FuturesBlogs | Not Those Beans
Not Those Beans
Posted by Michelle Torres on February 12, 2008 7:58 AM
Cocoa ? March Cocoa is trading above the 2400 mark this morning on continued commodity strength and a weaker U.S. Dollar. Commodities in general have been seeing strong inflows of money due to a shaky stock market and choppy treasury market. The Ivory Coast and Ghana are only expected to get light precipitation on three of the next ten days, which is far too little to improve the overall hot, dry conditions. Civil unrest in both nations figures to disrupt normal port arrivals and could lead to a short-term supply squeeze. Friday's swift rally after the market broke down on Thursday gives evidence of strong fund buying on dips due to the solid fundamentals and the relatively under-priced state of the market. It is critical from a technical standpoint that the market hold above the 2400 mark, as a weak close could bring sellers out in full force. March Cocoa remains overbought on the RSI and stochastic indicators, suggesting the market could be vulnerable to profit-taking pressure in the near future, especially if new technical goals are not met. Momentum is beginning to turn a bit flat to lower as a result of today's trading, suggesting the near-term bias may shift slightly in favor of the bears. Support comes in at 1275, 2364 and 2355, while resistance may be found at 2395, 2405 and 2415. As of the writing of this report, March Cocoa has traded through the first two resistance levels.
Coffee ? Coffee is slightly lower this morning on profit-taking amid technically overbought levels. The caffeinated commodity has made a good run of late, breaking through resistance at 144.00 and signaling that the market may be emerging from range-bound trading and forming an uptrend. Brazilian exports for January are down 17 percent from the same period last year and consumption has risen, which could lead to tighter supplies this year. Coffee trees in the second largest world producer are entering a less productive phase in a two-year cycle ? coupled with warm, dry weather, this could severely diminish output. World production for the 2008-09 crop year is expected to barely meet 2007 consumption levels, which would eliminate any surpluses and put pressure on growers to meet demand. Yesterday's chart pattern indicates the possibility of a short-term reversal and could bring about a test of the newly established 144.00 support area. A violation of this area could bring about heavy profit-taking pressure. Support comes in at 1445.70, 143.50 and 142.05, while resistance can be found at 149.35, 150.80 and 153.00.
Dow ? Stock index futures are trading higher this morning after posting moderate gains yesterday. The renewed buying interest comes on the heels of comments from St. Louis Fed President Poole's announcement that he sees the U.S. avoiding a recession. Six major U.S. banks are expected to announce a 30-day moratorium on foreclosures while they weigh the possibility of restructuring mortgages. "Buy" recommendations for Time Warner and Schlumberger are also aiding the market in the early going. Investors have begun to find bargains out there, especially in technology and consumer staples. Strengthening Crude Oil prices have helped renew buying interesting in large petroleum companies, such as Exxon-Mobil and Chevron. March Mini-Dow futures seemed to have stabilized after falling as much as 700 points over the past week. Moves above 12,500 could trigger more technical buying, while rejections of this price level point to sideways-to-lower trading. Momentum is showing bearish divergence from the RSI, suggesting the market may not be able to cross the 12,500 hurdle. Support comes in at 12,181, 12,124 and 12,087, while resistance can be found at 12,275, 12,312 and 12,369.
Rob Kurzatkowski, Commodity Analyst
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