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The Financials Pit Review
For the week of October 12th, 2009
By PitGuru Frank LaMantia
S&P & Currencies
A new high was reached in the market and the S&P is trading in the 1070's with no visible resistance. Last week the S&P rose 4.5%, beating the best weekly rise since July3. Firms are still selling holdings to try to make up for losses or to show gains. This morning Blackstone announced that it was willing to sell 5 companies that it owns. Also, Goldman Sachs is catching flack for giving out bonuses. My opinion is that no one should count other people's money. Most of Main Street does get jumpy because of the astronomic pay these people receive. Let's not forget the risk they take, the hours they put in, and the amount of years these people give up on their lives due to stress. The bonuses they receive are off of profits - and they are typically profitable. One should be concerned about Citigroup and the fact that they have to pay their commodities manager more money in bonus than they pay the entire company. At least Goldman has a great stock which trades at 196 while Citigroup trades at 4.50. Earnings reports are still coming this week and should make it interesting for day trading. I am going to mention those that most will be keeping an eye on. Try to look at all of the earnings to have a clear sense of which sectors appear the strongest.
Monday we have Charles Schwab (SCHW) which is expected to deliver an EPS of 0.17. Tuesday, Johnson & Johnson (JNJ) is expecting 1.13. Also, Intel (INTC) expects .27. Wednesday, JP Morgan (JPM) expects 0.49 and has pretty much weathered the storm since the downturn in the market in 2008. As you remember, JPM absorbed Bear Sterns in a fire sale due to the government loving Jaime Diamond, CEO of JPM. I would have to say that Thursday could be a pretty exciting day considering that Advanced Micro Devices (AMD) expecting -.42, Citigroup (C) to expect -.21, Google (GOOG) 5.38, Goldman Sachs (GS) 4.24, and Nokia (NOK) 0.18 reporting earnings. Friday, Halliburton (HAL) expects .026, General Electric (GE) .20, and Mattel (MAT) .63. Energy and retail sales numbers could be the trigger that lifts the market to fresh highs.1
Economic data and earnings are very important this week so be attentive to every detail. Oct 14th, retail sales are forecasted to be down -2.7%. If the sales number actually beats expectations and earnings are positive buyers could step in lifting the market. Oct 15th, CPI and Initial jobless claims will be announced. CPI is expected to be 0.2% and Core CPI to be 0.1%. The market also expects initial jobless claims to be 525k. Everyone is waiting for positive data for retail sales, job reports, and earnings. Can they hit the trifecta and have all of those reports be positive? I don't think so and I am very bearish on job reports and retail sales.1
In currencies, the Euro has reached its year high of 1.4768 on improving data and a weakened US dollar. I am not sure if this can continue. Pretty soon the US may be bought out by every major European bank or hedge fund. The dollar falling is not a good sign even though the stock market is rising. The US doesn't feel like the major financial super power it used to be.
1 http://biz.yahoo.com/c/e.html
2 http://www.cnbc.com/
3 http://www.ft.com/cms/s/0/83dc1b6a-b511-11de-8b17-00144feab49a.html?nclick_check=1
The Energies Pit Review
For the week of October 12th, 2009
By PitGuru Daniel Cronin
Great week for the energy sector as the USD fell, equities rose, and inventories fell in crude all leading to higher prices on the New York Mercantile Exchange. Crude oil rose 2.8 % to close at $71.77, its highest close in more than 2 weeks as inventories drew more than 1 million barrels the Dept of Energy reported. Gasoline only rallied 1.6% to $1.7680 as higher inventories kept somewhat of a lid on this sluggish market. Heating Oil, the best performer, gained 3.7% to $1.8528 as the nation is fast approaching the cold weather in the North East. Natural Gas had a very modest week with prices only higher by .7% to a shade under $4.74. This market took a breather after two consecutive weeks of +15% in the oversold market.
This is likely a huge week for the markets as it gets very important third quarter earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., and Bank of America Corp. along with Google Inc., Southwest Airlines Co., Intel Corp., IBM Corp., General Electric Co., and Johnson & Johnson. A more optimistic crude demand forecast by the International Energy Agency on Friday helped boost trader confidence. The Paris-based IEA, which advises oil-consuming countries, said demand may reach 86.1 million barrels a day in 2010, up 1.7 percent from this year. Crude oil is already at the most recent resistance of $72.60 and if it gets solid earnings from the aforementioned companies I believe it can go and test the triple top of $75.
What could limit any further pricing gains in the Oil market is rising inventories, not only from Crude, but from the Products as well. U.S. stockpiles of distillate fuel, including heating oil and diesel, have climbed to their highest since January 1983, according to Energy Department data. Gasoline inventories jumped by 2.94 million barrels to 214.4 million as refiners boosted output, the department said Oct. 7. The overstocked inventories can put a damper on crudes run so look out for another important inventory report coming out this week on Wednesday at the NYMEX.
The Softs Pit Review
For the week of October 12th, 2009
By PitGuru Jurgens H. Bauer
For the most part weakness in the dollar and improving stock markets benefited commodity prices during much of the past week. At week's end dollar strength applied "corrective" pressure, yet stocks remained firm. While positive price action may draw attention and promote commodities as an asset, there is also reason to expect a shifting of resources among markets as noted by the recent news regarding re-allocation among ETFs. I think this is a feature one shall see more of in the universe of commodities and expect to see more such shifting to be accomplished this coming week among the soft markets.
Re-allocating positions may help explain the severity for the sharp decline in sugar. Sugar prices took a dramatic turn downward, losing almost 300 points from Wednesday to Friday when SBH fell 130. Some analysts are calling this a correction... certainly prices had been over bought and the failure last week when sugar was challenging a 28-year high fits into that scenario. The failure up there, of course, could result in a correction but 300 points seems a bit much. You know as weak as sugar might appear, they can get that thing up 150 points quick, especially as they coax specs to the short side. I don't suggest jumping in front of a moving train, nor diving to catch a falling knife - but Sugar prices should find support in SBH at 2110.
I really believe that coffee is preparing to make a nice push up. What I've noticed about trading in coffee is that it often will shake the trees before making such a move. Friday's price action shook the tree. KCZ may dip a little further, so any move below 133 may threaten nervous longs and chase them out. However, a move down below 133 basis KCZ might also prove to be a comfortable entry level for fresh longs, willing to risk a close below 131, or a drop below 130. Nothing goes straight up.
Cotton prices have failed three times when presented with 6500. It may happen again, but it may instead push through and gain spec buying from short covering. The crop numbers were favorable, but of course didn't take into consideration the damage to the SE crop from all the wet weather. China ought to be a key, so I lean to the upside not feeling comfortable getting short as I expect more crop news to assist moving prices higher.
I cannot explain the crazy goings on in the Cocoa market except to say the volatility seems the direct result of uncertainty and electronic trading. I expect big swings to continue and think buying options is the only way to go. Have no strong opinion, but do not believe demand will be as good as anticipated. Hearing grinding revisions are possible.
OJ received a bullish crop report and that was all it took to rally the market limit on Friday. Limit today will be 20 cents. I think there is more room for OJ on the upside.
The Metals Pit Review
For the week of October 12th, 2009
By PitGuru Daniel Cronin
Precious and base metals had a great week as the USD continued its slide as investors poured into Gold, Silver and Platinum. Gold was up 3% to a new weekly close of $1,046 and Silver gained as much as 8.7% to close out at $17.70/oz on the COMEX. Platinum now trades at a handle of $1,340 which was good for a 4% gain on the week and Copper gained a nice 6% as it came off of the support levels of $2.65 and traded up to $2.90.
New all-time high for Gold above $1,033, and it seemed like more and more investors wanted to get in pushing the market above $1,055 where it now has an all-time high of $1,059/oz. Silver has been lagging behind but if you notice it had a much better week percentage wise than Gold when you consider that Silver was up almost 9% so it looks like Silver may be a better place to put your money right now as the advantages to the upside seem greater.
Copper looks relatively supported in the $2.85 range as it was on the verge of a major sell off if the market had happen to fall below $2.64. This week may be a big one with earnings coming out from major companies. Just like with Alcoa last week, if companies can make both the bottom and top line growth than Copper could really move. Keep an eye out for those earnings with JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. along with Google Inc., Southwest Airlines Co., Intel Corp., IBM Corp., General Electric Co., and Johnson & Johnson. This may be the big market driver this week.
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 http://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 http://www.pitguru.com/
Disclaimer: Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.
