27 ledna 2009

27.january: Market update 1

HG Copper on Nymex and Copper on LME rose strongly yesterday breaking a few technical resistance points. The trigger has been a combination of a weaker dollar, stronger stock markets and most importantly yesterdays surprise jump in Existing home sales.

Technically a break above $162,65 on HGH9 could signal an end to the month long sell off with an initial target towards $171. The move comes despite record levels of stock piles in LME registered warehouses as demand from builders and automakers declines faster than production can be trimmed.

Gold yesterday reached a high of $916.30 just shy of trend line resistance at 918 on continuation charts. The market was supported both by a weaker dollar but also concerns that government spending will eventually lead to inflation. A US government 20yr auction of TIPS (Treasury Inflation Protected Bonds) notes attracted a higher yield than forecast at 2.5% .

A break above the Sept/Oct highs leaves the market open for gains back towards $1,000 but for now the trend line resistance at $918 is going to be the first major hurdle.

Support: 901 890 860
Resistance: 918 926

The dollar weakness seen since yesterday has provided the dollar based commodities with an incentive to move higher.

Crude had another stab at $50 but failed at 48.59. While the front month now have rallied 41% from last week’s low the equivalent rally for the June contract (CLM9) has only been 12%.

This is a sign that OPEC cuts are beginning to have an impact but also that spread trades have been closed down. The famous carry trade is therefore no longer as profitable as earlier, if at all….

Venezuela is ready to support OPEC with a 4 mio barrel per day cut. This is mostly being ignored as “talking your book” as they need $60 to balance their book and rely on oil to support half of its budget and 93% of export revenues.

Technically we have not broken any significant levels so it most of all looks like a continuation of the sideways trading now seen since the middle of December. Upside levels worth mentioning is $51.00 and $54.25 both being channel tops depending if you are looking at CLc1 or CLH9.

Support: 45.25 42.90
Resistance: 48.60 51.00 54.25

US 2yr treasury yield is at a three week high ahead of a $40 bln 2yr Note auction today and a $30 bln 5 yr Note auction tomorrow, the largest ever.

It is incredible important that the Government get these auctions away at decent levels and with decent investor interest. GS estimates that the U.S. will probably have to borrow a record $2.5 trillion this fiscal year ending Sept 30, versus $892 bln in the previous year.

10yr Notes (ZNH9) yesterday broke the early January low at 123-09 but holding above for now. Next level of support is 121-15 which is 38,2% fibbo

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