Crude oil, gold, silver, copper
The big story for the beginning of the market week will be Hurricane Sandy, expected to hit the Northeast Monday and stay a while. With evacuations scheduled, we could see a disruption of the financial markets and possibly the closure of the New York Stock Exchange. With the scheduled closure of the subway system, some bridges and highways, workers at the exchange and other financial institutions may not be able to get to work. The storm, nicknamed "Frankenstorm," is expected to be the worst in 100 years.
Meanwhile, markets are still awaiting a definitive U.S. presidential election result next week and price action seems to be on hold until then. We will temper our comments until then.
Now for some comments on what has already occurred...
Interest Rates: December Treasury bonds closed at 148 up 1 05/32nds on weak economic data. Consumers purchasing power rose by 0.8% annual rate from July through Septem ber, the least since the end of 2011. GDP reported at 2%, up from 1.3% the prior quarter but not indicative of economic strength. The final reading on the Thomson Reuters University of Michigan’s consumer sentiment index for October reported at 82.6 against analyst expectations of an 86 reading. We continue to view the treasury market as a safe haven with prices expected in the 145-155 range. Anything under 150 median could be considered a buy against economic data. S&P 500 downgrading of some Spanish banks also a factor in the flight to the safety of U.S. Treasuries.
Stock Indices: The Dow Jones industrials closed at 13,107.21, up 3.53 points but lost 1.8% for the week. The S&P 500 closed at 1,411.94, down 1.03 points and for the week posted a loss of 1.5%. The Nasdaq closed at 2,987.95, down 1.96 points and lost 0.6% for the week. Poor earnings reports, concern over the European debt crisis, the downgrade of some French and Spanish banks by Standard and Poors rating agency the main feature this past week. We continue to forecast much lower stock index values and implore our subscribers to implement hedging strategies.
Currencies: The December U.S. dollar index closed at 80.11, down 4.6 points with China’s yuan making a new high against the dollar. U.S. political pressure and growing economic confidence prompting the strength. The December Euro closed at $1.2939, down 16 with Swiss Franc $1.07 down 10, Japanese Yen, 12558, up 1.04, British Pound $1.6095, down 26, Canadian Dollar $1.02, down 28, and the Australian dollar, $1.0331, up 9 points. We continue to favor the U.S. dollar.
Energies: Hurricane Sandy is expected to disrupt some production and could prompt a short-term boost in energy prices. December crude oil closed at $86.28 per barrel, up 23c and with an unsure track of Hurricane Sandy, we cannot determine what, if any, disruptions will occur. However, we continue to expect reduced demand tied to global economic weakness and consequently still lower prices. The Energy Department said supplies were up 5.9 million barrels last week, the highest level for this time of year since at least 1982. Hold put positions and add on any rallies tied to the hurricane.
Copper: December copper closed at $3.5350 down 1.55 on continuing weak demand from China and in conjunction with European and U.S. economic concerns. We continue to expect lower prices tied to reduced demand and would hold put positions.
Precious Metals: December gold closed at $1,711.90 per ounce, down $1.10 tied to U.S. GDP figures as well as consumer sentiment and economic indicators from Spain and South Korea. We remain sidelined in gold and silver. December silver closed at $32.04 per ounce, down 4c in line with similar criteria for gold. Of the two markets, should investors require precious metal holdings, we continue to prefer silver. Otherwise stay out for now. January platinum closed at $1,546 per ounce, down $22.80 while December palladium lost $9.10 to close at $595.40. We continue to prefer palladium over platinum.
Next page: Ags and softs
Grains and Oilseeds: December corn closed at $7.38 ¼, down 3 3/4c tied to weak export data and reduced ethanol demand. We prefer the sidelines in corn. December wheat closed at $8.64 ½, down 8 1/4c tied to plantings in line with expectations. Profittaking after recent strength also a factor in front of the weekend. We don’t expect the East coast Hurricane to have any material effect on shipments or supplies. We prefer the sidelines here as well. November soybeans closed at $15.60 ½, down 3 1/2c and appears to have completed a "near term bottom". Weekly export inspections were favorable and we like the long side of soybeans once again.
Meats: December cattle closed at $1.2525 per pound, down 40 points as wholesale prices declined. Prices remain under pressure after recent heavy long liquidation and prices remain at or near lows. We could see additional shortcovering but would use stop protection for any new buying. December hogs closed at 78.88 per pound, up 75 points on shortcovering and new momentum buying. Improved demand and continued low herd sizes tied to the higher feed prices providing recent strength. We could see continued strength and would buy but with stop protection.
Coffee, Cocoa and Sugar: December coffee closed at $1.5775, down 3.25dc on economic concerns globally and ample supplies. We continue on the sidelines in coffee. December cocoa closed at $2389 per tonne, up $6.00 on strong demand for dark chocolate with high cocoa content and increased demand for cocoa powder. We could see further price gains and would hold any long positions. March sugar closed at 19.43c up 8 ticks but remains weak tied to global surplus. We could see some shortcovering after recent long liquidation.
Cotton: December cotton closed at 73.00c unchanged and remains in a tight range tied to the combination of China’s cotton stockpiling program and offsetting pressure from record global inventories. We look for continued sideways pricing for now.
