community. 


A couple of quick observations to make from the trade yesterday and last evening:

-)  WTI crude oil touched $60 last evening, the first time it has printed this price since September.

-)  Grain prices, including cotton, had a strong move up on the improved trading prospects/expectations with China.

-)  Coffee prices continue to surge higher, to over 2 year highs, driven by spec buyers adding and continued concerns about future supply.

-)  Brazil 2019 coffee output was cut by 3.1% to 57m bags.

-)  Sugar prices continue to push to new highs as well, driven by supply concerns and the trade deal.

-)  Lean hogs also rallied on the thoughts of additional business with China, especially as some new cases of ASF are beginning to be reported.

-)  The dollar index is getting pummeled today, creating additional support for commodity prices.

-)  China’s renminbi has traded substantially below the $7 level, that had been the support barrier, and very important during the trade negotiations.

-)  The British pound exploded higher on the election news, only to be coming back off a bit as everything gets digested. 

-)  A sale of 1.6m tons of corn was sold to Mexico by US exporters.  An additional 110k tons were sold to Unknown.

-)  US inflation numbers, released yesterday, came in below expectations, confirming the Fed’s comments on inflation being well under control.

-)  Copper and palladium prices surge higher as well, with palladium trading at an all-time high; while copper reaches a 7 month high.


The trade today will basically be driven by the market interpreting the details of the trade deal, and the implications from the UK election.  The markets will also be attempting to determine if these new developments will have any impact on global monetary policy going forward and the global economy.       


Technical Moving Averages:

Product               50 day                100 day               200 day

SF0                       919.50                   907.25                   912.50

CH0                      389.50                   392.25                   407.25

WH0                    518.75                   504.50                   508.75

KWH0                  433.50                   431.00                   460.50

MWH0                535.00                   535.00                   554.75

SMF0                   304.3                     303.0                     310.5

BOF0                   30.91                     30.08                     29.66

CLF0                     56.05                     55.62                     57.30

GCG0                   1489.2                   1499.9                   1423.9

LHG0                   72.265                   72.525                   76.045

LCG0                    122.640                 117.600                 118.120

KCH0                   110.10                   106.65                   107.20

CCH0                   2544                       2443                       2419

CTH0                   65.13                     63.08                     67.14

SBH0                    12.66                     12.58                     13.07

JOF0                    99.80                     102.15                   108.90

HGH0                   266.30                   264.15                   272.50






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC