S&P

Economic data from Europe's indexes showed that their economy may be stabilizing. Yes, this is good news - but obviously they are lagging our data. The unfortunate problem is that unemployment has not stopped dropping; and it may continue to grow past 12% in the upcoming months. With the end of the month and quarter ending at the same time, many traders and/or investors may pull profits off the table. The S&P has no clear direction and is still (what many people call) “sideways trading”, which is when prices move through or between support and resistance. In the past, sideways trading meant a consolidation in the market. A correction may be in order and analysts (as well as I) believe a possible 10% correction in the market could happen before a bullish run. The S&P is currently trading at 915 and is being bolstered by the data from overseas but may not be able to sustain momentum. Have you noticed that analysts’ keep moving their dates back on when a recovery will be reached? It is ignorant to say a month or the end of the summer! Okay - proposing a year is somewhat intelligent, but this current economic situation has too many variables. Bernie Madoff will be sentenced today and hopefully forgotten about in prison. His penthouse, vacation homes, yachts, and cars need to be auctioned off to pay back investors.

Tuesday, June 30th, we have consumer confidence numbers which are forecasted to be 56. I think it may come in a tiny bit lower to around 55 and should be bearish for the market. Wednesday, July 1st, the ISM number is forecasted to be at 44 and should have little to no effect on market activity. July 2nd, we have a few numbers that could drive the market. Initial jobless claims should be in line with what I mentioned earlier. We should not expect anything but poor news on this front! Also, Non-farm payrolls and the unemployment number will be rearing their ugly heads. Non-farm payrolls should be -400k and the unemployment number may be much higher than the forecast of 9.6%. If the number hits 10% we will see large sell-offs and fear, which may send the market into a correction phase or new lows. I do have confidence in our system, but we must be careful not to rush like a bull into this market.

Bonds

The bond market is holding its ground which shows that our government is trying to keep it together. If the market sells off, many investors will seek shelter in treasuries. A juggling act between treasuries and stocks is very difficult for investment managers and foreign government that buy out treasuries as leverage. We may be going long treasuries and short the market in the near future depending on future economic data.

Currencies

The Euro continues to strengthen while the dollar slumps. These two currencies work like the bond and stock market; they both trade with an inverse relationship a large percentage of the time. The Euro is trading 1.40 while the dollar index is at 79.89. This week's data will be pivotal for the U.S. dollar as many stay away from going long the dollar before important economic announcements at the end of the week.



Last week saw energies falter coming off the $70 level as crude traded down to $66 but finished at $69.16/barrel, good for a 1.2% decline even when inventories drew more than expected. Gasoline lost more than 2.3% to $1.8719 as inventories built 3.8 million barrels. Heating Oil was down by 2.4% to $1.7810. Natural Gas continued to slide down 2.1% to $4.10 in the August contract.

Crude Oil would have tried to test the $65 support last week if it had not been for the geo-political issue of Nigeria and a weakening USD that lost more than two cents last week to trade up to $1.41 in the Euro/USD. The chart seems to have a breach in the upward momentum as it has traded down here and will likely only go so far as the equity market and USD will take it. The IEA came out over the weekend and reported that it cut its five-year forecasts for global crude demand because of the economic slump, predicting consumption won’t regain last year’s levels until 2012; yet we are still higher by more than 90 cents on the overnight session trading up to $70 with a stronger dollar. We look to now be range-bound in the $68-$72 area for the time being, so let's sell on the rally up there and buy on the dip below $68. Until we get a real idea for where this market is headed we should play the range game for right now. WTI spreads have weakened in the front with Aug/Sep trading -90 right now, and the August Arb trading below 30 cents. Signs do point to lower prices but traders still must be careful.



Among the Soft markets, Sugar had an exciting week with a pronounced rally. The remaining markets proved dull in comparison. Cocoa prices recovered sharply thanks to the dollar on Thursday and managed to close up about a 100 for the week. While Cotton prices also managed to gain on the week, participation amid lower open interest and cooler volume leaves specs now net short and in control. The week ahead is shortened by the July 4th holiday, so things might be slow Thursday; but Tuesday is month-end and brings the planted acreage report that will carry influence on cotton. Any major moves ought to stem from action in the dollar.

Coffee: Optimistic for a sizable correction in this technically bear market, but prices seem stuck at these levels. Fundamentals haven't changed during this down move attributed to seasonal weakness and lack of cool forecasts. Specs have dumped longs (and in some cases gotten short); therefore, a bout of short covering may occur. If so, Sept needs to first close above 123. Then and only then might we expect Sep to move up to 128. Otherwise sideways to lower prices expected with 116 being support and 121.50 resistance.

Sugar prices backed off on Friday; what could be expected after a 12% rise in five days? The reason for that strength? Well, the reduced crop in India is a sexy story fundamentally, but the bottom line should be attributed to short funds running for cover while long funds added to their longs. Will this action continue? Probably. Will it carry the balance of the complex? Doubtful. Why? Because commodity funds are being more selective and not taking the market basket approach. Look for sugar prices to press upward as they seek fresh highs.

Cocoa: Trading off the dollar, so be in tune with any significant response there. Therefore, it’s worth mentioning that while expectations for inflation remain high credit problems do too. Food for thought: if we had only a cash-based economy, then printing money would indeed cause price inflation; but in a credit based economy such as ours, credit is being destroyed at a much faster rate than the Fed can print. Look for a weak dollar to stimulate cocoa prices, but I cannot jump on the bull wagon in this market.

Cotton: Tuesday will bring the planted acreage report that will have influence on cotton. Of concern is that open interest and volume levels have dropped. This reduced participation leaves cotton prices vulnerable to spec influences. While prices have the seasonal tendency to work lower, any weather developments in Texas will be a focus. December looks to be in a range between 52 and 60 cents.



Precious metals had a mixed bag last week even though the USD was weaker as gold traded higher by $5 to $940 (+.6%), silver lost 8 cents down .4%, and platinum was down .5% to $1,203/oz. Copper had an up and down week but ended up flat at $2.28/pound.

Copper has been the best play here, buying on the dips as we saw copper come down to test the 200 day moving average at $2.14, only to watch prices get support there and rally back up 15 cents in the latter part of the week. Prices do look healthy here and the chart seems to be very bullish for the long term on this market.

Gold and silver slowly drifted higher as the USD lost more than 2 cents against the Euro last week. I will not be a believer in this metal until we see a close above $950 with the Euro/USD testing $1.44. To me, there is just too much resistance right now up at $1,000 as we have had 3 lower highs in the market so far here. Watch the USD to get a good feel for where the precious metals will be headed.



Not the normal weekend report this time. The acreage report will change everything on Tuesday, so no use in prognosticating ahead of the numbers. The two crucial numbers are planted acreage for corn and beans. In all my years analyzing agricultural markets, I have never seen a wider range of estimates or a wider scatter of said estimates. It looks like everyone lined up and took a shot at a dart board. Corn acreage on the March acreage report was 85 million with beans at 76. The range of guesses is between 80.5 and 86.5 with beans between 75-80.5. This is unreal. Take for example the production difference between the bottom and top estimates for corn. At an expected 153 per acre that gives us a difference of almost 1 billion bushels...amazing. The entire new crop carry out is up for grabs. In beans it’s just as drastic, with beans having a much smaller new crop carryover with only 200 million to play with. With a 41 yield expected the 5 million range risks the entire carry out as well. My personal estimates are between 84-84.5 for corn with beans picking up a bit with a number just over 77 million. The USDA will not allow a panic in corn and thus will err on the bearish side in this commodity. Beans are less controllable due to high international production number percentages, but a small gain should help bears following the stable start. Overall, the week will start off with position squaring with the report due out on Tuesday at 7:30 CST. Following the report we have to deal with month-end and the distinct possibility of capital rebalancing Weds through Fri. Keep an eye on condition ratings for IL, IN, and OH on Monday offering a possible post report catalyst with any further deterioration offering bulls a hand-hold. Outside of these factors continue to look at crude and the US Dollar for direction with the unstable macro environment more important than fundamentals immediately following the report.


Frank LaMantia (S&P and Currency trader), Matthew Pierce (Grain Floor Trader), Daniel Cronin (Energy & Metals Broker) and Jurgens Bauer (Softs Floor Trader) are the Gurus for the Weekly Pit Review published on www.PitGuru.com by Futures Press, Inc. - hear their audio market commentary, learn more about them and sign-up for the Weekly Pit Review by visiting www.PitGuru.com



Disclaimer: Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.