Feb 6, 2018 - Commodity Weekly: After the support of weak dollar commodities seem to join selloff

After a supportive week of depreciating dollar commodities are getting hit by sell off in equities and overall negative sentiment in risk assets. While the dollar should have been helping commodities rise, it wasn’t entirely the case even last week and the air was filled with tension especially after the FOMC meeting on Wednesday where the Fed noted inflation is on track. The most negative impact was on the Energy sector, Grains are holding relatively well and Sugar had also a few good days as investors were probably liquidating some of their shorts.

Oil

The more aggressive central bank outlook scared investors all over the market place and made them scale back on the positions built in the last year. Oil traders joined the crowd in selling their positions although the selloff wasn’t that aggressive as in equities ahead of a series of monthly report. Tuesday we have EIA and next Monday Opec and Tuesday IEA Monthly oil reports will give us a hint how these institutions see the development of market fundamentals.

Corn

The sector of grains saw a good week after news about drought in South America (corn and soybeans) and Kansas, Oklahoma (winter wheat) made traders liquidate a huge part of their shorts. However the magnitude of short covering increased the likelihood of additional selling if negative news will not be confirmed.

Sugar

The huge short that was built up during the last year is the biggest obstacle ahead of the bears despite the negative fundamentals persist. The raw sugar #11 traded in New York could not break the 13 cents psychological support last week and this changed the sentiment into more bullish, or at least less bearish. The prices rallied recently up to 13.90 that was most probably caused by the liquidation of some of the shorts at least. We will know more before the week end.

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016-2018. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Aug 14, 2017 - Weekly Commodity: Risk off sentiment and bearish reports hit commodities

It was a week of swings in the commodity markets with several reports and events driving the market sentiment. The Bloomberg commodity index first jumped 1.4% and then dropped to close the week with only half percent gain. While precious metals and coffee where among the biggest winners, oil and especially grains lost the most.

Crude

According to the IEA, OPEC’s compliance rate dropped in July to a new low of this year at 75 percent. Year-to-date compliance within OPEC is 87 percent while non-OPEC countries were at 67 percent last month. The 22 signatories reduced in July about 470,000 bpd above the combined level they have committed to keep, according to the IEA. After the OPEC meeting that failed to deliver significant proof that the compliance with the cut will improve, the EIA reported another massive 6.5 mil. barrels decline in US crude inventories while Gasoline inventories on the other hand increased by 3.4 mil. barrels. Both are in the upper half of the average range. An upcomming longer term declining trend in crude inventories is also supported by the disappearance of contango in the Crude market which will result that the „buy now - store - sell in the future“ strategy won’t be profitable any more as longer expiries are at the same level as spot prices.

From technical perspective the WTI rejected the $50/brl resistance and the outside day 2 weeks ago and the negative sentiment due to the tension on the Korean peninsula, the Thursday red candle on high volume was especially warning. However while the market tried to break lower on Friday, despite the overall risk off mode it could hold levels $48 and bounced back which is a positive sign but for a few more weeks I expect range trading btw $47-50 (or wider $45-52) before oil will take off on the declining supplies, and the rally could be eventually triggered by Venezuela.

Corn

The weekly crop progress report showed little weekly worsening of the corn condition while compared to the last year the numbers are much weaker. However in the WASDE report there was a huge bearish surprise when the USDA decreased its estimated average corn yield only by 1.2 bushels. And if this wouldn’t be enough, the report suggested higher or unchanged production from the biggest players in the global markets like Russia, Ukraine and Brazil. The slump in corn prices was partially caused by wheat which got a hit from Russia where the USDA expect record production. According to some brokers however, are sceptic regarding corn and soybean data as according to their calculations the yields should come much lower. I think however bulls should be cautious at this point.

Technically the market seemed to be more determined about the direction than last weeks, with volumes rising slightly. The market closed below the 61.8% retracement from recent tops however the last price was still pretty close so there is still some hope for the bulls which may hold for the next WASDE and first harvest reports. However the disillusionment of traders could be very painful.

Sugar

The sweetener was also hit by global risk off mode and record production added to the pain. Brazilian Cane industry group Unica reported 9.5% y-on-y increase in sugar production in the Centre South, the region that accounts for 90% of the country’s sugar output. The dry weather that allowed an unusually early start to cane crushing season is now seems to be a problem. The prolonged period without rain is the main source of concerns together with prices below the ethanol parity. Both can result in drop in sugar production for the rest of the crushing season. According to Brazil industry leader Cosan, the current drop in prices is temporary and the company is expecting sugar to rebound from lows. The company’s hedging activity is declining on the other hand however it’s increasing interest in biofuel sector through its energy venture which could be another way of hedging against price drop.

Technically the inverse head and shoulders formation failed as prices dropped below the neckline testing right shoulder. The 13 cents level will be key whether prices will rebound and take another attempt to reach 16 cent levels. However if this support will not hold the next stop is 12.53 and then 12.00 where the end of our target zone from earlier this year stands. In this case we will have to look at the historical lows of 2015, 10.80-11.10 first long term support and 10.00-10.13 will serve as second support zone.

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016.

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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20 Apr, 2017 - Trade idea: Long Crude after healthy correction

Crude oil inventories dropped 1mil barels last week according to EIA and are close to the upper band of the average this time of the year. However Gasoline inventories increased 1.5mil barels and are close to upper limit of the average range too. This may offset the expected increase in refinery demand and as a result we saw an intesive market reaction yesterday. Overnight the prices were pushed back to the support zone $50-52 which seems to be a great opportunity to buy. We were waiting for this correction for some time as the technical picture was pointing to the upside. Check Weekly Commodity from previous weeks: http://landoftrading.blogspot.cz/search/label/Weekly%20Commodity

ENTRY 2 units somewhere btw $50.50 - $50.90

Stop 49.35  (risk in the range of $1.15-$1.55)

Unit 1 Profit Target:  $54.80 /RR 3.7- 2.5/  =  if hit move stop to entry

Unit 2 Profit Target:   $56.80 /RR 5.4 – 3.8/

Why to buy? Well medium term there are three main factors you should see fundamentally

1. Still in the middle of the season of increased refinery demand
2. OPEC meeting is scheduled for May25 and where an extention of production cut is expected to be agreed
3. Geopolitical risks in Syria

What is the main risk. The increase in US production could offset production cut. 

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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Apr 16, 2017 - Weekly Commodity (Oil stock decline, bearish Wasde report but huge net short in corn and wheat, no sweat future for sugar)

The highlights of the last week are decline in oil invetnories and oil supply and demand getting closer to balance. In the Agricutural sector the long awaited WASDE report didnt surprice rather confirm expectations however concerns regarding heavy raining in Argentina closer to the weekend pushed prices of Soybean and corn higher. Indian suagr imports caused cautious correction but prices couldnt clos the week above 17 cents.

Crude oil had a great week after API and EIA both reported decline in oil inventories in line with expectation of a seasonal drop as refinery demand picks up. The move was supported also by rising geopolitical tension. The Paris based IEA when in its monthly report the agency said, the oil market is getting close to balance but expects global production to rise due to rising US production. Based on Baker Hughes report, US producers launched another 11 oil rigs last week taking the total US rig count to 683. Due to weaker than expected demand growth in Russia, India and several Middle east countries, South Korea and US, the IEA revised its 2017 demand growth from 1.4 mb/d to 1.3 mb/d. However as global stocks declined , according to the report “it can be argued confidently that the market is already very close to balance“.

As the market seems to be a little overbought after breaking the key resistance zone 50-52 and also uptrend line. On its way WTI prices rose from March bottoms to April tops in only 3 weeks 15%. Now a possible pullback to the up-trend line could offer a great buying opportunity. Key points to watch will be:

• Regular reports from API and EIA inventories
• Situation US/Syria/Russia/N. Korea
• Opec meeting on May 25 to consider extending output cuts beyond June

Grains had a mixed week after the hedge funds turned net bearish on the sector according to CFTC COT report. In USDA WASDE report published on Tuesday, US corn ending stocks estimates remained unchanged and wheat ending stocks estimates were increased by 30m bushels. The global ending stocks forecast for both increase by more than 2mil MT each. Export sales were just below the expected range for corn while at the upper end of expectation for wheat. In case of wheat there are concerns regarding slow pace of shipments. Here could come a negative surprise in the coming weeks as due to slow export shipment the USDA may be forced to downgrade its export estimates. Both grains saw intensive buying (or short covering) after the WASDE report however wheat gave back part of its gains before weekend 

The USDA soybeans ending stocks estimates were higher by 10 mil bushels to 445 mb, which was more than expected. Also world ending stock estimate was higher than in March by more than 5%. However the prices bounced back the same day as bears lost strength. The dramatic change in the mood on Soybean market came on Friday as weather concerns in Argentina got more spotligth.

According to US Department of Agriculture's Brasilia bureau strong corn harvest is expected in Brazil and end stocks in the country should jump as much as 70%. There are some concerns regarding the weather in Argentina as more than 1m ha of cropland was flooded. The most rain hit areas last week were already flooded so the impact of current heavy rains will be limited and as dry wheather is expected in the coming weeks the harvest will most likely continue soon.

This seems that the current picture is supporting the bearish positioning of hedge funds. However traders should be careful a skewed exposure to the downside often results in high volatility due to surprise news. And we all know from history that negative wheather surprise is a matter of time after such a long period of good weather conditions.

The last commodity we follow the last weeks is raw sugar where there is a huge head and shoulders confirmed after last Friday bulls faild to break above the descending neckline. After the price of raw sugar in NY jumped above 17 cents per pound this attracted seller and sugar was down again well below 17 cents. On reason why the mood turned little bullsih was the Indian government decision to approve duty free import of 500k MT which is much ess than expected. Another reason could be that Sugar options are expiring on Monday and as a large number of ITM puts should be expired this can result in profit taking lifting the prices higher. Money managers keep 105k lots short but net positioning is still 43k long so no danger of short squeeze at the moment. 

Good Luck and remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

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