Commodity Corner: Morning Comments

Good morning,


DXU9  97.750  -0.076                       GCZ9  1522.8  -5.0                                  ESU9  2850.75  +10.00                    CLU9  54.77  -0.46


Shortly after 4 AM CDT this morning, the headline that China would retaliate imminently against the proposed new tariffs from President Trump last week.  China claims the new tariffs are a violation of the accord reached between President Trump and President Xi Jinping.  China said it has no choice to take necessary retaliatory measures against these tariffs.  This doesn’t really strike me as new news, since China declared retaliation when President Trump first announced the tariffs.  Nonetheless, markets did a complete 180 spin on the headlines, suggesting an agreement remains far in the distance.  S&P futures went from up 20 points to down 20 points.  Likewise, gold, which was in a lower correction, popped back up.  Oil got smacked below $54, and fixed income markets shot higher.  Now liquidity may be a factor in the magnitude of the reaction here, as the headlines appeared after Europe’s open and ahead of US desks getting to work.  In addition, today is a partial holiday in Europe, which also may have been a factor.


Perfect example of the craziness in this market.  I step off the desk for 45 minutes at 6 AM CDT, and S&P futures are now back up 15 and gold is down again.  The latest headline is that China hopes the US can meet half way in the negotiations.  Oil is still lower, but has bounced almost $1 off the lows.  Well, it is summertime, amusement park season.  The roller coaster is up and running again today! 


In any event, as stated yesterday, while all of the markets have story lines of their own, the trade topic can certainly jolt markets very abruptly.  Buckle up!  Given the events of the early US hours today, this most likely is going to be the story of the day.


Oil was hit hard yesterday, as data confirmed increases to oil production and inventories last week.  Oil was already under pressure ahead of the release, from the API data on Tuesday evening.  In addition, the negative vibe on the trade talks, hampering economic growth prospects, weighed on oil prices.  Oil still basically remains in a trading range.  It’s a pretty wide range, just below $60 down to just above $50, but it continues to have wild swings (like many markets of late) within that band.  Once the dust settles, it appears oil tends to revert to a more confined range of $54 to $56.


Egypt is in today, with a wheat purchase tender.  The Black Sea has dominated in this arena of late.  The market will be watching the price, and gauging how far away the US is from being competitive.  Just released, bids came in from 11 companies, all but one from the Black Sea (France submitted 1 bid, at a lower price, but transportation was not included in this price).


US economic data just released showed an uptick in July retail sales figures, along with increases to non -farm productivity and unit labor costs.  Fixed income markets set back on this. 


The theme for trading these markets remains to keep your eyes glued to the headlines, and your Twitter feeds.             


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       903.25                   898.00                   921.00

CZ9                      433.75                   415.00                   407.25

WU9                    509.25                   489.75                   507.00

KWU9                  446.00                   443.00                   481.75

MWU9                539.25                   541.00                   563.25

SMZ9                   315.6                     314.4                     318.2

BOZ9                   28.62                     28.73                     29.45

CLU9                    56.05                     58.92                     57.44

GCZ9                    1423.7                   1366.2                   1335.7

LHV9                    73.385                   80.065                   74.705

LCV9                    106.935                 109.890                 112.635

KCZ9                    106.25                   103.25                   109.75

CCZ9                    2453                       2409                       2359

CTZ9                    63.90                     68.39                     71.78

SBV9                    12.25                     12.45                     12.83

JOU9                    102.95                   106.45                   118.70

HGU9                  266.70                   274.90                   276.95






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC