Energies on Feb 22 [more]
The new high price of 254.05 was established on what was thought to have been buying by funds in NY coffee. This lifted coffee prices as KCH heads into option expiration today and while prices have eased a bit this morning, the potential for fireworks remains. I am standing aside till Monday. Cotton and Sugar remain quite volatile, even in lieu of recent rule changes by ICE made in an effort to tone down the severe price action. Once you've opened Pandora's box...
At first on Wednesday Cotton prices responded in a sideways to lower fashion once the USDA crop numbers were reported. As the day wore on however, cotton prices jumped, resulting in new contract highs among several months. This morning cotton prices are adding to those gains and my earlier prediction that cotton values will seek $2.00 is now just around the corner. Friday brings option expiration for March. What has been most interesting to see has been the strength shown by next year's crop.
Coffee option expiration will dominate action today. Will we see the 245 strike visited? The 255 strike perhaps? Or maybe, just maybe the 260? Or will things settle down right in the middle at 250? Regardless, be ready for some fireworks. Personally, I suspect to see a shot at the 245, but who knows? Anything can happen and often does. Or will it be 260? Stay tuned.
Sugar prices move around every day in wild fashion. I cannot make sense of some of these moves and attribute them to computers trading on their own. I think ultimately the fundamentals will take hold, but for now, look for more wild days ahead.
I favor the long side of Cocoa, as I do all the soft markets. Holding long July call spreads and will seek to add on dips. Looking for a close over 3300 to stimulate things, but the upside won't heat up until either fresh news comes out of Ivory coast, or technically, we close above 3335 in CCH.
Jurgens H. Bauer, Softs Guru [more]
Crude oil called lower by more than $1 as the liquidation still continues after the huge premium flatprice following the political issues in Egypt. The supply and demand fundamentals are settling back into the market as crude oil falls below $87.00 this morning as it has broken support there. WTI spreads are still the main story with H/J breaking -300 to trade -325 as the shorts finally broke great support there after countless tries to get below -300. Dec11/Dec12 also breaking -100 as this market is looking to go lower here as well. Watch for API reports coming out after the bell today as this will likely be a huge catalyst for flatprice. I would like to buy on the dip as my next support level is $82 but the market still has another $4 to go on the downside.
Natural gas is liquidating the last few days as well with March natural falling below $4.10 as a couple of concerning in inventory reports have done this market in. Look for natty to have a solid base at $4.00 and I would recommend getting back in around these prices.
- Daniel Cronin, Energies Guru [more]