The big news of the weekend was that Italy’s Prime Minister, Mario Monti, announced his intention to resign from office. This news spurred some overnight buying of U.S. treasuries as a “safe-haven” asset, and tempered any follow-through U.S. stock index rally from Friday’s above consensus jobs number. Monti’s formal intention to resign simply adds more uncertainty to the market’s view of Italy and Europe on the whole. The simple truth is, the market at this point doesn’t seem to know if Europe will be a bigger problem than even more can conceive, or whether the big boat can slowly shift its course and the region’s financial difficulties can stabilize and turn in a good direction. Even with positive U.S. economic data released on Friday, the markets seem to be stuck in the mud. Any urge for stocks to rally seems to be trumped by the fiscal cliff and Europe concern.
Precious metals are having a slightly positive morning thus far, with platinum and copper leading the way up today. Platinum futures are trading up around $17, or 1%, while copper futures are trading up 5 cents, or 1.37%. Gold and silver are up .5% and .7% respectively. Since dipping below $1700, gold has seemed to find buyers under that key level. We believe this $1700 might serve as magnet level for gold in the near term.
Most energy markets are somewhat quiet, but JAN13 natural gas continues its fall from just above $4 down to around $3.46 today. This is mainly because of forecasts of warmer weather, thus potentially limiting demand for natural gas. However, we view this market is just about being oversold at these levels.
We focus more on corn futures today for you. Predictions for rains in Brazil and drier conditions in Argentina improved crop prospects, thus potentially diminishing U.S. export sales. The MAR13 corn futures market is now trading below our key pivot level of $7.35. We believe corn is headed to test its key support level at $7.15. If it breaks below this important benchmark, the next potential downside target is $6.80. The summer drought really skewed prices of all of the grains markets. As global grain production potentially starts to ramp up and weather becomes more favorable for production, grain prices could slide. However this scenario still depends on production and anything can happen.
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