Watching Natural Gas

We kickoff the Chinese New Year’s Eve with Export Sales, Jobless Claims and PPI at 7:30 A.M. Followed by Capacity Utilization and Industrial Production at 8:15 A.M., EIA Gas Storage at 9:30 A.M. and NOPA Crush at 11:00 A.M. On the Corn front the market is monitoring the drought in Argentina’s Pampas grain belt which is likely to continue in the second half of February with no rains in sight. The three month dry spell led the U.S. government and the Bueno Aires Grains Exchange to cut harvest estimates for Argentina, the world’s top exporter of Soymeal Livestock Feed and it is the number 3 supplier of Corn and Raw Soybeans. In the overnight electronic session the March Corn is currently trading at 367 ¾ which is a ½ of a cent higher. The trading range has been 367 ¾ to 366 ½.

On the Ethanol front rollovers are starting up with the April contract picking up activity, which will begin the start of the summer driving season early with Easter coming early this year. In the overnight electronic session the March contract is currently trading at 1.461, which is .007 of a cent higher. The trading range has been 1.466 to 1.459. The market is currently showing 1 bid @ 1.463 and 1 offer @ 1.467 with 6 contracts traded and Open Interest at 1,019.

On the Crude Oil front the market is easing off of yesterday’s price spike. In the overnight electronic session the March contract is currently trading at 6021, which is 39 points lower. The trading range has been 6155 to 6018. The market could retest the highs with the Stock Market roaring again and the continuation of the U.S. dollar selloff.

On the Natural Gas front we have the weekly EIA Gas Storage and the Thomson Reuters poll with 25 analyst participating expect draws anywhere from 162 bcf to 207 bcf with the median 184 bcf. This compares to the one-year of 92 bcf and the five-year average of 145 bcf. In the overnight electronic session the March Natural Gas is currently trading at 2.557, which is 3 cents lower. The trading range has been 2.623 to 2.530.

Have a Great Trading Day!

Gold Takes Breather After Strong Gains

Gold prices is trading sideways in the Thursday session, after surging higher on Wednesday. Currently, the spot price for an ounce of gold is $1351.30, up 0.05% on the day. On the release front, PPI gained 0.4%, matching the forecast. Core PPI also gained 0.4%, beating the estimate of 0.2%. Both indicators rebounded after declines in the previous month. Unemployment Claims climbed to 230 thousand, just above the estimate of 229 thousand. Manufacturing data was mixed. The Empire State Manufacturing Index continues to slow down, and dropped to 13.1, missing the estimate of 17.7 points. The Philly Fed Manufacturing Index rose to 25.8, easily beating the estimate of 21.5 points. On Friday, the US releases key housing and consumer confidence numbers.

The US dollar has sagged against the major currencies, and gold has jumped on the bandwagon. On Thursday, gold jumped 1.6% on disappointing retail sales reports. Concerns of high inflation was a catalyst for the market sell-off last week, and fears of a resumption in the downward spiral are weighing on the dollar. If investors react negatively and ditch the markets yet again, safe-haven assets like gold will likely be the big winners. Gold prices were down in the first half of February, but gold has recovered these losses, after posting strong gains of 2.7% this week. US fundamentals remain solid, as the US economy is showing strong expansion, the labor market remains at capacity, and inflation levels are moving higher. This has led some analysts to attribute the recent sag in the US dollar to technical factors rather than fundamental reasons.

The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, as he started his new position last week. Powell sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time. Currently, the Fed is planning three hikes this year, but that could change to four or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.

Crude Oil: A Good Spot For A Bounce

The stock market continues to recover from its first 10% correction in almost 2 years. But did you notice that crude oil also had a better than 10% correction? This was caused by over supply and the US overtaking the Middle Eastern oil producers in capacity, or so the pundits would have you believe. Others will tell you it is from the unwinding speculative long positions in the futures market. Think about that one. oil prices are falling because people are selling it. Really? Pay the pundit.

Why can’t oil prices fall for the same reason that any prices fall, changes in sentiment. Did you notice that oil fell at the same time as the broad stock markets after also going through a long run higher? A quick look at the chart of West Texas Intermediate crude oil shows the price running higher in a channel from a low around 42 to its high over 66. After a double top there it pulled back nearly 38.2% of the move higher, finding support at the 100 day SMA and prior resistance. Momentum also reset lower with the RSI pulling back out of overbought territory down to near oversold. The MACD also reset near zero.

WTIC Chart

And then what happened? After the reset to price and momentum it is moving back higher. If the stock market can reset and then move higher why can’t oil prices do the same thing? The upside strength now sees potential resistance at the 50 day SMA and the prior support near 62.50 then the recent top at 66.50. A move over that could establish a target price of near 80. Now is a good time to be long oil as long as it stays above the low of the week.

aravind limted

sell aravind @385 target 370/360/345/328

nse tips

buy exide industries @ 214.50 sl 210 target 217.50/220.50/223.50