01.28.09
Filed 4:59 pm WEDNESDAY
————————Last————————Last Week 1.21
Mar Crude—————-42.17————————–43.82
Mar Heat—————–142.25————————-138.40
Mar XRB (Blended Gas)—–121.05————————-119.88

Crude oil fell steeply on Tuesday on the growing consensus that the US recession is deepening. This belief was underscored or encouraged by the announcement of 4 major corporations of 71 thousand job cuts between Monday and Tuesday. Also, consumer confidence continued to decline as well as the median price for a home. On Wednesday, the Department of Energy announced that crude stocks rose yet again, the 16th time in the last 18 weeks. The DOE stated that crude stocks rose by 6.2 million barrels. They went on to say that gas stocks actually declined by 121,000 barrels while the trade had been looking for an increase of 2 million barrels. The DOE went on to report that distillate stocks were as expected, a draw down of 1 million barrels. The initial response to this release was accurately reflective of the information: crude was lower by 43 cents a barrel while heating oil was up 2.3 cents and gasoline was better by 2.2 cents in trading just before the noon hour.

A new wrinkle to trading this market has been introduced by the American Petroleum Institute. Apparently feeling that their report had been increasingly overshadowed by the release of the Department of Energy, the API is now releasing its weekly supply and demand figures on Tuesday at 4:30 pm, east coast time. Last night, the API stated that crude stocks rose by only 800,000 barrels.

Consumer confidence fell to 37.7%. Crude prices are 50% lower than year ago levels. OPEC is to curb supplies 5% this month and will attempt to further tighten production at its upcoming meeting in March. OPEC also called upon futures exchanges to make speculation in oil trading more difficult. Many traders believe crude is working a range bound trade with $30 the lower end and $50 the top end of resistance. Oil should have a positive response to the passage of a stimulus package from Washington.

————————–Support—————-Resistance
Mar Crude—————–37.00——————49.00
Mar Heat——————129.00—————–150.00
Mar XRB——————-107.00—————–125.00

METALS
————————–Last—————————Last Week
April Gold —————-889.30—————————851.70
Mar Silver—————–11.955————————–11.325
Apr Platinum————–960.00—————————927.60

Gold traded off recent highs on Tuesday and Wednesday to reflect weaker values for crude, a drop in consumer confidence, the continuing decline in real estate valuations and a new round of job cuts announced by major US corporations. Previously, gold had traded hands at a three month high which prompted some to take profits when the metal pierced $900 an ounce. Gold holdings in ETFs reached a record at 832 metric tons. Gold has been recast recently as a currency more than a precious metal with industrial application. General dissatisfaction with paper asserts and continuing questions about the viability of the banking system has driven investors towards diversification with metals. Also, it’s important to keep in mind that gold is a non interest rate bearing asset. With real rates of interest approaching zero, gold hasn’t much competition for funds from debt instruments. Also, gold has a certain clarity which other investment instruments don’t possess. Currencies are affected by political factors and interest rate differentials as well as fiscal and monetary policy. These factors are always changing and hard to accurately quantify. In the end, gold is gold; it’s an asset class with few mysteries. Any break of $25 to $30 will continue to find buyers. Exports to India have slowed with higher prices. Month on month, imports by India fell to 2 tons from 24 tons. Gold also found sellers as the equity market rallied on the belief that a stimulus package and banking reform would possibly stabilize the US economy. Platinum found itself under some pressure as well as Japanese car makers stated that they were cutting back production. To counterbalance this, physical demand from the jewelry trade is expected to remain stronger than previously expected.

—————————-Support———————–Resistance
Apr Gold——————— 885.00————————–916.00
Mar Silver———————-11.72————————–12.45
Apr Plat———————–919.00 ————————993.00

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SOFTS
——————————-Last———————–Last Week
Mar Coffee———————122.50———————–117.70
Mar Sugar———————–12.88————————12.67

Sugar was under selling pressure ahead of a decision by India on whether or not to change import taxes. Currently, India has a 60% tax on sugar imports for refining and local use.

If India drops the import tax on sugar this would be a positive for price.

Coffee continued to grind higher as supplies from Central America declined. Exports from Columbia were lower by 23% in December. Even with economic contraction, demand remains inelastic.

—————————-Support——————-Resistance
Mar Coffee——————–119.00——————–125.00
Mar Sugar ———————12.50———————13.20

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——————————-Last——————–Last Week
Mar Soybeans——————– 9.824——————-10.256
Mar Corn————————3.844——————–3.924

Corn and soybeans fell sharply, the most in a week on Tuesday as concern about economic contraction continued which in turn led to a projection that global demand for corn and soybeans would consequently contract as well. The erosion of consumer confidence was not a positive.  The announcement of severe job cuts was a negative as well.  On Tuesday, corn was lower by 2.3% and soybeans by 2.2%. Also, rains in key growing regions in South America were a market negative. The rains in Brazil were probably enough to relive the stress on the crops for now but more will be needed. By mid session Wednesday, process had rebounded with corn 5 cents better an d soybeans 13 cents higher than Tuesday’s close.

Mar Soybeans————-9.50——————-10.30
Mar Corn——————-3.65——————-4.03

Chuck Kespert

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.