Wednesday, April 14, 2010
RUT Filled
I was filled right away so there might be a little more credit there if you work the price higher.
RUT Update
Our May 750/760 call spread is coming into play. So based on today's close and the opening price tomorrow an adjustment may be required.
Our April 730/740 call spread has also come back from the dead. So we migh need to buy this spread back at the close tomorrow to avoid any settlement gap risk.
NEW ORDER
Sell to open 3 May 640/630 put spreads limit GTC @ 0.50 Credit.
Our April 730/740 call spread has also come back from the dead. So we migh need to buy this spread back at the close tomorrow to avoid any settlement gap risk.
NEW ORDER
Sell to open 3 May 640/630 put spreads limit GTC @ 0.50 Credit.
Swing Futures Entry
Short 1 Jun 30yr T-Bond (ZB) @ 116'10
Stop @ 117'12
Target @ 113'10
-----------
Filled @ 116'10
Stop @ 117'12
Target @ 113'10
-----------
Filled @ 116'10
Today's Market Guidance
Financial Overview:
While the range down reversal yesterday wasn't your typical big range down washout and reversal signal, the market should get some positive technical momentum from the action Tuesday. In fact, if the market doesn't run up strong today, that would be disappointing for the bull camp, as the market would seem to have the news to return to fresh new highs for the year. In looking back, the market should be emboldened by the much better than expected Intel earnings, as the expected targets were surpassed and the company supposedly saw increases in business spending. With expectations of a moderately up beat US retail sales reading later today and news of a build in business inventories, the market should see investor confidence improve. If you are bearish and want to look to the negatives, there is certainly the potential for more rate hike mongering or perhaps an indirect hint from Bernanke that the Fed is watching inflation, or perhaps that the Fed is attuned to the need to manage inflation closely. We are somewhat disappointed in the magnitude of the initial rally this morning in the wake of the Intel news, but perhaps the market is waiting on additional economic confirmation from the US retail sales reading, that the US economy is indeed moving forward.
DOW:
The June Mini Dow has managed a quasi big range down reversal pattern yesterday and that is typically a formation that can yield 2 to 3 days of higher trade. One would expect sentiment to be improved today but we still get the sense that the bull camp remains somewhat skeptical of the overall recovery pace. It should be noted that the Dow was initially and primarily lifted off its lows yesterday by large industrial companies and now that Intel has registered favorable results, that would seem to suggest that positive things are happening throughout the marketplace. Critical support in the early action today, is seen at 10,875, with up trend channel support now rising to 10,885. Up trend channel resistance and an early target for the June Mini Dow today is seen at 11,024.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal up is a positive indicator that could support higher prices. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside objective is now at 10860. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 11013 and 11045, while 1st support hits today at 10921 and below there at 10860.
S&P:
The S&P would seem to be the least impacted sector of the market in the wake of the favorable Intel earnings. Surprisingly the S&P has consistently shown the least spec long positioning of the most actively traded Index futures contracts and yet it seems content this morning to merely follow or be dragged higher by the rest of the market. Close-in pivot point support on the charts is seen at 1192.60, with initial resistance seen at 1198.20. We would expect to see a fresh new high for the year today, but it is clear that the S&P needs all the help it can get from the scheduled data to extend on the upside.
A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's close above the 9-day moving average suggests the short-term trend remains positive. The upside closing price reversal on the daily chart is somewhat bullish. The market's close below the pivot swing number is a mildly negative setup. The next downside target is now at 1181.07. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1198.62 and 1202.56, while 1st support hits today at 1187.88 and below there at 1181.07.
NASDAQ:
The Nasdaq has forged a gap up move this morning and that isn't surprising considering the magnitude of the positive overnight news flow. With the tech sector seemingly capable of thriving in a slow recovery, that should prompt investors to push additional money into Nasdaq shares and we would be surprised if the market wasn't able to make even higher highs today. Next significant long term resistance in the Nasdaq off the weekly charts, is seen all the way up at 2035, which would be the highest level seen since several months ahead of the sub-prime kick off.
Bonds:
The Bear camp looks to have the first trading edge in several trading sessions today, as a slight recovery in equity prices, favorable Intel earnings, perhaps a little inflation selling and decent US retail sales readings confront the Treasury market later this morning. With Intel earnings coming in much above expectations and the tech sector giant suggesting their results were helped by increased business spending, we would think that a number of longs are set to be pushed from the market later today. With significant price gain readings noted in the recent trade balance reports and signs that the economy is gaining its footing again, it is possible that the CPI report will show a tick or two gain above the expected levels today, but the main report of the day will probably be retail sales, which is the first report in several trading sessions to give a reading on the pace of the US economy. We have to wonder if fairly up beat same store chain sales will translate into real activity in the overall economy in today's monthly retail sales reading. Adding into the downside tilt this morning are recent trade rumors that the Fed is poised to alter its 'keeping rates low for an extended period of time' statement. The Fed's Lacker overnight suggested that his resolve for leaving rates low is softening but that position has been widely circulated of late. However, the market didn't seem to give the rumors of a change in the Fed statement that much credence, as that in conjunction with the news facing the market this morning, should have sent bonds and notes down by more than is being seen early today. It should be noted that Bernanke will be in the press this morning, as he testifies in front of a Joint economic committee of Congress. On the other hand, seeing a fairly strong retail sales reading, in the wake of the Intel news and solid strength in large industrial shares yesterday, should leave the bear camp with the edge. While it might fly in the face of conventional wisdom, seeing US business inventories rise this morning could be a sign that companies are seeing improved demand and are starting to rebuild supply chains and therefore a rise in business inventories might actually be a bearish development for the Treasury market this morning. With the mostly bearish tilt in place this morning and the prospect of bearish data flows later this morning, we easily expect to see a test of close-in support on the charts around 116-02 in June bonds and at 116-07 in June Notes. In fact, given scheduled economic readings that are at expectations, the odds for a big range down move are very good today. Secondary support on the charts in June bonds is seen down at 115-23 and down at 116-00 in June Notes. It should also be noted that the yield curve is poised to reach the narrowest level in 15 trading sessions and that could suggest that confidence in some form of recovery is indeed returning.
The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next upside objective is 117-010. The next area of resistance is around 116-240 and 117-010, while 1st support hits today at 116-050 and below there at 115-260.
US Dollar:
The Dollar is having mixed fortunes against the major currencies this morning, with the Greenback trading weaker against the major currencies, while rallying against the June Yen. The major piece of news overnight came out of Asia, as Singapore shook up the markets with a currency revaluation, as that would seem to suggest that some form of Chinese revaluation is ahead. It would also appear as if the Dollar is seeing some pressure off ideas that Intel earnings point to better US and global economic conditions ahead and that in turn means some players will shift out of the flight to quality Dollar and into cheaper and perhaps oversold currencies. Much of the markets overnight volatility was centered on the June Yen, as the most likely direction for a rate move in Japan is still pointing lower and that leaves the interest rate differential against the Yen and that in turn is supporting the Dollar somewhat. There is a full slate of US economic numbers this morning for the market to digest and the expectations are calling for most favorable US economic numbers and that might result in a weaker Dollar off waning flight to quality mentality. It is also possible that the Dollar could benefit from 'ultra' strong numbers as that might point to a need to be in the Dollar. However, we get the sense that the Dollar is going to weaken a bit through the US numbers this morning.
Euro:
The June Euro appears to have made it through the turbulence created by yesterday's Greece T-bill auction and it has now picked up strength this morning from a decent Euro Zone industrial production number, a good Intel earnings reading and perhaps from an improved overall macro economic condition. While a good portion of today's support has come from spreading versus the Yen, there is also a sense of near-term relief that the Greece debt crisis have been put on the backburner. Whether it will stay there remains to be seen, but in this case no fresh news is being treated as good news. Although the more likely longer-term direction for the June Euro is lower, prices today should see some upside action, especially if the Euro shows some positive action in the wake of the US retail sales figures. Initial resistance is pegged at the 1.3367 level and then again up at 1.3694.
Yen:
The June Yen continues to take it on this chin this morning from the Singapore revaluation, although much of this weakness has occurred during European trading action. The early market take on Singapore's action is that there are trying to get ahead of expected Chinese exchange rate changes. With Bank of Japan officials making it abundantly clear that the choice for Japanese rates is either unchanged or lower, the June Yen also looks to remain under pressure from an unfavorable interest rate differential argument. Today's move looks like it has derailed the June Yen's April bounce rally from 10-month lows. Look for the June Yen to head back toward and below the 106.00 over the near-term, with new lows an increasingly likely prospect directly ahead.
Gold:
The June gold contract has managed to rise above the prior session's high in the early action today and it generally managed to respect the even number $1,150 on the charts early today. The bull camp will suggest that the market is seeing an improved macro economic sentiment, without much in the way of fresh anxiety from the EU debt front. The bear camp is trying to play up the prospect of a possible change in the Fed's interest rate statement, with the Fed's Lacker overnight suggesting he was becoming less comfortable with the leaving rates low for an extended period of time statement. If the bull camp is really benefiting from improved economic sentiment, then this morning's retail sale report should give the bull's added incentive. With the US CPI report also due out today, there could be some cross currents for the gold trade from the Fed policy debate front. The gold market might also garner some lift from very favorable Indian monthly gold import figures overnight but recently the gold market has tended to give demand side stories more credence than supply side developments. Gold Stocks for April 12th were 10.074 million ounces up 698 ounce. Therefore, gold stocks have extended their recent pattern of new record stock levels.
Silver:
While May silver has managed to rise above the prior session's high in the early Wednesday trade, the silver market was still trading below this week's highs. However, silver and other physical commodities seem to be benefiting from an improved macro economic outlook that seems to be the result of better than expected Intel Corporate earnings news. However, the silver market did see news of increased 1st quarter physical silver production from a key Mexican silver mining company overnight and that might have held back prices early today. Surprisingly the copper market is showing some weakness early this morning and that might be considered a minor negative outside market issue for silver by some traders. In another minor negative, exchange silver stocks for April 12th were 115.815 million ounces up 748,687 ounces. It would appear that silver is set to behave like a classic physical commodity market that is at least temporarily being cheered by favorable economic views. The big question will be whether the US retail sales and CPI reports further economic optimism or will they temper the new found optimism.
Crude Oil:
Energy prices continue to build on yesterday's recovery move and the trade looks set to hold those gains into the US Wednesday action. With favorable equity market action, a lower Dollar, upbeat Intel earnings news and expectations of a 1.5% gain in US retail sales, the bulls would seem to be facing positive demand conditions today. With the June crude oil market fresh off a major big range down reversal in the prior trading session, one would think that the market is in a very good technical position to rally today. However, the trade will probably be a little restrained through the scheduled economic readings, as the weekly storage figures loom later in the trading session. Comments made by OPEC officials early this morning were a bit conflicting, as their forecasts for increased demand came with an expected price range forecast that was below where the market is currently trading. While the trade is generally expecting to see another build in crude oil stocks this morning, we suspect that the EIA numbers might be given less importance in the face of decent outside market conditions today. In fact, in the face of a noted range up move in equities and as or better than expected US retail sales readings we would not be surprised to see June crude oil rise to $86.52 and perhaps even up to $86.70. There was a minor production snafu overnight but we suspect that the energy markets focus will be on the prospect of improving demand and not on the prospect of tightening supply.
Natrual Gas:
June natural gas appears to have solidified its rally away from the $4.00 level and also appears to have ventured near an upside breakout on the charts about the $4.25 level. However, the market will still need a decent storage number this week, in order to consolidate and extend those gains. In fact, since expectations are already calling for a sizeable build this week, any sort of number falling short of those expectations would likely move the market well above this week's highs and up towards the $4.40 level that was achieved earlier in the month. There is a T-Boone Pickens testimony ahead and that could give the natural gas market psychological support, as major policy changes tend to be very slow in coming. However, we would think that dialogue from Pickens regarding the cheapness and abundance of natural gas supply, could be enough to give the market a change of returning to the early April highs of $4.42.
Corn:
The corn market ran out of sellers yesterday, and the day session ended with a burst of buying. Traders said that this was caused in part by reports that a major commercial might cancel some corn receipts that were previously registered for delivery. The late rally took the July contract above the recent tight consolidation range near 355 to 360. Follow-through buying overnight is said to consist of further short covering along with some technical buying. This is a light week for news with the corn market continuing to focus on the favorable weather outlook. That includes mostly dry weather into tomorrow when light to moderate rains are expected to move into the NW and north central Corn Belt. This system is then expected to spread to the east and shift down near the Ohio River Valley into Friday. Forecasts have somewhat downgraded the amounts of rain expected as this system moves south, so many fields should experience continued longer term drying. Heavier amounts are expected from eastern Kansas into western Missouri and possibly parts of Iowa in conjunction with the latter stages of this rain event. The USDA will release its latest Export Sales report tomorrow and that may be the main piece of fundamental news for the week. Last week's total sales soared well past 1 million tonnes which was well above trade expectations. Sales currently need to average just 566,700 tonnes each week to reach the USDA's export projection for 2009/10. South Korea is in the market again for corn with that country's biggest feed maker looking to buy 100,000 to 110,000 tonnes of corn for September delivery according to traders. A processing association in South Korea is looking to buy 55,000 tonnes.
Cattle:
The technical action looks somewhat negative, but the large discount of June cattle to the cash market and the outlook for improving beef demand into the May-June time frame leaves the market looking undervalued. Beef prices look even better if Russia resumes poultry imports from the US. June cattle closed moderately lower on the session yesterday, and have seen a break of as much as 222 points off of Monday's highs. News that cash cattle traded $1.00 lower in Texas at $99.00 this week helped spark the selling, and traders noted sell-stop orders added to the selling as the market took out both Monday's and last week's lows. The discount of June cattle to the cash market and news of higher beef prices at mid-session helped to provide underlying support. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 251,000 head, up from 239,000 last week at this time and up from 239,000 a year ago. Boxed beef cutout values were up $1.15 at mid-session yesterday and closed 61 cents higher at $166.92. This was up from $164.94 a week ago and is the highest beef price since July 21st of 2008. Beef production so far this year is down 1% from last year as lighter weights help keep production down. On top of those forces, exports are picking up steam and imports are down from last year. The surge higher in beef prices would also suggest a strong recovery in retail domestic demand. The surge higher in cash prices combined with the stiff discount of futures to the cash market could help hold down average weights, as producers move cattle before reaching full weight. The USDA predicts that 2nd quarter beef production will be about 300 million pounds above first quarter production. This is the 'smallest' increase for the quarter in ten years, and could help exaggerate the typical seasonal tendency for beef prices to rally into the spring.
While the range down reversal yesterday wasn't your typical big range down washout and reversal signal, the market should get some positive technical momentum from the action Tuesday. In fact, if the market doesn't run up strong today, that would be disappointing for the bull camp, as the market would seem to have the news to return to fresh new highs for the year. In looking back, the market should be emboldened by the much better than expected Intel earnings, as the expected targets were surpassed and the company supposedly saw increases in business spending. With expectations of a moderately up beat US retail sales reading later today and news of a build in business inventories, the market should see investor confidence improve. If you are bearish and want to look to the negatives, there is certainly the potential for more rate hike mongering or perhaps an indirect hint from Bernanke that the Fed is watching inflation, or perhaps that the Fed is attuned to the need to manage inflation closely. We are somewhat disappointed in the magnitude of the initial rally this morning in the wake of the Intel news, but perhaps the market is waiting on additional economic confirmation from the US retail sales reading, that the US economy is indeed moving forward.
DOW:
The June Mini Dow has managed a quasi big range down reversal pattern yesterday and that is typically a formation that can yield 2 to 3 days of higher trade. One would expect sentiment to be improved today but we still get the sense that the bull camp remains somewhat skeptical of the overall recovery pace. It should be noted that the Dow was initially and primarily lifted off its lows yesterday by large industrial companies and now that Intel has registered favorable results, that would seem to suggest that positive things are happening throughout the marketplace. Critical support in the early action today, is seen at 10,875, with up trend channel support now rising to 10,885. Up trend channel resistance and an early target for the June Mini Dow today is seen at 11,024.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal up is a positive indicator that could support higher prices. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside objective is now at 10860. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 11013 and 11045, while 1st support hits today at 10921 and below there at 10860.
S&P:
The S&P would seem to be the least impacted sector of the market in the wake of the favorable Intel earnings. Surprisingly the S&P has consistently shown the least spec long positioning of the most actively traded Index futures contracts and yet it seems content this morning to merely follow or be dragged higher by the rest of the market. Close-in pivot point support on the charts is seen at 1192.60, with initial resistance seen at 1198.20. We would expect to see a fresh new high for the year today, but it is clear that the S&P needs all the help it can get from the scheduled data to extend on the upside.
A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's close above the 9-day moving average suggests the short-term trend remains positive. The upside closing price reversal on the daily chart is somewhat bullish. The market's close below the pivot swing number is a mildly negative setup. The next downside target is now at 1181.07. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1198.62 and 1202.56, while 1st support hits today at 1187.88 and below there at 1181.07.
NASDAQ:
The Nasdaq has forged a gap up move this morning and that isn't surprising considering the magnitude of the positive overnight news flow. With the tech sector seemingly capable of thriving in a slow recovery, that should prompt investors to push additional money into Nasdaq shares and we would be surprised if the market wasn't able to make even higher highs today. Next significant long term resistance in the Nasdaq off the weekly charts, is seen all the way up at 2035, which would be the highest level seen since several months ahead of the sub-prime kick off.
Bonds:
The Bear camp looks to have the first trading edge in several trading sessions today, as a slight recovery in equity prices, favorable Intel earnings, perhaps a little inflation selling and decent US retail sales readings confront the Treasury market later this morning. With Intel earnings coming in much above expectations and the tech sector giant suggesting their results were helped by increased business spending, we would think that a number of longs are set to be pushed from the market later today. With significant price gain readings noted in the recent trade balance reports and signs that the economy is gaining its footing again, it is possible that the CPI report will show a tick or two gain above the expected levels today, but the main report of the day will probably be retail sales, which is the first report in several trading sessions to give a reading on the pace of the US economy. We have to wonder if fairly up beat same store chain sales will translate into real activity in the overall economy in today's monthly retail sales reading. Adding into the downside tilt this morning are recent trade rumors that the Fed is poised to alter its 'keeping rates low for an extended period of time' statement. The Fed's Lacker overnight suggested that his resolve for leaving rates low is softening but that position has been widely circulated of late. However, the market didn't seem to give the rumors of a change in the Fed statement that much credence, as that in conjunction with the news facing the market this morning, should have sent bonds and notes down by more than is being seen early today. It should be noted that Bernanke will be in the press this morning, as he testifies in front of a Joint economic committee of Congress. On the other hand, seeing a fairly strong retail sales reading, in the wake of the Intel news and solid strength in large industrial shares yesterday, should leave the bear camp with the edge. While it might fly in the face of conventional wisdom, seeing US business inventories rise this morning could be a sign that companies are seeing improved demand and are starting to rebuild supply chains and therefore a rise in business inventories might actually be a bearish development for the Treasury market this morning. With the mostly bearish tilt in place this morning and the prospect of bearish data flows later this morning, we easily expect to see a test of close-in support on the charts around 116-02 in June bonds and at 116-07 in June Notes. In fact, given scheduled economic readings that are at expectations, the odds for a big range down move are very good today. Secondary support on the charts in June bonds is seen down at 115-23 and down at 116-00 in June Notes. It should also be noted that the yield curve is poised to reach the narrowest level in 15 trading sessions and that could suggest that confidence in some form of recovery is indeed returning.
The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next upside objective is 117-010. The next area of resistance is around 116-240 and 117-010, while 1st support hits today at 116-050 and below there at 115-260.
US Dollar:
The Dollar is having mixed fortunes against the major currencies this morning, with the Greenback trading weaker against the major currencies, while rallying against the June Yen. The major piece of news overnight came out of Asia, as Singapore shook up the markets with a currency revaluation, as that would seem to suggest that some form of Chinese revaluation is ahead. It would also appear as if the Dollar is seeing some pressure off ideas that Intel earnings point to better US and global economic conditions ahead and that in turn means some players will shift out of the flight to quality Dollar and into cheaper and perhaps oversold currencies. Much of the markets overnight volatility was centered on the June Yen, as the most likely direction for a rate move in Japan is still pointing lower and that leaves the interest rate differential against the Yen and that in turn is supporting the Dollar somewhat. There is a full slate of US economic numbers this morning for the market to digest and the expectations are calling for most favorable US economic numbers and that might result in a weaker Dollar off waning flight to quality mentality. It is also possible that the Dollar could benefit from 'ultra' strong numbers as that might point to a need to be in the Dollar. However, we get the sense that the Dollar is going to weaken a bit through the US numbers this morning.
Euro:
The June Euro appears to have made it through the turbulence created by yesterday's Greece T-bill auction and it has now picked up strength this morning from a decent Euro Zone industrial production number, a good Intel earnings reading and perhaps from an improved overall macro economic condition. While a good portion of today's support has come from spreading versus the Yen, there is also a sense of near-term relief that the Greece debt crisis have been put on the backburner. Whether it will stay there remains to be seen, but in this case no fresh news is being treated as good news. Although the more likely longer-term direction for the June Euro is lower, prices today should see some upside action, especially if the Euro shows some positive action in the wake of the US retail sales figures. Initial resistance is pegged at the 1.3367 level and then again up at 1.3694.
Yen:
The June Yen continues to take it on this chin this morning from the Singapore revaluation, although much of this weakness has occurred during European trading action. The early market take on Singapore's action is that there are trying to get ahead of expected Chinese exchange rate changes. With Bank of Japan officials making it abundantly clear that the choice for Japanese rates is either unchanged or lower, the June Yen also looks to remain under pressure from an unfavorable interest rate differential argument. Today's move looks like it has derailed the June Yen's April bounce rally from 10-month lows. Look for the June Yen to head back toward and below the 106.00 over the near-term, with new lows an increasingly likely prospect directly ahead.
Gold:
The June gold contract has managed to rise above the prior session's high in the early action today and it generally managed to respect the even number $1,150 on the charts early today. The bull camp will suggest that the market is seeing an improved macro economic sentiment, without much in the way of fresh anxiety from the EU debt front. The bear camp is trying to play up the prospect of a possible change in the Fed's interest rate statement, with the Fed's Lacker overnight suggesting he was becoming less comfortable with the leaving rates low for an extended period of time statement. If the bull camp is really benefiting from improved economic sentiment, then this morning's retail sale report should give the bull's added incentive. With the US CPI report also due out today, there could be some cross currents for the gold trade from the Fed policy debate front. The gold market might also garner some lift from very favorable Indian monthly gold import figures overnight but recently the gold market has tended to give demand side stories more credence than supply side developments. Gold Stocks for April 12th were 10.074 million ounces up 698 ounce. Therefore, gold stocks have extended their recent pattern of new record stock levels.
Silver:
While May silver has managed to rise above the prior session's high in the early Wednesday trade, the silver market was still trading below this week's highs. However, silver and other physical commodities seem to be benefiting from an improved macro economic outlook that seems to be the result of better than expected Intel Corporate earnings news. However, the silver market did see news of increased 1st quarter physical silver production from a key Mexican silver mining company overnight and that might have held back prices early today. Surprisingly the copper market is showing some weakness early this morning and that might be considered a minor negative outside market issue for silver by some traders. In another minor negative, exchange silver stocks for April 12th were 115.815 million ounces up 748,687 ounces. It would appear that silver is set to behave like a classic physical commodity market that is at least temporarily being cheered by favorable economic views. The big question will be whether the US retail sales and CPI reports further economic optimism or will they temper the new found optimism.
Crude Oil:
Energy prices continue to build on yesterday's recovery move and the trade looks set to hold those gains into the US Wednesday action. With favorable equity market action, a lower Dollar, upbeat Intel earnings news and expectations of a 1.5% gain in US retail sales, the bulls would seem to be facing positive demand conditions today. With the June crude oil market fresh off a major big range down reversal in the prior trading session, one would think that the market is in a very good technical position to rally today. However, the trade will probably be a little restrained through the scheduled economic readings, as the weekly storage figures loom later in the trading session. Comments made by OPEC officials early this morning were a bit conflicting, as their forecasts for increased demand came with an expected price range forecast that was below where the market is currently trading. While the trade is generally expecting to see another build in crude oil stocks this morning, we suspect that the EIA numbers might be given less importance in the face of decent outside market conditions today. In fact, in the face of a noted range up move in equities and as or better than expected US retail sales readings we would not be surprised to see June crude oil rise to $86.52 and perhaps even up to $86.70. There was a minor production snafu overnight but we suspect that the energy markets focus will be on the prospect of improving demand and not on the prospect of tightening supply.
Natrual Gas:
June natural gas appears to have solidified its rally away from the $4.00 level and also appears to have ventured near an upside breakout on the charts about the $4.25 level. However, the market will still need a decent storage number this week, in order to consolidate and extend those gains. In fact, since expectations are already calling for a sizeable build this week, any sort of number falling short of those expectations would likely move the market well above this week's highs and up towards the $4.40 level that was achieved earlier in the month. There is a T-Boone Pickens testimony ahead and that could give the natural gas market psychological support, as major policy changes tend to be very slow in coming. However, we would think that dialogue from Pickens regarding the cheapness and abundance of natural gas supply, could be enough to give the market a change of returning to the early April highs of $4.42.
Corn:
The corn market ran out of sellers yesterday, and the day session ended with a burst of buying. Traders said that this was caused in part by reports that a major commercial might cancel some corn receipts that were previously registered for delivery. The late rally took the July contract above the recent tight consolidation range near 355 to 360. Follow-through buying overnight is said to consist of further short covering along with some technical buying. This is a light week for news with the corn market continuing to focus on the favorable weather outlook. That includes mostly dry weather into tomorrow when light to moderate rains are expected to move into the NW and north central Corn Belt. This system is then expected to spread to the east and shift down near the Ohio River Valley into Friday. Forecasts have somewhat downgraded the amounts of rain expected as this system moves south, so many fields should experience continued longer term drying. Heavier amounts are expected from eastern Kansas into western Missouri and possibly parts of Iowa in conjunction with the latter stages of this rain event. The USDA will release its latest Export Sales report tomorrow and that may be the main piece of fundamental news for the week. Last week's total sales soared well past 1 million tonnes which was well above trade expectations. Sales currently need to average just 566,700 tonnes each week to reach the USDA's export projection for 2009/10. South Korea is in the market again for corn with that country's biggest feed maker looking to buy 100,000 to 110,000 tonnes of corn for September delivery according to traders. A processing association in South Korea is looking to buy 55,000 tonnes.
Cattle:
The technical action looks somewhat negative, but the large discount of June cattle to the cash market and the outlook for improving beef demand into the May-June time frame leaves the market looking undervalued. Beef prices look even better if Russia resumes poultry imports from the US. June cattle closed moderately lower on the session yesterday, and have seen a break of as much as 222 points off of Monday's highs. News that cash cattle traded $1.00 lower in Texas at $99.00 this week helped spark the selling, and traders noted sell-stop orders added to the selling as the market took out both Monday's and last week's lows. The discount of June cattle to the cash market and news of higher beef prices at mid-session helped to provide underlying support. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 251,000 head, up from 239,000 last week at this time and up from 239,000 a year ago. Boxed beef cutout values were up $1.15 at mid-session yesterday and closed 61 cents higher at $166.92. This was up from $164.94 a week ago and is the highest beef price since July 21st of 2008. Beef production so far this year is down 1% from last year as lighter weights help keep production down. On top of those forces, exports are picking up steam and imports are down from last year. The surge higher in beef prices would also suggest a strong recovery in retail domestic demand. The surge higher in cash prices combined with the stiff discount of futures to the cash market could help hold down average weights, as producers move cattle before reaching full weight. The USDA predicts that 2nd quarter beef production will be about 300 million pounds above first quarter production. This is the 'smallest' increase for the quarter in ten years, and could help exaggerate the typical seasonal tendency for beef prices to rally into the spring.
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