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Wkly Futures Mkt Summary Apr 15.24


The treasury markets were deserving of a short covering bounce to end the trading week last Friday, even if the longer-term trend remains firmly in favor of the bear camp. We suspect growing anxiety from US equity market losses, the dramatic escalation of Middle East fear, rekindled economic concerns toward China and the unrelenting gains in gold are beginning to prompt bargain hunting buying of treasuries. While treasury bonds have initially managed to respect last week’s quasi double low starting at 114-31, the charts suggest lower lows are ahead. . In a minimally supportive US Treasury development, the European Central Bank is thought to be poised to cut interest rates three times before the end of this year with some analysts suggesting the ECB wants to display independence from the US Fed suggesting they will cut before the US.


With last week’s aggressive three-day rally in the dollar of more than 200 points, the bull case toward the dollar might be temporarily overstated. However, the US March inflation report cycle clearly indicated US inflation is not coming down as much as hoped for at the Fed. Furthermore, a historic runup in gold and an uneasy feeling throughout the markets of something bad ahead is likely to keep the dollar firm from flight to quality buying. While the euro has not forged a lower low in the early trade this week, the currency remains severely damaged on its charts and is undermined further by signs of softening economy. While the Pound charts are injured, seeing the country attempt to solidify laws on asylum could help underpin the UK currency. While a major jump in trading volume on last Friday’s spike down move could suggest bargain hunting interest in the Canadian dollar surfaced at last week’s low.


In retrospect, the equity markets saw a very bearish week of headlines last week with the most prominent bearish development yet another pushing back of US interest rate cut timing. Adding to investor anxiety is a significant jump in US interest rates, unending negative Boeing headlines somewhat disappointing bank sector earnings. However, the market’s recent slide has not produced high anxiety levels and therefore the markets probably have not exhausted selling interest yet. Over the weekend, Iran launched an attack on Israel using drones and missiles, virtually all of which were shot down by Israeli, US, and UK defense weapons. Global equity markets at the start of this week were generally higher with markets tracking positive barely outnumbering those trading lower. Clearly, the Dow has shown the most vulnerability to the disappointment over the slide in US central bank rate cut hope. As opposed to the Dow, the NASDAQ has held up the best of the actively traded stock index futures markets.


In addition to the major swing higher at the end of last week exaggerating the overbought conditions of gold and silver, the trade will likely have to contend with a surging US dollar, which is nearing the highest level in 5 1/2 months. Fortunately for the bull camp, US interest rates fell back slightly on Friday with traders thinking the upward track in interest rates will now abate. However, the Iranian drone attack directly against Israel is clearly an expansion of the fighting and could mean a country fighting a country instead of a country fighting a terrorist group!

In a slightly negative development, gold ETF holdings last week saw outflow of 481,361 ounces while silver ETF holdings declined by 9.5 million ounces. According to Goldman Sachs, the gold market is now an “Unshakeable bull market” likely to extend because of emerging market central bank buying, rising Asian retail investment and escalating US political uncertainty into the election. Therefore, gold and silver look as if they are in a flight to quality environment again but given severe outside market headwinds in the extreme ($ and Rates), and severe overbought technical signals, daily trading ranges could now become extreme.


While the May copper contract forged a significantly higher high upward thrust early this week, as of this writing the market is trading nearly $0.11 under its early high! A portion of the sharp rally in copper prices could be the result of various copper exchanges, and government entities pushing to enforce a ban on Russian copper supply flow into the LME as that could obviously pinch world supply. However, reports are that China is already purchasing disguised copper from Russia to avoid sanctions designed to punish Russia. A fresh bullish headline from early this week came from Citgroup who upwardly revised their copper price forecasts for the second and third quarters.


The energy markets’ lack of significant upside extension following the weekend Iranian drone attack of Israel is disappointing to the bull camp. Like several other physical commodity markets, the crude oil market ranged sharply higher early Friday and promptly fell back $2.00 from the early high in a fashion suggesting the markets may have over factored Iranian retaliation. However, with Iran launching direct drone attacks on Israel, one could consider the war has expanded as feared. On the other hand, the Iranians seem to suggest their retaliation was justified by the attack of their personnel in Syria and seemed to indicate the matter should now be settled as they have avenged the deaths of Iranian military officers in Syria. Unfortunately, Israel is unlikely to allow the direct attacks go unpunished. While Chinese January through March crude oil imports gained 0.7%, the trade was probably expecting larger imports.

At times last week, the gasoline market was the strongest petroleum market but with the significant range up reversal last Friday (July gasoline closed more than four cents below its high) combined with an inflated net spec and fund long positioning that leaves the RBOB market vulnerable to start the new trading week. With the June natural gas contract posting a nine-day low on Friday, the market could be poised to retest contract lows at $1.928.

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A rather subdued start to the week given the increased geopolitical risks after Iran attacked Israel, although the attack seemed more for show as it was telegraphed well ahead of time and resulted in very minor damage. Israel has not indicated how or if they will respond. Mostly dry conditions prevailed over the weekend for the Midwest, but the 1-5 day forecast shows good rains over the next few days for the central Midwest, including Iowa. The moisture is seen as beneficial since it is too early for traders to worry too much about precipitation delaying planting.


Corn prices have not seen an increase in volatility so far from the Iranian attack on Israel over the weekend, but if Israel does respond, that could further elevate the risks of all-out Mideast war and potentially result in global buyers stepping up to secure additional supplies. The market seems unconcerned about that at the moment. Managed Money remains heavily short but doesn’t appear worried enough yet to pare down those short positions. The upper Plains and Midwest will see some moisture midweek, but low temperatures will be in the 20s and 30s across the area late this week into the weekend before warming to above normal levels in the 8-14 day timeframe.


Surprisingly, prices were weaker at the start of this week after the weekend attacks by Iran on Israel. The attack was more of a show as it was well telegraphed and caused very minor damage, which could mitigate the aggressiveness of Israel’s response. Iran’s seizure of a cargo ship owned by an Israeli firm also escalates transportation risks in the region. Many countries in the Middle East are reliant on wheat imports and fears of a wider regional war in the Middle East could result in additional buying to build stockpiles in countries that rely heavily on wheat imports.


June hogs are under the negative influence of a key reversal top from last week. Pork prices have eased after reaching their highest levels since last summer, and slaughter and pork production have picked up the past couple of weeks. The first retracement of the rally from the contract low on January 2 to last week’s contract high comes in at 101.20, which could be an initial support level today. Friday’s Commitments of Traders showed managed money traders were net long 92,731 contracts as of April 9, their biggest since 2013. This data was as of last Tuesday, the day before the market experienced its key reversal lower and no doubt contributed to the heavy selling last Wednesday and Friday.


Despite a disappointing cash trade last week, June live cattle may find support around 169.00, the bottom of a month-long consolidation that lasted from mid-December from mid-January. At Friday’s low the market had fallen 16.375 from the March peak, while cash live cattle prices have fallen only 4.00 during the same period, which suggests that fund selling may have gotten ahead of the market. Cash live cattle were lower last week. As of Friday afternoon, the five-day, five-area weighted average price was $183.48, down from $185.53 the previous week and down from a peak of $189.44 on March 22. The USDA estimated cattle slaughter came in at 603,000 head last week, down from 613,000 the previous week and 611,000 a year ago.


After a lower close on Friday, July cocoa gapped higher at the start of this week and traded to new a contract high, with the nearby contract trading to a new all-time high. Ivory Coast port arrivals for the week ending April 14 totaled 13,000 tonnes, down from 29,000 for the same week last year. Total arrivals for the 2023/24 marketing year have reached 1.317 million tonnes, down 28% from the same period last year. The mid-crop appears to be starting out weak after the prolonged heat wave and record temperatures last month. The slow arrivals may also be reflecting growers’ frustration that the Ivory Coast marketing board, the CCC, was not more aggressive in raising the official farmgate price. Farmer groups are asking authorities for increase to 2,500 West African francs ($4) per kilo from the 1,500 ($2.50) announced earlier this month, which itself was an increase of 50% from the previous level.


July coffee closed well off its highs on Friday after reaching its highest level since January 2022, and this makes Friday’s high at 229.75 a formidable resistance area. Vietnam’s rainy season is normally well advanced by now, but a prolonged heatwave this year is viewed at damaging for their 2024/25 robusta crop. This follows a 2023/24 crop that is estimated to be down 20% from 2022/23. Houthi attacks in the Red Sea have forced shippers to take a much longer route around South Africa instead of the Suez Canal, and this has slowed the arrival of robusta supplies in Europe and forced European grinders to rely more on coffee from Brazil.


July cotton was higher at the start of this week as the market seems to have fallen too far too fast after an 18% decline from its February peak. Last week’s USDA supply demand report held few surprises, but it did come in at the bullish end of expectations, with US 2023/24 ending stocks unchanged at 2.5 million bales versus an average expectation of 2.56 million and world ending stocks at 83.08 million bales versus 83.38 million expected. USDA left Brazilian and Australian production unchanged, but they did increase Brazilian exports to 11.7 million from 11.2 million in March and Australian exports to 6.00 million from 5.75 million.


The sugar market may draw some support early this week from a statement by a senior Indian Food Ministry official that the government is not considering allowing sugar exports for the rest of the 2023/24 season, despite requests to do so from sugar manufacturers. The key industry group ISMA had requested that exports be allowed in the wake of improved production reports since the start of the year. Last week a government official said that they would like to see any additional cane output go towards ethanol production.

Please contact us at 1.877.690.7303 or via email at sales@admis.com for any questions or comments on this report or would like more information about ADMIS research. 

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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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