Good morning,
DXU9 97.655 +0.024 GCZ9 1523.0 +8.9 ESU9 2902.50 -29.50 CLU9 55.78 -1.32
Trade progress, or hopes of it. That pretty much sums up the main driver in the market yesterday. Upon the announcement of talks resuming in a couple of weeks, and President Trump declaring the additional proposed tariffs on China wouldn’t take effect until December, sent most markets soaring. Even with the, been there, done that feeling that most get when these headlines hit the tapes, the emotionless algo programs grab the headlines and then proceed to grab the market. One can’t really fight the initial thrust, so all you can do is pile on.
Obviously, a healthy trading relationship with China is a boon to economic prospects, and good for numerous US products that have been looking for a home. So, equities, the dollar, oil, industrial metals, grains and soft commodities all shot higher, with a couple of exceptions. Live cattle was limit down for a second consecutive day, as the shake out from the destruction from the fire at a slaughter plant in southwest Kansas continues to shake out. Corn was also down fairly sharply again yesterday, also still coming to grips with extremely bearish data from Monday, which left many traders shaking their heads. Monday’s immediate limit down move on the release of the data also found some funds stuck with long positions, and yesterday was finally a chance to get out. Fixed income markets, which had been rallying on the premise of a more aggressive easing of monetary policy from the Federal Reserve, due to the lengthy trade talk delays, corrected lower on the renewed trade hopes. Likewise, gold dropped sharply, as some of the safe haven status of gold eroded.
The oil market has a bit of a story behind the trade this morning. Prices are lower, following yesterday afternoon’s report from API that crude inventories rose by 3.7 m barrels last week. The market had been anticipating a decline of about 2.3 m barrels, which started the oil market inching higher yesterday, before the trade headlines. Today brings more production and inventory data for the energy markets.
Grains appear to have digested, for the time being, the latest WASDE report and updated planting intentions survey. There remains much debate on the data, compared to what is being reported on a weekly basis, so the trade will stay on edge, looking for clues regarding how accurate the USDA will be in its projections. Fund positioning had an opportunity to get more aligned in yesterday’s trade.
It is worth noting that in gold, the lead contract GCZ9, held above the psychological $1500 level on the break yesterday, and again in the overnight trade. Unrest in Hong Kong remains, Argentina’s government will be a large question mark throughout the fall until the next elections take place and the overall sentiment for global central banks appears to be that of easier monetary policies. All of this helps support gold prices.
For the rest of the markets, while all have specific stories pertaining to supply and demand developments, which have been discussed in the past in this commentary, the most influential input will be trade developments, positive or negative. So remained tuned in to Twitter and watching for headlines. That should guide the trade.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 903.75 898.50 921.25
CZ9 435.25 415.25 407.25
WU9 510.25 489.75 507.50
KWU9 448.00 443.75 482.75
MWU9 540.50 541.75 563.75
SMZ9 316.2 314.7 318.3
BOZ9 28.60 28.73 29.45
CLU9 56.02 58.97 57.50
GCZ9 1420.0 1364.3 1334.4
LHV9 73.625 80.285 74.705
LCV9 107.065 110.115 112.715
KCZ9 106.50 103.30 109.95
CCZ9 2456 2409 2360
CTZ9 64.06 68.55 71.87
SBV9 12.27 12.46 12.84
JOU9 103.20 106.80 118.90
HGU9 266.85 275.15 277.05
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404