Commodity Corner: Morning Comments

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






Michael Clifford


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