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

Read More

Oct 2, 2017 - Weekly Commodity - Opportunities ahead in Crude, Corn and Sugar as well

Commodity markets are currently in a difficult situation as combination of fundamentals and stronger dollar both added pressure. However the technical picture reveals medium term opportunities in all three commodities we follow.

The crude oil had a nice rally behind but despite promising news about growing demand, could hold recent highs. During the brent driven rally the spread between WTI and Brent widened to 7 dollars. Despite the gap tigthened to 5 dollars, Brent seems to offer a better shorting still with Money manager longs close to record highs.

Corn had a bumpy summer, but the most traded December contract seems to bottomed out recently unable to drop significantly below 350 cents. On weekly chart you can spot a triangle which is often on that timeframe a signal that the reversal is close. The harvest during coming weeks will reveal whether USDA or traders were right regarding the US corn yields. If USDA was to optimistic, corn may rally well above 400 cents per bushel with the helps of traders covering record shorts.

After the introduction of the ethanol import tax in Brazil the raw sugar could not find the enoguh support to rally significantly. One of the reasons is the expected increase of the European sugar exports and the other is the Indian sugar production that rebounced from last years drop. However analysts say that the sugar market will end in deficit next year and this may add some bull power. Here again record shorts of money managers can play key role in breaking the 15 cent level.

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

Read More

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

Read More

Aug 2, 2017 – Weekly Commodity: Good week for commodities but bulls seem to run a little too fast

Last week was overall very good for commodities supported with both weak dollar and fundamentals as the Bloomberg commodity index rose1.8%. However there are emerging speculations that the bull had run a littlebit too fast and some correction could be ahead, which was supported with the price action in the beginning of this week in most of the US traded commodity futures

Crude

The sharp drop in oil inventories reported Tuesday by API and confirmed by EIA next day were the main mover behind the rally last week. On Thursday API also added data about rising demand in July to the highest level this year pace since. Additionally the announced Russia – Saudi oil meeting regarding deteriorating OPEC compliance with output cut agreement helped also the bulls. After the US announced possible sanctions on Venezuela the WTI touched $50 and managed to close above this important level on Monday however yesterday it gave up these levels with a strong reversal technical pattern after API crude oil stocks increased by 1.78mil barrels.

Corn

In Brazil the corn prices paid to farmers in the central regions are at record low and the government announced export subsidies that will make harder for corn futures in Chicago to recover. From EU corn import forecast are at record high when last week upgraded by 3mil tonnes to 15.3mil tonnes and there is also a robust demand from swine and cattle industries. EU “usable” Corn production estimates were cut by 3.6mil tonnes due to heatwaves in Europe.

Colder weather is expected along the Corn Belt the next 10 days that can limit dryness and heatwaves, and this is a price-negative news. In the Crop Progress report the percentage of corn in excellent and good conditions declined just 1% so USDA doesn’t see any huge damage to the crop so far. Overall grain positioning of hedge funds is supporting concerns that further gains are limited (net long in corn is almost 105k lots… but still far from record lvls)

Sugar

There are rumours that only one month supply was left in India and that the government is considering another tranche of tariff free export to ease the shortage. While an increased demand is expected from India the next couple of months, the normal monsoon rains support sugar cane growers.

The Brazilian government cut biofuel tax which makes biofuels more competitive. Therefore demand for ethanol is expected to be higher ethanol which push higher sugar prices to as ethanol parity is will be rising.  Current calculations shows ethanol parity above 14 cents in sugar price terms and it’s expected to rise until the year 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. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com

Read More

July 24, 2017 – Weekly Commodity : Opec meeting and Crop Progress report today will be crucial

The holiday mood (and liquidity) was felt all over the commodity markets. Traders are chasing news and this is bringing volatility which is however quickly fading and volumes are declining. The Bloomberg Commodity index increased 0.3% the last week with precious metals and the part of the soft sector among the biggest winners, while the energy and grain sectors were searching for direction.

Crude oil

While crude inventories in the US are on decline, price of crude oil dropped on Friday on reports that OPEC Production could have increased in July by 145K bpd mainly driven increased supplies from Saudi Arabia, UAE and Nigeria. As OPEC having problem with compliance traders will watch closely the OPEC Monitoring Committee meeting and its outcome on Monday. There are rumours that Saudi Arabia could be pushed to cut their crude export to the whole world by 1mil bpd to make room for Libya and Nigeria. This could be hugely supportive for both WTI and Brent.

Last week the US field crude production increased again and it’s approaching the 2015 summer peaks. While rig count declined marginally, the increasing oil production is still bad news for producers. Money managers were increasing their net long for the last few weeks which is the result of liquidating shorts mainly. Is it a major change in the direction or just a preparation for another bear run, I think we will see in a few day or maybe 2 weeks. For bullish confirmation MM definitely need to increase longs too.

Technically no change for now, despite ugly daily chart where a double top formed recently.

Corn

Grain traders are awaiting the USDA Crop Progress report Monday ET 4PM where the main number will be the quality grades for each crop. Due to the above average temperature the main concern in that the USDA corn yield estimate last week was too optimistic and there will be a drop much below 170 b/a. This with an already decrease acreage for the crop could mean a significant reduction in the ending stocks for 2017/2018 marketing year.

Sugar

The sweetener was trading sideways due to lack of news and stable to higher production data from Brazil. In India, which is the largest sugar consumer of the world, the production is set to rebound as the above average monsoon rains are supporting the growth of sugar cane started to be crushed from October. Corrective upside move toward 16.50-17.00 possible based on technical but overall negative outlook medium term (1 year).

Good Luck guys and remember to watch your risk and be consistent. Oh, one more thing! If you are now on vacation, please enjoy your holiday and don’t trade… rest, and regain energy, you’ll need it when you’re back.

Take care

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

Read More

July 17, 2017 - Weekly Commodity: Commodities boosted by fundamentals and falling dollar

The commodities tracked by Bloomberg Commodity index (BCOM:IND) rallied 1.1% on mixed to worsening fundamentals and weaker dollar. Speculators cut a significant part of their short positions up to Tuesday but commodity prices surged especially the last day of the week as traders were adjusting positions to the holiday liquidity.

Crude Oil

Oil had a pretty good week. According to EIA weekly Petroleum Status Report, crude oil inventories fell by 7.6M barrels while motor gasoline stocks decreased by 1.6M barrels however both staying in the upper half of the average range for this time of the year.

On the other hand the US production after being flat for a few weeks it jumped 59K bpd last week, which could be simply the result of improved weather conditions in the Gulf of Mexico. However the drop of average number of weekly opened oilrigs from 10.5 in the Q1 to only 7 in Q2 signals it could be a challenge to reach 10M bpd US production around the year turn.

The IEA in his monthly report stated that the compliance of OPEC members with the production cut also decreased to 78% while the non-OPEC countries increased to 82%. In June OPEC output rose by 340K bpd after Saudi Arabia, Libya and Nigeria increased flows. There was not much reaction from the market after these figures  maybe because according to the same report, the world crude oil demand growth accelerated to 1.5M bpd in Q2 after a “lacklustre” 1M bpd increase in Q1.

Technically the medium term picture is still rather bullish to me although crude established a clear downtrend channel. In my view what we see is a countertrend to the main trend forming bullish flag pattern. The upper channel line will be however critical as there is also a very strong resistance zone at $50-52. I expect the prices to test $50 next week. This could be a nice entry for a quick short with a target at $47-45 ahead of the breakout from the channel.

Corn

In the grain markets now clearly the weather is in the drivers’ seat. After 2 weeks of rally the corn bulls gave up their fight. The US Department of Agriculture in the latest Wasde report stuck to the strong corn yields estimates above 170 bushels per acre. This triggered fresh selling right after that money managers went net long in corn. The official estimates were well in contrast with the market expectations (btw 165-168 bushels per acre) and caught traders off-guard.

The US Corn belt weather forecast showing above average temperature for the next week pushed back the bulls in the game. The reason is that the coming week will be crucial for the yields as the corn plants are in the important pollination period and hot and dry weather could be very harmful. The revival of grains was strengthened by the weakening dollar following the soft inflation data on Friday.

The technical picture is rather mixed, still in uptrend but ... the bulls didn’t manage to close above the earlier uptrend line which was followed by a huge red canlde (engulfing pattern). Traders are apparently chasing the news which creates very tough trading conditions with mixed signals. Currently it looks more to the downside but the Friday buying could mean a change in the sentiment...again.  In my opinion there is still a good chance for a rally if price of the closest expiry stay above 360cents per bushel. Here the weather is a key factor of uncertainty and traders are getting more and more nervous which is visible from the long green and red candles following each other.

Sugar

Stronger brazil real (or weaker dollar) and the increased fuel prices in Brazil were the two main drivers of sugar prices which surged last week despite an increase import duty on sugar in India from 40% to 50%. Also worth to mention that Petrobras can from July adjust gasoline prices daily which could eventually mean smaller but more frequent changes and less volatile impact on sugar.

The speculative net short little changed until last Tuesday however I expect some more significant short covering took place towards the end of the week. We will know more next Thursday when new COT data will be released. Although the market may seem to be oversold but there are reasons to be pessimistic. In India the raw sugar production is expected rise by 25% and the refined sugar production from Europe around 20% in 2017-18. This will mean a significant boost to supply and support for bears.

Technically sugar bounced back from 12.50 support and on the daily chart now created an inverse head and shoulder formation. After the outside week (also huge engulfing pattern) 2 weeks ago it seem that a correction move ahead will be confirmed if the inverse HS pattern will be completed. Price targets could be 15.50 (Fibo) 16.50-17.00 (HS depth) however one should be very careful with position sizing as fundamentals strongly support bears in medium term, and with a long position you would trade against the trend...

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

Read More

July 10, 2017 - Weekly Commodity: Oil and precious metals dropped while crops rallied

Despite the rally in grains the Bloomberg Commodity Index dropped 1.5% last week as oil and precious metals fell. The weakening of the dollar couldn’t give sufficient support to the commodity bulls as fundamentals were lagging.

Oil

As Nigeria and Libya, exempt from the OPEC deal, are increasing production, the cartel fails to cap the production. The US rig count increased again after last weeks’ slight drop but according to news the US production has risen in Q2 only by 139k bpd which shows a falling momentum compared to 439k bpd rise in Q1. This drop was partially caused by the Tropical storm Cindy which resulted in disruptions on offshore oil platforms as well as delayed transportation in the Gulf of Mexico. Most likely this caused also the “surprise” drop in crude and fuel inventories which should really a surprise if one’s watching the news…

Technically there is still a chance the market will turn north to complete the 5^th wave however it looks at the moment more bearish at least short term due to a possible increase in Crude inventories after the recovery of production in the Mexican Gulf. The summer has however just began and demand should increase with the ongoing holiday season on the northern hemisphere. Any military escalation of the Qatar case would add support to the bulls. In this relation don’t forget the Aramco IPO where at the Saudi Arabia has a major interest in increasing oil prices…

Corn

Weather concerns and drop in planted acreage were the main movers of grain prices the last 2 weeks. Corn and wheat were planted in smaller acreage as expected while soybean acreage didn’t rise as much as expected. The biggest problems seems to be developing in the wheat market as according to some analyst only 90-92%% of the high protein hard spring wheat will make it to the harvest due to the extremely dry weather expected in the north wheat belt in the US. This is much lower than the Official USDA estimate of 96%.

The surge in wheat prices helped to push higher the corn and soybean too. The official USDA Crop progress estimate on Monday however showed improved corn conditions with 68% of crop good and excellent vs. expected decline to 65%. Now traders are focusing on the corn yields and the question is how much it will fall from the last years’ records. 165 bushel per acre could be the level to watch as this would bring the ending stocks below the psychological 2bn bushels for the 2017/2018 marketing year. So watch the weather in the Corn Belt, the key will be if the drought will continue through July or will come some rains.

The front end corn contracts managed to close above 390cents and while there was a gap up on Monday and the following days the trading was very hectic (check long shadows on daily candles). Managed money covered its shorts mostly but new longs were not built which shows that there is no real sentiment change rather cautiousness. According to some news during the weeks there was significant commercial selling which can signal there are more hurdles ahead of the bulls.

Sugar

The state owned Brazilian energy giant Petrobras cut gasoline prices again last week again, now by 5.9% which will pressure ethanol prices and ethanol parity, resulting in more profits producing sugar for the Brazilian sugar mills. And the pressure on sugar will increase later this year as in October the EU will end limits on production quotes. According to the producers on the oldest continent this could result in an increase of European sugar production by 20-25% in 2017-2018 season. Adding the expected 25% increase of sugar production in India there seems to be more troubles ahead for the sweetener in the next couple of months unless the weather will not help to lift prices.

Managed money on the other hand reached net short levels close to record highs and in this environment a short covering could trigger a short term volatile rally. The head and shoulder formation reached profit target and some profit taking took place since that but at least according to the COT data from 3^rd July there was no change in net short of money managers positioning.


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

Read More

June 20, 2017 – Weekly Commodity (crude below $45, but follow the US/Russia tension)

Commodities didn’t have a good week. The Bloomberg Commodity index dropped to one year lows and Monday the negative momentum doesn’t seem to fade. The best performers were the grains and the worst performers were the soft commodities, but there were significant losses in the energy and metal markets too.

Oil

Drillers added active oil rigs for the 22nd consecutive weeks however only 6 new rigs bringing the total US oil rigs to 747. The US EIA crude inventories declined 1,66mil barrels but the fuel inventories rose despite the summer driving season. According to CNBC eight prominent hedge funds reduced their positions in shale drillers saying they are going to undo the recent recovery in the sector as pumping oil too fast and this will drive the prices lower and lower. After there is an activation of an oil rig it takes approximately 4-6 months to start to pump oil so the increase of rig-count means the US shale oil production will rise at a similar pace in the next 6 months. This means around the year turn the US oil sector will reach 10 mil bpd.

On the other side of the Atlantic in Africa, Libya and Nigeria are aiming to get back to the levels of production before the fights started as both are exempt from OPEC cut agreement. In the Middle East the highly ignored tension by the media between the US and Russians over the downed Syrian plane could bring some upside pressure after the Russians claimed they will stop any coordination with the US coalition and the coalition aircraft will be considered potential targets.

We are at a very important point as the market managed to close below the psychological $45 level.  Technically this can result in a technical selling that can trigger stops below or around $44, however be careful as a return above $45 can give new hopes for bulls.

Corn

Grains had a very good week overall. News about strong Chinese soybean demand lifted the beans and with it the whole sector. The hot weather in the US Midwest raises more and more talks about its impact on the quality of the crops, and this could easily result in a lower ending stocks than estimated by the USDA. More clarity we will get from the US crop progress report.

Technically the corn futures broke out from triangle formation a week ago however after the short squeeze dropped back and retested the upper trend line of the triangle. Last week however prices turned north again so trader needed to jump back to the game if their stops were hit.

Sugar

The lowered fuel prices in Brazil are pushing the sugar lower as bears are feeling stronger and stronger. The weaker gasoline prices mean lower ethanol prices. During the ongoing Cane Crush season this is very important as Sugar mills are deciding whether to produce ethanol or sugar and still sugar means bigger profits. Tuesday the data from key sugar producing region of Centre South showed again higher than expected sugar production. However the short positioning is increasing that there were some speculation of potential short squeeze, but we believe the right time did not come yet although the current positioning is unusual.

Technically the market is ahead of the 12-13 cents target range and nothing seems to stop the bulls unless there is a weather shock on the way.

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

Read More

June 11, 2017 - Weekly Commodity: Oil resistant to turmoil around Qatar, Corn on rollercoaster bull and Sugar in consolidation

According to the Bloomberg Commodity Index, commodities bounced back on Friday from lows seen in May after rollercoaster week. The biggest winners are corn and cocoa, were traders focused on weather concerns. Also copper had a good week on technical buying and escalated turmoil in the world’s second biggest copper mine in Indonesia. On the other side it was a bad week for precious metals and crude oil. The later fell after a very disappointing EIA Weekly petroleum report were crude and gasoline inventories increased massively compared to an expected drop.

Crude oil

The oil market had a turbulent week after the production cut extension agreed by OPEC  and Russia didn’t convince the market that it will be enough to bring balance back to the market. This week the pressure on oil bulls increased after the EIA crude inventories were released as instead an expected drop by 3mil barrels they increased by 3.3mil barrels. Moreover fuel stocks also increased by 4.4 mil barrels signalling there is more than enough supply for the upcoming US driving season. The market is driven by a very negative sentiment and if there is even some bullish news, traders are ignoring them. The light at the end of the tunnel is the developing political crisis in the Middle East involving Qatar as the risk of this tension is not priced in at all. The main thing here is that it cause supply disruption in case of war but also this could put the OPEC production cut in jeopardy.

Technically there are two scenarios therefore it's a risky situation. The market is retesting currently the 61.8% level of the rally from last August until January (in case of uptrend the 3rd wave on the chart). Until the 45 dollar level holds, the direction where we look should be the upside. On the other hand the uptrendline is broken and if the $45 is broken we can sea a bearmerket with next support at $40. The question here is how long it will take for the crude to take off from the $45-50 range if ... (next spring could be goal for Russia and Saudi Arabia to lift prices / more here) and how many times will the bears try to test the support at $45 level. At this stage I would definitely not throw away longs if I have them and would be cautious with any stops as these will be possibly hunted below $45. Focus on weekly close.

Corn

After a volatile week in Corn market it seems that hedge funds are losing their nerves. According to CFTC COT report Money managers closed out 38k shorts to 373k contracts. On the other hand they also increased longs significantly by 32k lots in the week ending on 6th June (last Tuesday). With the net short decreased by more than 35% the market seems to be more balanced and this rebalancing probably continued until the end of the week (we will know next Thursday the fresh data).

The hot weather coming to the Midwest offset the bearish reports from USDA last week. The Crop progress report that despite earlier concerns farmers managed to speed up corn planting and the warm weather is helped to develop the crop although there is a delay compared to last year. However the continuation of hot and dry weather (even exceeding 90-100 °F , 38°C) forecasted for this week could decrease soil moisture too much and this can change the situation for corn and soybean. The USDA in WASDE report Friday was rather bearish raising estimates of world corn and soybean stocks but the US corn stocks were left unchanged. Also CASDE suggested that China may see the smallest crop from 2013.

Technically corn broke out from the triangle which was forming for 2 month and holding strong despite a pullback (bearish shooting star) on Thursday. It seems that the uptrend line from last September is the next main resistance as the market could not close above it despite testing twice during the week.

Sugar

The sugar market was consolidating and managed to close above 14 cents. Monday traders will be watching cane harvest data from the Brazilian Sugarcane Industry Association. Analysts expect a 9% drop in the key Brazil Centre South region and also the amount of sugar contained in cane is supposed to drop due to heavy rains. This will add support to the sugar but still plenty of bearish factors weigh.

The Indian sugar lobby is trying to persuade the government to increase import duty on Sugar to 60% from 40% due to the falling prices as imports at 40% duty are still viable. Do you remember few weeks ago the Indians reduced import duty to zero for 500k tones due to domestic sugar shortage, quite a change... Domestic Sugar production is estimated to rise app. 20% this marketing year. Also China introduced duty on sugar imports last month. According to the CASDE report the Chinese sugar imports may fall as much as 300k tonnes. Moreover the EU is planning to boost its sugar export to gain market share after years of isolation from international markets. Moreover European sugar production is expected to rise by 13% this year.

Technically despite a short term support and possible increase in prises we expect Sugar prices to fall further toward the Head and Shoulders price target. However first a correction toward 15 maybe even 16 cents is possible. The question is only how much the prices will rise before they fall again.

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

Read More

June,5 2017 - Weekly Commodity: Oil and Sugar under pressure, Grains in a vacuum

Crude oil had a hangover week after OPEC meeting,  and some additional dose of pessimism supported bearsto push prices lower below 48 dollars. Grains were looking for direction from USDA Crop Progress report but there was no uggly suprise. Sugar had a tough week caused by falling fuel prices and early monsoon in India where a 25% higher sugar production is projected for this year.

Crude oil

The US withdrawal from the Paris climate deal was translated by traders into more US oil pumped out of the ground. US oil production is on the rise and we have seen something over 400k bpd added in 6 months (from last September until March). Given this pace, the US will be close to 10 mil bpd production (the levels of Saudi Arabia or Russia) in 1 year time.

The recent weakness was also supported by the spike in Libyan and Nigerian oil production. These countries are exempt from the OPEC cut deal and they are expected to increase the production further in the second half of the year.

So what could support the perspective of higher price? Well short term nothing really and it will probably oscillate between $45-50 unless there is production outage in any of producers or geoplitical tension rises in the middle east. However medium term two important events will take place that can provide support to crude. 

The first is Russian Presidential Elections 18 March 2018 where most probably Putin will win another 6 years term. However to convince voters he may need higher oil prices. The second supportive event is the planned Aramco IPO next year where the exact day is to be announced yet. Here again higher oil prices are needed to set higher price for the initial offering. The US oil production will be influenced by two things: first drilling cost inflation (expected 10-30% next year for shale oil) and second, the Feds interest rate policy (the cheap credit environment could come to an end if Fed continues on current rate hike path).

Grains

The grain market is in a kind of vacuum, hesitation continues as despite the rainy weather in the US, there are no signs of further delays in planting. The USDA Crop Progress report showed corn planting as expected above 90% but a little behind 5 year average, so no big moves… yet. While 73% of planted corn emerged, 72% is in good or excellent condition and in poor or very poor condition only 3%. 

So overall one could say that corn is on track to a good year for farmers. However there are two things we need to keep in mind. This estimate for corn is based on only 18 states producing 92% of 2016 corn acreage. The second thing is that it’s enough to miss the planed corn acreage by few percentage point to get a much lower ending stocks (some estimates talks already about 1.7bil bushels vs. the USDA estimate of 2.1bil bushels) So short term probably range trading btw 355-390 (July contract), but possible rise later the summer / in the fall when the impact of rains on final acreage and yields will be clearer (Sept/Dec contract). Therefore it’s important which contract are you watching.

Sugar 

Sugar futures in New York fell sharply last week in line with our estimation. The lower fuel and ethanol prices pushed the Ethanol parity to 13.50-14.00 which means major support now. Prices dived into this zone on Friday as early Indian monsoon helped the bears to push prices lower. Money managers positioning in the futures market was net short more than 23k contracts based on the data from last Thursday however after the sell off on Friday we can expect in the next COT report a significant change in the positioning. The light at the end of tunnel is that producers are stopping their hedging activity at these price levels, but on the other hand additional pressure from speculators may appear as they are closing their longs. Don’t forget for the bulls these weeks were very painful. 

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

Read More