Weekly Commodity Update 23-11-09

Currency and stock market movements combined with a massive flow of investment into commodities continues to set the overall tone of commodity markets.

This week was the last full trading week ahead of the U.S. Thanksgiving holiday next week. This normally signals the beginning of the winding down for year end. After that time many traders and funds begins to focus on year end and on how they should be positioned into the normally quiet month of December.

Some risk fatigue began to emerge towards the end of the week with energy and base metals giving up some of their recent gains. Whether it is that or just early position squaring time will tell.

The wall of money floating around in the financial system continues to benefit commodities as a way of diversifying portfolios and in order to shield investments from a non-negligible risk of a US debt and currency crisis.  A research note from a major bank sees flows into commodities this year of USD 60 billion which will bring the total amount invested up towards USD 240 billion at year end.

Most precious metals and some base metals made new highs for the year and the Baltic Dry bulk index, which indicates the cost of shipping dry bulk commodities around the globe, rallied sharply. Gold still catches most of the headlines as it despite moving into a very overbought situation continues to make new highs reaching USD 1.150, a 12.3% rally since the news about India buying IMF gold broke some weeks ago.

We see the break above the 2008 high as a signal that a new rally has been initiated which could take the price of gold towards an initial target of USD 1.300 followed by a potential 5 year target of USD 1.500. Gold still has a long way to go – both in terms of price appreciation and in terms of years of increases. It will at times be volatile, experiencing quarterly declines, but the overall direction will be higher

Near term however gold has moved into an extreme overbought situation which has not been seen for many years and we urge new investors to be patient as a correction back towards USD 1,120 and maybe even USD 1,100 is increasingly likely. The trigger for a correction could be the upcoming U.S. holiday next week as positions in correlated markets like the EURUSD could run into profit taking and thereby remove some of the recent support.

The energy sector continues to be driven by present reality versus future expectations as the overall demand situation still remains weak. Good demand from emerging economies continues to be off-set by continued weak demand from the developed economies.

On this basis the overall investor appetite for commodities is still the main driver of energy prices as investors seeks shelter and a hedge from the falling dollar. This tuck of war has kept Crude Oil range bound over the last month with USD 75 to 80 being the current range.

The global economic pick up over the last few quarters is still happening on the back of continued job losses and that leaves a big question about when and by how much consumption will pick up. For now though the worries about dollar weakness and future inflation should be enough to keep the prices supported over the coming weeks and months.

Technically the front month Crude of January is currently stuck in a bullish flag pattern between USD 75 to 80 range and just the last few days some risk adversity has been seen on the back of a stronger dollar. A greater bullish potential remains as long prices stays above USD 75, otherwise there is a risk of returning to the recent USD 65 to 75 trading range. Some position squaring ahead of the US holiday next week will probably be the main focus into the early part of next week.

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How to check Trading Conditions – eBridge Trader Video Tutorial

CNBC Report by Bill McLaren – 5 June 09

LET’S LOOK AT THE S&P 500 INDEX -DAILY CHART

 

Two weeks ago I indicated the index was going up into the 90 day time window and could be an important high or even a top.  Please understand the trend remains in a strong position holding above swing highs and since the last low the sell offs have only been one day.  So looking to short this market will be very high risk without some evidence but I do have a time window for the next three trading days that could be very difficult resistance.  Price resistance is maximum 1012, then 995 and 963.  A move above Tuesday’s high seems likely and a break of the low of the high day would be the first indication a high could be in place.

LET’S LOOK AT THE 30 YEAR US T-BOND

 

This is the Feds worst nightmare.  Rates are rapidly rising.  Normally this would occur if the economy were improving.  Unfortunately bonds could be falling due to the government policies and not economic demand-we don’t know.  The Fed cannot control long rates-they have tried in the past a failed.  So Bonds could ruin the part and should be watched.  Best date I have to end the move down is around June 16^th but that is not a high confidence cycle but is still a 60% probability.  Could be still in a capitulation move down. Support marginally below 113 then 108.      

LET’S LOOK AT THE US DOLLAR INDEX-DAILY CHART

 

Two weeks ago I said the US DOLLAR was in a panic move down and would not rally past 4 days until the panic was complete.  I indicated the important dates were June 2^nd (the current low) and June 8^th.  The 8^th is Monday and could be another counter trend high if the index goes up into that date and would indicate the panic style of trend will continue.  IF it moves up past Monday then the 2^nd could be a low of some significance. If Monday is a high then June 20^th and July 8^th could be vibrations in “time” and the end of the cycle and possible end of the trend will be July 26^th.  If the Dollar is going down into that end of July date there will be one rally of 7 to 12 trading days before 26^th.  But for now the panic is continuing.  This is very important IF Monday is not a counter trend high then a low of some significance is in place.  The reason for this is the possibility of a “false break” low versus the December low if it can rally past Monday.  If Monday is a high then that “time” factor will be valid.

Source: McLaren Report

Bespoke’s Commodity Snapshot

Tricom Today Australian Stock Market Report 20-3-09

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The SFE Futures suggested a 13 point rise in the market. BHP and RIO both up in ADR form overnight – 5.23% and 3.93% respectively. (BHP closed at the equivalent of 3287c, up 162c on yesterday’s close.) Metals up overnight – Copper up 6.47%, Zinc up 6.22% and Aluminium up 6.09%. Nickel up 1.32%. Oil price up 6.9% to $51.46 on a lower US$ against other currencies as the Fed announced their potential inflation inducing $1 trillion capital injection into the financial system. Gold up $69.70 to $958.80. Bonds down slightly with the 10 year yield up to 2.6086%. A$/US$ up slightly to 68.51c. CRB Commodity index up 5%. The weaker US$ was underpinning the strong performance across commodities. The US$ was down 1.7% last night and down over 4% over the last two sessions. Material stocks up 1.4% on the higher metal prices. General Electric up on reaffirming positive profit guidance for 1Q and FY. Fed Ex posted 3Q NPAT down 75% – plans to cut more jobs and cut costs. Oracle and Nike beat quarterly expectations. The market is down 3 after being up 19 points earlier in line with the 13 point rise predicted by the SFE Futures this morning. Financials down, Resources up on higher metals and commodity prices. US$ down – Aussie dollar up. Financials taking a breather today – down 2.2% – after consecutive days of gains, not helped by US Financials which went backwards overnight.

Tricom Today ASX Stock Market Report 19-3-09

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The SFE Futures suggested a 31 point rise in the market.BHP and RIO mixed in ADR form overnight – BHP up 2.15% and RIO down 2.3%.(BHP closed at the equivalent of 3166c, up 58c on yesterday’s close.)Metals mostly down overnight – Copper down 1.16%, Zinc down 3.64% and Aluminium up 0.44%. Nickel down 2.23%. Oil price down 1.7% to $48.12 on a government report showing a bigger-thanexpected inventory increase in the US. Gold down $27.70 to $889.10, but rallied after hours $50+. Bonds up with the 10 year yield down to 2.5419%. A$/US$ up 2.21% to 67.66c. Material and energy stocks finished higher despite the fall in oil and metals overnight. Technology stocks up on the news IBM is in takeover talks with Sun Microsystems – reports of at least $6.5bn in cash for the deal are being bandied around. Oracle announced positive results after the close. Financials up 10.1% on the announcements from the Fed regarding their plans to further stimulate the economy, increasing the flow of credit and creating demand for assets. Diversified financials services companies up 13.2%. Diversified banks up 14.9%. Our market is having a good day – up 20 – up 54 at best and in line with the 31 point rise predicted by the SFE Futures this morning. Most sectors up – only healthcare and telecom stocks down. Financials, Resources and Industrials outperforming.

Tricom Today ASX Stock Market Report 16-3-09

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The SFE Futures suggested a 26 point rise in the market. BHP and RIO both up in ADR form Friday – 2.30% and 0.8% respectively. (BHP closed at the equivalent of 3186c, up 20c on Friday’s close.)Metals mostly up Friday – Copper up 2.51%, Zinc down 0.16% and Aluminium up 0.52%. Nickel up 1.53%. Oil price down 1.5% to $46.22. Gold up $6.10 to $930.10. Bonds down with the 10 year yield up to 2.8921%. A$/US$ down 0.5% to 65.475c. Obama announced a $730m package to provide assistance to small business owners. The government also plans to increase the government guarantee on some small business administration loans to 90%. They will also boost bank liquidity with
$10bn in an attempt to unfreeze the secondary credit market. Healthcare – the largest sector in the S&P 500 – up 3.3% after recent heavy selling pressure due to fears over government reform. Energy down the most – fell 0.7% on the lower oil price. OPEC’s meeting over the weekend only created more uncertainty about demand and stabilizing prices. They did not make a cut to production but urged their members to stop overproducing. The market is up 16 in-line with the 26 point rise predicted by the SFE Futures this morning. A pretty flat start to the week with not a lot of significant news around. Resources struggling, Property Trusts and Banks doing well.

Tricom Today Australian Stock Report 13-3-09

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The SFE Futures suggested a 58 point rise in the market. BHP and RIO both up in ADR form overnight – 0.22% and 3.48% respectively. (BHP closed at the equivalent of 3108c, up 73c on yesterday’s close.) Metals mostly down overnight – Copper down 0.25%, Zinc down 1.13% and Nickel 3.5%. Aluminium up 0.07%. Oil price up 10.5% to $46.91 following the better-than-expected US February retail sales figures. OPEC meet this weekend to discuss production. Gold up $13.30 to $924.00. Bonds up with the 10 year yield down to 2.8544%. A$/US$ up 0.27c to 65.47c. Biggest 3-day rally since November – up nearly 11% week-to-date. Financials lead the way. Oil has a 10% bounce. The FASB told Congress it may recommend a suspension of “mark-to-market” rules. Bank of America said they were profitable in the first 2 months of the year. Retail numbers better-than-expected. Initial jobless claims worse-than-expected. Business inventories down 1.1% in-line with expectations. General Electric’s credit rating cut less-than-expected – only to AA. General Motors said it wouldn’t need the previously requested $2bn from the government. The market is up 106 outperforming the 58 point rise predicted by the SFE Futures this morning. All sectors enjoying the bounce, particularly property (still recovering) and energy after the 10% bounce in the oil price overnight.

Tricom Today Stock Market Report 6-3-09

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The SFE Futures suggested a 50 point fall in the market. BHP and RIO both down in ADR form overnight – 6.77% and 5.88% respectively. Metals mostly down overnight – Copper down 1.6%, Zinc up 1.47% and Aluminium down 2.87%. Nickel down 2.0%. Oil price down 3.8% to $43.54 after China released little detail about the further stimulus package to boost their economy. US government reports suggested the demand for energy could still drop further.
Gold up $21.10 to $927.80.Bonds up with the 10 year yield down to 2.81%. A$/US$ down 1.64% to 63.86. Financials down 9.9% – Citigroup had an intraday fall of 13% to 98c on fears it will not escape nationalization. Its market cap has fallen from $270bn to $5.4bn over the last two years. Diversified banks down 16.5%. Diversified financial services down 13.2%. General Motor’s future is being questioned – the auditors of its annual report raised serious doubt about whether the company could remain liquid – GM has already had $30bn in handouts from the government. The market is down 48 in-line with the 50 point fall predicted by the Futures this morning. Quiet session ahead of Labour Day on Monday.

Tricom Today ASX Stock Market Report 5-3-09

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The SFE Futures suggest a 72 point rise in the market. BHP and RIO both up in ADR form overnight – 8.70% and 11.14% respectively. Metals up strongly overnight – Copper up 5.82%, Zinc 8.02% and Aluminium 3.42%. Nickel up 3.89%. Oil price up 8.9% to $45.28. Oil up with the rally in the general markets and on reports that crude levels in US storage has unexpectedly shrunk. Gold down $6.90 to $906.70Bonds down with the 10 year yield up to %2.9874. A$/US$ up to 65c. Financials closed 3.5% down after being up as much as 3.5% – down after Reuters reported a congressional subcommittee will meet on March 12th for a hearing on the mark-to-market accounting rules that could result in financials taking huge writedowns on their problem assets. Diversified banks down 10.2% – investors worried about news that Bancorp (Minneapolis-based bank) will cut its dividend by 88% – it was seen as one of the healthier banks. General Electric down to 18-year-lows on the fact that they might have to inject more cash into GE Capital. GE denied they required any outside assistance with capital saying they had ample liquidity. Credit agencies are warning their AAA rating is in danger of being downgraded. GE was down 17% on the open but rallied to close down only 4.5% – GE’s strength gave support to the broad-based market. The market is up 40 – a little disappointing considering the 72 point rise predicted by the SFE Futures this morning. BHP has been holding up the market all morning – boosting the index 28 points alone at midday.

What is the Popularity of CFD Trading?

The popularity of CFD trading has taken everyone by storm. There would have been few people in the investment community that could have predicted the success of this leveraged product and even during the economic downturn some of the major CFD brokers are increasing trading volumes.

The popularity of CFDs in Australia has largely come down to the simplicity of the product itself. Contracts for Difference or CFDs are exactly like trading the sharemarket except you need a small amount of money upfront. While CFDs are a leveraged product, the amount of leverage a trader users is entirely up to them. This means any trader could make the product as safe or as risky as they choose.

Trading activity has recently doubled

In fact a recent article in the Australian newspaper indicated that one CFD broker managed to double the level of trading activity in the last six months of 2008 and new account openings were up 65%.

Using CFDs to Hedge and reduce portfolio volatility

One of the reasons for the heightened interest in CFD trading in Australia is due to the fact that CFDs can actually be used as a hedging tool and enable investors to reduce their risk on their existing share portfolio. Further to this any trader knows that with increased volatility comes an increased amount of opportunity.

So as you can see the popularity of trading CFDs in Australia is huge. It has overtaken the other derivative products like options, warrants and futures and will remain one of the best products to trade moving forward.

Tricom Today ASX Stock Market Report 4-3-09

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The SFE Futures suggested a 25 point fall in the market this morning.BHP and RIO both up in ADR form overnight – up 4.44% and 0.84% respectively. Metals mostly up overnight – Copper up 4.55%, Zinc up 3% and Nickel 1.05%.
Aluminium down 0.23%. Oil price up 3.7% to $41.57. Oil managed to hold early advances but trading was volatile after the last few weeks of losses in the face of a continuing synchronized global downturn. Gold down $26.40 to $913.60. Bonds down with the 10 year yield up to %2.88255. A$/US$ up to 63.73c. January Pending home sales down 7.7%- worse than the 3.5% expected. Job losses
are continuing and consumer confidence remains at all-time lows. Treasury secretary Geithner reiterated in Congress that Obama’s budget deficit was required to make long-term investment in healthcare, energy and education – the comments didn’t support market buying. The market is down 47 – bit disappointing considering the 25 point fall predicted by the SFE Futures this morning. Industrials the only sector up with Brambles outperforming, but most sectors struggling, most notably Property trusts. Energy stocks down despite the oil price bouncing overnight. 4th Q GDP Number is a bit of a horror – against consensus estimates for a small positive number of +0.2% the number has come out at -0.5%.

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Market depth for SFE futures is available Tricom Trader.

Tricom Today Stock Market Report 3-3-09

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The SFE Futures suggested a 78 point fall in the market. BHP and RIO both down heavily in ADR form overnight – 7.85% and 9.9% respectively. Metals all down overnight – Copper down 3.26%, Zinc down 2.39% and Aluminium 1.79%. Nickel down 4.50%. Oil price down 4% to $40.07. Three-day rally over on the deteriorating outlook for the world economy. Gold down $2.50 to $940.00. Bonds up with the 10 year yield down to 2.86%. A$/US$ down to 63.01c. The Bank of America’s CEO is saying the $20bn he borrowed from the government to buy out the failing Merrill Lynch last year was a ‘tactical mistake’.Materials and Energy stocks down 6.9% and 6.4%. The market is down 48 and in-line with the 87 point fall predicted by the SFE Futures this morning. It was down 97 at worst. Not a lot of company related news and no real theme this morning except everything’s down. One feature is Macquarie Group which has bounced from being down 4.8% to up 7.0% at its peak. No announcement and have yet to dig up a reason.
RBA Meeting Today – Decision at 2.30pm – Lots of opinions about what they will do. A Dow Jones newswire consensus of 18 economists suggest a consensus for a 25bp cut.

Tricom Today ASX Stock Market Report 27-2-09

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The market is up 13 outperforming the 13 point fall predicted by the SFE Futures this morning.
Resources outperforming up 1.6% with OZ Minerals up 11.6% after their debt refinancing was extended to March
31st. BHP and RIO up 0.8% and 2.5%. Fortescue up 3.5% today. January’s private sector credit growth was stronger than expected up 0.6% from a fall of 0.2% in December. Increases the chance of the RBA slowing rate cuts – looks like stimulus packages and budget measures are starting to bite.

Tricom Today ASX Stock Market Report 26-2-09

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The market is up 20 – doing better-than-expected after the negative session in the US – outperforming the 10 point fall predicted by the SFE Futures this morning. Macquarie has been getting thumped this year….down 62% from 4329c in January to a low of 1625c today. They have dropped 33% in less than two weeks….and you can’t even short the stock(!). They have popped out an announcement this morning telling us that they are not about to have a capital raising. There are suggestions on the newswires that ASIC (the government) will once again extend the ban on shorting financials from its expiry date a week tomorrow (March 6th). The stock is attracting a lot of attention and trade at the moment. Resources unchanged – BHP unchanged and RIO up 0.7% following a negative lead from the US miners.
Bendigo and Adelaide Bank down 5.1% having gone ex dividend. Fortescue Metals down 5.7% as it starts trading again having pulled a $500m institutional placement with institutions unwilling to pay the 248c price paid by Hunan
Valin. OZ Minerals up 9.1% after big falls yesterday with their Friday $1.1bn debt rollover deadline looming and suggestions they are moments away from announcing a $425m sale of assets. Pacific Brands are closing down their Australian manufacturing operations in Australia (7 factories) after 92 years and will be moving them offshore. They are sacking 1850 staff. Price up 11.4%. Wesfarmers has completed their Retail Entitlement offer. There was a 60% take up. Babcock & Brown Power (BBP) has had a profit warning. Arrow Energy (AOE) – Pure Energy independent directors accept the superior BG offer. BG will now have a 29% stake in PES. Shareholders accept BG bid.

Tricom Today ASX Stock Market Report 25-02-09

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The market is up 11,was up 51 earlier – underperforming the 70 point rise predicted by the SFE Futures this morning. Financials up 0.3% following the 14.8% rise in the banks in the US overnight on the back of positive comments from Bernanke reassurance that the banks won’t be nationalized. All our banks up 1-2% early on. Resources up 0.1% – BHP and RIO up 0.9% and 0.4% following significant jumps in the miners overnight in the US and a rise in metal prices. Industrials up 1.7% – APN News and Media (APN) posted a FY NPAT loss of $24m. Final dividend will be 12c. Guides FY09 underlying NPAT to be $120m in-line with consensus. Balance sheet in good shape. Doesn’t expect further jobs cuts. Expects a slow 1H09, picking up in the 2H. Property up 2.1% after recent heavy falls - Westfield up 2.4%.

Tricom Today ASX Stock Market Report 23-2-09

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The market is down 46 after being down 90 earlier poor performance today underperforming the 3 point rise predicted by the SFE Futures this morning. Property down 2.3% – all the big names down Westfield Group down 3.6% at midday. They have results this week. Caltex down 6.1% on broker downgrades this morning after results down 95% on Friday. All other energy stocks down on the lower oil price Friday. Gold stocks all up on the gold price breaking through the $1000 barrier Friday. Small miners mostly down on lower metal prices. Industrials down 4.6% – Fairfax down, Virgin Blue down, and Transfield Services down on results. Cochlear down nearly 4.4% at midday having gone ex dividend 80c. Macquarie Infrastructure down 7% and Macquarie Airports down 5.3% on suggestions that the Macquarie stable is being shorted whilst Macquarie Group remains protected by the shorting ban on financials  which comes off on Friday week. MQG still fell 14% last week. Financials down 1.3% following a turbulent session in the sector in the US Friday where financials were down 9% at one stage on concerns over the need for Citigroup and the Bank of America to be nationalised. Our Banks all down 1-2% around midday. ANZ down 2.5%.

Tricom Today ASX Market Report 20-02-09

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The market is down 65 underperforming the 13 point fall predicted by the SFE Futures this morning. Industrials down 3.8%. Financials down 2.7% – banks all down following the grim lead in US financials. US Banks hit 17 year low. The NAB’s Ahmed Fahour will quit the board as director. NAB down 3.0%. Gold stocks well down as the gold price falls $1.70 but US gold stocks fall around5%. Newcrest down 6.4% and Lihir down 2.6%. We are still waiting for St Barbara
Limited to come out of its trading halt having done an institutional placement. Fairfax is falling over still, down 2c to 97c. They have results on Monday. This is an all time low. Property down another 1.3% – Goodman Group up 9.7% early on 1H operating income after tax of $215m.Coal stocks doing well with some corporate action between Whitehaven (WHC) and Gloucester Coal (GCL) who are planning a merger to create a $900m coal miner. 1 GCL share for every 2.45 WHC shares.