Commodity Corner: Morning Comments

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





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC