The Acuvest Letter
by John Caiazzo
| Date: 06/29/09 | Estimated Update: 07/06/09 |
|---|---|
| Company: | Acuvest |
| Phone: | 951-693-9600 |
| E-Mail: | futures@acuvest.com |
| Website: | www.acuvest.com |
Overview
Markets continued to gyrate as new reports emerged from the U.S. and the Organization for Economic Cooperation and Development and the World Bank. The OECD raised its growth forecast this week but the World Bank forecast the global economy would contract by 2.9% this year in a report June 22nd. That kind of contradiction prompted wide market swings internationally and we favor the World Bank forecast on the simple basis that the U.S. is in recession and as the consumer of the world, the way the U.S. economy goes, so go the economies of the industrial nations. We have been very vocal in our assumptions over the past two years and we continue to expect further global economic declines regardless of the rhetoric emanating from Washington. This coming week a number of economic reports will be issued, not the least of which will be the all important June employment report as well as manufacturing and housing data. We would suggest, strongly, that inventors put their financial “house” in order and where possible, implement hedging strategies across the board. Friday the U.S. celebrates the July 4th Independence Day holiday and all U.S. markets and government services will be closed. Now for some actual information.
Interest Rates
September Treasury bonds closed at 11817, up 16.5 points on continued shortcovering after recent long liquidation in anticipation of government requirements met through the sale of treasuries. As I suggested over the last couple of weeks, the U.S. is in “denial” as to whether to spend and sell treasuries to finance the spending, or go “out on a limb” and buy treasuries to reduce yields in order to promote home buying. On the recent selloff we suggested the latter would take place and that treasury bonds should be bought on declines. We have not changed our opinion but do expect wide price swings tied to the various economic data.
Stock Indicies
The Dow Jones industrials closed at 8438.39, down 34.01 points and lost 1.2% for the week. The S&P 500 closed at 918.90, down 1.36 points and lost 0.3% for the week. However the second quarter had the S&P pick up 121.03 points or 15%. The Nasdaq closed at 1838.22, up 8.68 points and gained 0.6% for the week compiling 14 gains out of the past 16 weeks. For the second quarter, the Nasdaq gained 309.63 points or 20%. It could easily prove to be the Nasdaq’s highest quarterly gain in nearly six years. We once again suggest implementing hedging strategies depending on portfolio composition as to which indices to use for hedging strategies.
Currencies
The September U.S. dollar index closed at 8030, down 39 points on Friday. The Swiss National Bank early in the week performed actions to weaken the Franc’s exchange rate and in so doing shored up the dollar against the Franc as well as the euro and other currencies. However, having taken no action on Friday, the Franc and euro recovered pushing the dollar lower once again. With U.S. Treasury yields near their lowest level in weeks, the dollar, in losing investment attraction, retreated. We continue to suggest buying Swiss Francs on any further declines. That suggest made over the past few weeks would have proved extremely profitable. Our longer term outlook for the Swiss Franc is to return to parity with the dollar. The September Euro on Friday closed at 14075, up 90 points with the Swiss Franc gaining 110 points to 9256, the British pound 157 points to 16527, the September Japanese yen 77 points to 10515, and the Canadian dollar 39 points to 8681. The Aussie dollar against gained closing at 8034, up 60 points.
Energies
Qutust crude oil closed at $69.16 per barrel, down $1.07 with august heating oil losing 4.36c to close at $1.7810 per gallon. August unleaded gasoline lost 2.97c to close at $1.8719, but August Natural Gas gained 116 points points to close at $4.105. The House of Representatives passed a sweeping energy bill on Friday that will toughen greenhouse gas emission standards for U.S. companies who had warned of increased imports and refining plant closings if it passed. We will have to see what this brings in the near term. Meanwhile stay out of energy products for now.
Copper
September copper closed at $2.3090 on Friday, down 70 points as the
World Bank forecast the global economy would contract by 2.9% this year
in a report June 22nd. The weak U.S. equity market was also a factor in
the selling. Inventories at the LME fell by 1,350 metric tons on Friday
to 270,250. The latest Comex data showed a decrease of 169 short tons to
59,596 tons and the weekly data from the Shanghai Futures Exchange
showed a decline of 12,443 metric tonnes to 56,088 tonnes. We continue
to suggest holding existing put option positions but not adding for now.
Precious Metals
Autust gold closed at $941 per ounce, up $1.50 with September gaining 12.4c to close at $14.156. July platinum closed at $1203, up $12 while September palladium gained $2.75 per ounce to $247.20. The weak dollar was responsible along with confusion after the Swiss Bank early week action to shore up the dollar which on Friday was not done. Warehouse stocks at the Comex rose by 15,498 ounces to 8,715.41. Silver stocks declined by 678,158 ounces to 118,554,438 ounces. The wide prices swings over the past few weeks make precious metals a “coin flip”. We prefer the sidelines.
Grains and Oilseeds
July corn closed at $3.84 ¼ per bushel, up 1 3/4c as traders awaited next weeks acreage and grain stocks reports. We prefer the sidelines. September wheat closed at $5.63 per bushel, up 1 1/2c in sideways action. Next weeks USDA acreage and quarterly stocks data expected on Tuesday should create volatility so would suggest the sidelines here as well. November soybeans closed at $9.91, up 11c per bushel. Traders are awaiting the USDA report but some analysts feel that good weather conditions for the late plantings and outlook for larger seeding could produce a bearish report. We like soybeans but would not be in position until after we have had a chance to review and analyze the report.
Coffee, Cocoa and Sugar
September coffee closed at $1.1920 per pound, down 1.05c. Technically coffee appears to have made an intermediate bottom according to some analysts and that could produce a consolidation phase for coffee. We would stand aside. September cocoa closed at $2,553 per metric tonne, down $3.00 on profittaking after the $33 gain early in the week. The weak dollar accounted for Fridays gain but the early week gains in the face of the strong dollar would suggest some information coming from the West African cocoa midcrop harvest. We would avoid shorting cocoa and traders could consider buying a few contracts but with stops. October sugar closed at 16.26c per pound, down 39 points after making a new contract high four days in a row. The selling on Friday could be attributable to weakness in other commodities specifically energy products since sugar is a base for ethanol production. Stay out.
Cotton
December cotton closed at 56.84c per pound, down 65 points on light trading in front of the planted acreage report due on Tuesday by the USDA. Stay out until after the report.
Information provided is from sources deemed to be reliable but not guaranteed. Futures and Options trading involve a high degree of risk and may not be suitable for everyone. John Caiazzo is a registered commodities broker with over 45 years experience in investments and opinions are his own and not of the Futures Commission Merchant he introduces his clients to.