Good morning,

 

DXM9  97.41  +0.034                          GCM9  1290.5  -7.3                                                         ESM9  2865.25  +10.25                      CLM9  62.94  +0.92

 

The positive vibe on the US/China trade negotiations generated from President Trump delaying auto import tariffs amid the EU/Japan trade talks and the positive negotiating of a trade deal with Mexico and Canada has propelled the US equity market higher, primarily  during  the European hours (stocks  were lower at the end of the Asian session).  Looking at a few of the markets confirms the optimism, with e-minis up, gold down, copper up, cotton up (hit hard recently on potential lost demand from China), and grains up (although the weather and fund positioning is driving this market at the moment).  Oil is marching higher as well, getting a nice boost yesterday from the US data showing gasoline inventories declined. 

 

As trade remains the primary concern of most markets, any news can have a big impact on the price action across numerous asset classes.  Other factors for the individual markets, while still pertinent, take a back seat when big  news on trade, positive or negative, hits the tape.  That being said, I will just post some bullet points with relevant items for a  few of the markets  either from yesterday’s trade, or heading int today’s trade.  I would  mention that, as the different markets whip around, technical analysis can be a very useful tool when trying to determine support and resistance levels for the markets to come to a halt.  Below are moving average levels for numerous  commodities.  These levels have worked well, to this  point, in providing support and  resistance  areas. 

 

Grain markets resume the  trade higher, as more rains are in the immediate forecast and reappear later next week.  While the farmers have made good progress in this planting window, these rains will cause even more delays.  Spring wheat and corn are quickly approaching the presumed end to  the planting season.  Also driving prices higher is short covering from the fund community, which continues to carry large shorts  across the complex.

 

Frozen orange juice is having its best 4 day rally since September of 2017.  This following the  prior trade which saw orange juice prices decimated on the big supply and slowing demand story.  On May 10, Brazil reported this season’s orange crop to be up from last year, but lower  than what the market  had  been expecting.  There was also a downward revision to the size of the Florida crop.  This created the short covering bid.  Cotton also is seeing some short covering, as the announced large crop size last Friday, coupled with diminished Chinese demand knocked prices down hard.  The bounce  here is driven by the hopes a trade deal can be put in place. 

 

Coffee has a bid today, also continuing to recover from a substantial sell off, as Brazil’s CONAB forecasts the expected size of the 2019 harvest.  While the 50.9m bags for this season is the largest volume ever for the lower yielding second  half of a two year cycle, it is at the low end of estimates that were in the market. 

 

Oil had a big reversal day yesterday, being down early following the API reporting an increase to the inventory build for crude on Tuesday afternoon, only to reverse course as the gasoline inventory numbers showed a decline yesterday morning.  With the tension in the Middle East remaining, as Saudi Arabia is blaming Iran for the drone attacks of its pipelines the other day, oil is ratcheting  higher. 

 

Copper is higher today, having rallied yesterday, as all the positive trade news Is seen as a boon for the global economy.  Yesterday’s news  of the delay on auto import tariffs also supported copper prices.  Gold prices continue to oscillate around $1300, as the trade headlines tug of war continues. 

 

As mentioned, the US weather has rain reappearing in the immediate forecast, and in the extended forecast for the Great Plains and Midwest.  This keeps the planting delay story intact, and as the calendar moves  along through May, brings even more plausibility to acres being lost or switched.  Even if the crops get planted, the overall cooler temperatures this spring have reduce soil temperatures, which ultimately could lead to a reduction is realized yields.   

 

Technical Moving Averages:

Product               50 day                100 day              200 day

SN9                      887.5                     911.25                   913.5

CN9                      371.0                     381.25                   387.0

WN9                    454.25                   485.25                   518.75

KWN9                  428.5                     467.75                   513.0

MWN9                538.0                     555.75                   583.0

CLM9                   61.70                     57.60                     60.66

GCM9                  1295.5                   1303.4                   1268.9

LHM9                  90.670                   84.355                   82.280

LCM9                   118.400                 118.015                 116.155

KCN9                   94.91                     101.05                   108.59

CCN9                   2302                       2316                       2278

CTN9                   76.05                     75.56                     78.83

SBN9                   12.53                     12.72                     12.64

JON9                    112.82                   117.86                   133.29

HGN9                  288.35                   282.50                   280.10

 

Have a good day,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1201A                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404

312-896-2012  (fax)