The U.S Dollar has become the barometer of market prices. Don't misunderstand me; it has always been a barometer but never to this extent. Markets tend to mutate over time and wear many different faces. This mutation has created a trading environment unlike any I have experienced in the past. That said; it is very important one plan their work and work their plan. A systematic approach to the markets is crucial at all times. Do not trade without a plan.
Life Time Trading Range 41.50 Cents - $337.50 per Pound
Trades on The ICE 2:30 AM - 1 PM CDT
Coffee market prices are being supported by a variety of situations. The supply tightness of high quality Brazilian coffee will continue to exist until at least next harvest. However, there are other factors that have come into play recently. Generally, during the flowering phase of the Coffee tree there is a dry period that allows the flowers to develop evenly. This year it failed to materialize becoming great cause for concern. Relentless rainy weather has produced some out of the ordinary results. There is talk of large and small beans as well as open flowers and budding flowers all on the same branch of Coffee trees. This could very well be the precursor of a lighter harvest than usual. This leaves the farmer in a quandary as to the timing of harvest so as to produce the best quality and quantity of Coffee bean. He certainly cannot afford to harvest from the same tree four times. The economics of Coffee farming won't allow for that. Higher prices for Coffee appear to be on the horizon.
March Coffee must close below 134.20 Friday to turn the weekly trend down.
Life Time Trading Range $444 - $5379 per Tonne
Trades on The ICE 3 AM - 1 PM CDT
There are quite a few conflicting fundamentals effecting Cocoa prices at this time. Even though the amount of Cocoa arriving at ports for export is running on the high side, there is concern that as we approach the second half of the harvest season quantities will drop. As a result, a smaller harvest is anticipated. Now keep in mind that before harvest there was talk of diseased bean pods and a smaller harvest than anticipated. My gut feeling is that the Cocoa farmers are jawboning the market the way any trader would. During my experience as a floor trader, I witnessed many large traders talking their positions. If they were long they would tell everyone how bullish the situation was and tell them to buy. Unknown to those traders who began buying on this information was the fact that they were buying from brokers initiating sell orders for the touts.
Over the years, I have pretty much adhered to these rules of thumb. Harvests that are projected to be bad tend to get worse as time progresses. Conversely expectations of a good harvest just get better. An astute trader of much experience once told me They try to freeze the crop and burn it out at least once each year but, there is always a harvest!
March Cocoa must close below 33.53 Friday to turn the weekly trend down.
Sugar 12/10/2009 Life Time Trading Range 2.30 Cents - 66.00 Cents per Pound
Trades on The ICE 2:30 AM - 1 PM CDT
Sugar is in a weekly downtrend having closed below 22.64 last Friday. Unica, The Cane Industry Association in Brazil, is estimating harvest from the south central region to be about a half million tons lower than last estimated in September. This news, as well as the impending import needs of India, has failed to support Sugar prices. This market has been very tightly linked to the U.S. dollar as of late. Longs exiting the market created a sizable decrease in open interest. This in and of itself is cause for concern amongst sugar bulls. The 23.57 high of December 3rd could very well hold.
March Sugar must close above 22.70 to turn the weekly trend up.
Life Time Trading Range $26.84 - $117.20 per Pound
Trades on The ICE 8 PM - 1:30 PM CDT (Next Day)
ICE Cotton is grown domestically and has always been sensitive to the value of the U.S. dollar. Being an industrial commodity as well it is also sensitive to the economic climate. However, Cotton prices have been in a sideways trading range for the past three weeks. That alone indicates the Cotton market is not in lockstep with the U.S. dollar's value, but is affected in more of a macro sense. Weather in the growing areas has been spotty at best. Wet weather is still hampering harvest and the dry spells are not long enough to allow its completion. This morning's release of this December's USDA cotton forecast for 2009 - 10 calls for a rise in exports of 500,000 bales due to increased foreign demand and ending stocks revised downward 400,000 bales; which is 31% of domestic usage. These higher than normal export numbers serve to support cotton prices at this level. Although some other markets have sold off, Cotton has not participated. If strength in the U.S. Dollar returns and exports do not up-tick substantially, we may see lower Cotton prices in the near future.
March Cotton must close below 74.00 Friday to turn the weekly trend down.
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