Any bright spots in this commodities slump?

September 30, 2014 06:54 AM

Confidence among U.S. consumers unexpectedly declined in September to a four-month low in a report issued this morning. Home prices in 20 U.S. cities rose in the year ended in July at the slowest pace in almost two years. Russia’s central bank is weighing the introduction of temporary capital controls if the flow of money out of the country intensifies. EBay Inc. jumped 6.7 percent after the world’s biggest online marketplace said it will separate from its payments unit PayPal next year.

Equities: The E-mini S&P 500 (CME:SPZ14) is up 6 points to 1975.50, after getting as low as 1962.75 this morning. Interestingly, the market had a sharp rally upon the release of multiple below-estimate economic reports. Perhaps these reports make the market go bullish in anticipation of a delayed commencement of rising interest rates. On the daily chart, our multiple moving averages still point to a current bearish environment.

Bonds: The U.S. bonds are up one tick to 138’11. The bonds have not gone down even as the U.S. dollar has had an incredibly strong rally. There are two key jobs reports this week, the private ADP report (Weds.) and the government issued non-farm payrolls report (Friday). If we see above-estimate jobs growth, we could see the bonds head back down and resume a recent down move. However, if the market sees below estimate numbers, the bonds could rally further. The jobs reports are very important to the bond market.

Currencies: The main story of September in forex markets has clearly been the USD. The U.S. dollar is up 31 ticks today to 86.02, hitting a high of 86.33. The USD has had a massive run over the past few months. Conversely, the Euro is down 66 tick to 126.33. We expect the Euro to depreciate further over time, but may start to slow down, as it has decreased over 13 cents from the high of this year.

Commodities: Commodities, generally speaking, have been hurt quite a bit recently, likely due to a rising dollar. Gold and silver are being hit today, with silver down almost 3% to $17.14. WTI crude oil is down almost $2 to $92.73. We would not be surprised to see oil head lower, possibly into the 80′s. The commodities that are still in major rally mode are feeder cattle, more than $235 today after trading limit up yesterday, and coffee, up almost $.06 to $1.97. We believe coffee will find a home well above $2.

About the Author

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.