Currencies:
The December U.S. Dollar Index (NYBOT:DXZ13) closed at 81.27, up 41.6 points thanks to the jobs "created" data issued Friday. The reason for the shortcovering and new buying is tied directly to the assumption that with this "good news" on the jobs sector, the Fed may start to "taper" their stimulus program and prompt higher U.S. interest rates which would attract dollar investment. We disagree since our view is that the "temporary distortion" we see will be short-lived and will not cause the Fed to take any action for now. We favored the dollar on a short term basis and now prefer the sidelines.
Energies:
December crude oil(NYMEX:CLZ13) closed at $94.33 per barrel, up 13c tied to the better than expected U.S. jobs data which lead traders to "assume" improved demand for energy products. The current talks between Western Diplomats and Iran will probably prove fruitless. Any concession by Iran to "verbally" agree to halt their nuclear program is a "fool’s dream" and hopefully the West will not change its current sanctions until any change can be proven. President Reagan once said "Trust but verify" and that certainly pertains to the current situation. We see continued pressure on crude prices tied to our view that global economies are not improving and that includes the U.S.
Copper:
December copper closed at $3.2580, up 95 points but for the week lost 1.4% tied to supply/demand factors. Copper moves in tandem with equities as the psychology of the markets suggests that better performance in equities is tied to improved economic developments and subsequently increased demand for industrial materials. We disagree as can be evidenced by our opinion stated in earlier comments.
Precious Metals:
December gold (COMEX:GCZ13) closed at $1,284.60 per ounce, down $23.90 or 1.8% tied to the strong dollar which had reacted to the U.S. jobs data. The expectation that the U.S. Federal Reserve would reconsider their stimulus program and raise rates the basis for the action Friday. We disagree but remain sidelined for gold. We do not see the Fed changing its posture based on a "confused" jobs picture as stated in our Overview. December silver (COMEX:SIZ13) closed at $21.32 per ounce, down 34c or 1.6%. January platinum closed at $1,442.90 per ounce, down $13.90 or 1% and lost 0.6% for the week, while December palladium lost $1.25 or 0.2% to close at $757.90 but for the week gained 2.7%. Our strategy of long palladium/short platinum performed well this week. Other than that strategy, we are on the sidelines in precious metals.
Grains and Oilseeds:
December corn (CBOT:CZ13) closed at $4.26 ¼ per bushel, up 5 3/4c on pre-holiday weekend short-covering and new buying tied to the U.S. increase in supplies less than expected. We prefer the sidelines. December wheat (NYBOT:WZ13) closed at $6.48 ¼ per bushel, down 4 3/4c after the USDA raised its forecast for ending stocks. We prefer the sidelines here as well. November Soybeans (NYBOT:SX13) closed at $13.06 ¾ per bushel, up 28c tied to the supply estimate increase less than expected as was the case for corn. We like soybeans from here but use stop protection.
Coffee, Cocoa and Sugar:
December coffee (NYBOT:KCZ13) closed at $1.0380 per pound, down 15 points and remains near lows. However, unable comment pending any material effect of the typhoon headed for Vietnam which may impact the ongoing harvest. We are on the sidelines for now. December cocoa (NYBOT:CCZ13) closed at $2,643 per tonne, down $33 on profit-taking. Cocoa prices are up over 20% for the year and a correction tied to lack of fresh fundamentals was to be expected. We remain sidelined in cocoa. March sugar (NYBOT:SBH14) closed at 18.09c per pound, up 5 little ticks on light short-covering but remains under pressure from global supplies. We prefer the sidelines.
Cotton:
December cotton (NYBOT:CTZ13) closed at 76.90c per pound, up 14 points but remains under pressure tied to reports that the Chinese buying declined as supplies gained. Good U.S. weather conditions also provided the recent selling pressure. We remain sidelined.
