Good morning,
DXM0 100.165 -0.269 GCM0 1759.8 +3.4 ESM0 2924.50 +78.00 CLM0 32.20 +2.77
The markets appear to be exhibiting a sense of calm, even some ”risk on” appetite, following Fed Chairman Powell’s interview on 60 Minutes last evening. Although the Chairman did warn that we may not have hit the worst yet, in terms of economic damage and the corresponding data, he was optimistic that the country would be able to recover. He was reluctant to put any type of a time window on this, and did warn that is would likely be a slower developing process than most would like, but he was optimistic. He also said that the Fed still had tools at its disposal to use from the monetary policy side, but also said that additional fiscal stimulus would most likely be needed.
Gold prices have been on fire overnight, trading up to a 7 year high. The Fed Chairman’s additional stimulus comments will most likely be needed fanned the gold flames. Reductions in interest rates tend to draw investors toward gold. Copper prices are up sharply overnight as well, as the optimism on eventual economic recovery should be a huge boost for copper demand.
Oil prices continue to mount an impressive comeback in prices, screaming through the psychological $30 price level for the June contract. Tomorrow is the last trading day for June, and the positioning outlook is much better than it was in front of the May expiration. June open interest currently stands at 55k today, a number believed to be much more manageable. Again, while economies are re-opening, the expectation for a surge in demand is feeding into prices. The additional production cuts agreed upon by Saudi Arabia and a couple of the other OPEC partners, along with the apparent cooperation between Russia and Saudi Arabia is also driving prices higher.
A very strong rain system swept across the US Midwest this week. The excessive rains delayed some planting progress over the weekend. However, both corn and soybeans had been on a pace ahead of the historical averages, so as long as the emerged crops don’t incur any damage, things should be ok. Once the rain pushes through, the next 4 days shows a very good window for planting, once the fields dry out. These same rains should be beneficial for wheat crops, where there had been some recent concerns of stress and damage from cold, then dry weather. Friday afternoon, the CFTC released the weekly COT report. Worth noting, the speculative short position in corn rose to almost record levels, showing the size of the short to be 267.6k. The old high is approximately 271k. This data was taken from last Tuesday, so positioning following the WASDE data would be included in this number. Given the large production and ending stocks projections, the size of the short isn’t that surprising. This does leave the corn market a bit vulnerable to have some short covering, whether the impetus for the trade be flooding/crop damage or improved oil/ethanol demand. China appearing to be attempting to honor some of its commitments from Phase 1 also could put a bid into prices.
Cotton prices are continuing with the decent rally observed last week. In addition to the expected pick up in demand as China recovers from the pandemic, and with the hopes that the rest of the world will follow a similar suit, prices move up. The has been some hot dry weather concerns in portions a Texas, which is thought to be bringing some stress to the crops as well. Orange juice futures were up sharply on Friday, as warmer temperatures and insufficient rains put the crops at risk. Sugar prices are also continuing to bounce, driven by oil along with dry weather in Vietnam again posing risks to the coffee crops there. Meat processing plants are managing to get themselves back up on line, which should gradually begin to help the short term domestic supply situation. Live cattle futures were again strong last Friday, on available supply concerns.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN0 856.50 894.75 918.50
CN0 336.75 364.50 383.00
WN0 531.50 543.00 528.75
KWN0 476.50 482.25 465.25
MWN0 524.75 540.75 546.75
SMN0 299.9 303.3 308.2
BON0 26.61 29.60 30.41
CLM0 25.16 39.70 46.99
GCM0 1668.0 1626.5 1569.4
LHM0 60.105 71.785 80.190
LCM0 89.000 101.160 106.820
KCN0 113.70 114.90 113.70
CCN0 2353 2534 2490
CTN0 55.31 62.54 63.76
SBN0 10.65 12.42 12.62
JON0 110.60 106.95 108.50
HGN0 231.25 250.15 258.15
HOM0 97.36 136.20 160.42
XBM0 79.27 126.32 150.19
NGM0 1.860 1.966 2.143
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404