Sureshot Commodity Tips

I remember when Obama was mocking the opponents of his health care bill saying the bill passed and the sun still came up. Well the sun did not come up for many Americans who have lost their jobs or failed to find one because of all of the uncertainties this jumbled mess of health care legislation has done to the private sector. Still in all fairness to the President I should tell you that according to the Wall Street Journal, Mark Zandi, Chief Economist at Moody's, estimated that the plan would add 2 percentage points to real GDP growth and 1.9 million payroll jobs, while reducing the unemployment rate by a percentage point. So we get to 8% maybe?

The oil market shook off a very bullish draw in the Energy Information Agency status report. Oil Imports took a big hit as they fell by about one million barrels a day, mainly due to the wild, topical weather. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.0 million barrels from the previous week putting them at  353.1 million barrels.

Yet the oil market seemed torn. The weekly jobs number was poor yet the trade balance numbers seemed to suggest a bottoming out of the manufacturing sector and perhaps even some signs of life. There was also some hope that Federal Reserve Chairman Ben Bernanke would hit us with some immediate stimulus. While the market will remain volatile I still believe that long term a bottom is in, perhaps for the rest of the year. 

In fact even the story by Gregg Myers from the Financial Times points out that exchange data revealed a surge of interest in options that convey the right to sell oil at $50 a barrel by December, almost $40 below current prices. Open interest has risen by 60 percent in the past month, making it the second most widely owned December crude put on the New York Mercantile Exchange and this does not waver me in my prediction. In fact it makes me even more bold in that prediction.

Once again we remember the attacks of September 11, 2001, a day freedom came under attack. Today the CME Group will observe the 10th anniversary of the attack on the World Trade Center. NYMEX/COMEX markets on the CME Globex will observe voluntary moments of silence at the following times.7:46 am CT/8:03 am CT/8:59 am CT/9:29 am Central Time /The CME requests that all electronic market participants refrain from trading NYMEX/COMEX products on CME Globex and CME ClearPort during these moments of silence. God Bless America.

Global stocks this morning are mostly lower with the Euro Stoxx 50 down -0.61% and Dec S&Ps down -6.30 points. The dollar index rose to a 1-3/4 month high and most commodities weakened on concern the global economic recovery is faltering. The euro slumped to a 5-3/4 month low against the dollar as concern grows over a Greek default as credit default swaps to insure Greek government debt climbed to a record high of 3,238 bp and the yield on the Greek 2-year note soared to a record high of 55.907%. G-7 finance ministers began a 2-day meeting in Marseille, France to discuss the European debt crisis and ways to bolster their economies. 

The Aug German CPI was revised slightly higher to unchanged m/m and +2.5% y/y from the previously reported -0.1% m/m and +2.4% y/y as energy costs increased. Limiting declines in European stocks was strength in French factory output after Jul French industrial production rose +1.5% m/m and +3.7% y/y, stronger than expectations of +0.4% m/m and +2.0% y/y. IMF Managing Director Lagarde said in a speech in London that the risk of recession outweighs the threat of inflation and monetary policies in advanced economies "should remain highly accommodative."

Asian stocks today closed lower with Japan down -0.63%, CHina -0.18%, Australia +0.16%, South Korea -2.13%, India -1.74%. Japanese stocks closed lower after Q2 Japan GDP was revised down to -0.5% q/q and -2.1% annualized, weaker than the previously reported -0.3% q/q and -1.3% annualized. 

The yen fell to a 1-month low against the dollar on speculation G-7 finance ministers meeting in France may discuss coordinated currency intervention to curb yen strength. Despite the fall in Aug China CPI to +6.2% y/y from July's 3-year high of +6.5% y/y, Chinese stocks finished lower on concern that economic momentum is slowing after Aug China industrial production rose +13.5% y/y, weaker than expectations of +13.7% y/y.

December S&Ps this morning are trading down -6.30 points. The US stock market yesterday traded mixed into early afternoon and then tumbled after Fed Chairman Bernanke said that risks to the economy have grown: Dow Jones -1.04, S&P 500 -1.06%, Nasdaq Composite -0.78%. 

Bearish factors included (1) the unexpected increase in weekly initial unemployment claims (+2,000 to 414,000 versus expectations of -4,000 to 405,000), (2) concerns the European debt crisis is dragging European economic growth lower after the ECB cut its 2011 and 2012 Euro-Zone GDP forecasts and ECB President Trichet said the European economy faces "particularly high uncertainty and intensified downside risks," (3) the action by the OECD to slash its Q3 U.S. growth forecast to 1.1% from a May forecast of 2.9% and cut its Q4 U.S. growth forecast to 0.4% from 3.0% in May, and (4) comments from Fed Chairman Bernanke who said that he sees increasing risks to the economic outlook along with disappointment that he did not suggest any immediate stimulus measures to stimulate the economy.

Regards,

Commodity Tips Advisory