Good morning,
DXH0 97.900 +0.133 GCJ0 1579.2 -4.5 ESH0 3259.00 +19.50 CLH0 53.44 +0.30
The markets appear to be calming a bit today, although the coronavirus concerns remain. Equities are posting a light volume bounce this morning. Gold is giving back some of the safe haven premium it received over the past few sessions, while oil continues to work its way back up. Oil had posted a decent recovery off the lows in yesterday’s late trade. The overall demand impact of the virus continues to weigh on commodity prices, which are lower again this morning, for the most part, after getting hammered the past few sessions. Today begins the 2 day Federal Reserve monetary policy meeting, where no change to short term interest rates is expected. However, given the geo-political landscape over the past few weeks, the market would appear to be bracing itself to see a slight shift in tone and stance from that of neutral, to slightly dovish (at least in the text) due to global circumstances. Any changes to the Fed’s thinking or positioning on policy can have a direct impact on numerous markets. The results of the meeting and accompanying text will be released tomorrow afternoon.
With all commodity prices reeling downwards, cocoa has been the one product that has held in. Cocoa has a couple of factors providing support to prices. There have been ongoing supply deficit concerns for cocoa, given the weather observed in Ghana and the Ivory Coast over growing season. In addition, there has been a $400/metric ton above the futures price surcharge tacked on to cocoa shipments. As delivery approaches for the near contract, this forces prices at the front of the futures converge higher towards what the ultimate delivery price will be.
Stories are abundant out there about the potential lack of demand for commodities if this virus continues to spread, so I will not bother repeating what would appear to be a rather obvious concept. Clearly, stories about the virus will dictate the trade over the next couple of sessions, as markets await the Fed’s response to the recent global developments. The UK is also expected to cut rates at its meeting on Thursday, just ahead of Brexit kicking in.
Month end is Friday, which may influence the trade towards the latter part of the week. Given the recent sell-off over the past few sessions, markets are no longer poised to go out at the highs. It will be interesting to monitor if the recent decline brings in a buy the dip mentality, for window dressing reasons or to position for a renewal of the recent rallies observed. Or, if markets view this as a time to exit, and book any profits that still may exist, although a lot has been left on the table from this time last week.
As the markets continue with the volatile price action, moving average levels can provide decent areas of support and resistance.
Technical Moving Averages:
Product 50 day 100 day 200 day
SH0 924.25 929.25 920.25
CH0 383.50 387.25 404.75
WH0 543.25 524.00 517.25
KWH0 460.50 443.25 458.50
MWH0 535.00 538.75 549.50
SMH0 302.6 305.2 309.9
BOH0 32.76 31.66 30.38
CLH0 58.57 56.65 56.75
GCJ0 1513.4 1513.5 1458.8
LHJ0 75.460 78.080 79.885
LCJ0 126.395 122.980 120.360
KCH0 121.20 112.30 109.15
CCH0 2571 2523 2461
CTH0 67.70 65.50 66.20
SBH0 13.45 12.91 13.06
JOH0 99.75 102.20 107.20
HGH0 275.25 269.50 270.65
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404