A day of lighter volume gave us a narrow 100 pt trading range that spent most of the day above 55.00 c/lb H'07 but came off at the close to settle near the lows of the day. The CRB had another very weak day settling at the lowest level since May 2005. Grains, energy and metals continued to give back as the dollar strengthened. Bearish options were another factor which lead to the meltdown on the close which is only 50 pts away from the 50% retracement.
Obviously, we need to hold that level in order to spark the funds to get back in the buying mood. The spec hedge only showed a slight increase from last weeks 6.6% long position to 7.4%. This may have been cut into on Friday with the spec sell stops that were hit on the last day of the year.
In any case, we seem to be consolidating the market at these levels and seeing profit taking in most of the commodities. Volume was 13,000 contracts which is back to a modest amount and don't expect any big trading days as we get ready for our first full week of 2007 and our January USDA crop report that comes out next week.
Technically, after the failure to settle above 57.00, the market is vulnerable and needs to hold 54.00. However, there is no business going off even with the pull back as most of the export buyers are still in the holiday mood and have cheaper foreign offer and consignment stock they can buy.
We will need to test the low 50's before we will be able to stir up any new business based H'07. It seems most mills have covered most of their needs for the first quarter and are happy to wait. This will continue to weigh on the market as we struggle to go higher.
marketing@alchempro.com
