Jan 8, 2018 – Weekly Commodity – Commodity Index rebalancing may bring corrections this week
The second week of the year is usually about Commodity Index rebalancing. During this process Commodity Index funds adjust their portfolios to those indices they follow. This often results in buying the worse performing commodities and selling the high performers. Some commodities may see a short term bounce or drop but without fundamental support any correction will be short lived
The main topic on the ooil markets is the increasing compliance of OPEC members with the extented agreement to cap oil production, although this is in some cases forced by external factors as in case of Venezuela. How ever the effect is the same, at the ned of the equation containing less supply and rising demand the result can be only hogher prices. The positive mood is also supported by overall rise of manufacturing activity. The Energy sector overall maybe not loking that bright due to low Natural gas prices but the oil bulls seem to be driven by strong fundamentals. However WTI is currently testing a key resistance (or rather the top of resistance zone) which could be hard to break as technical sellers will increase activity – also dont forget about rebalancing as crude had a very good year in 2017 and positions need to be adjusted.
Grains in general had a bad year despite several attempts to bounce, no real trend reversal took place. The high ending stocks and concerns about weak US exports pushing prices down. There are fears that the USDA Wasde report will bring another weak export data although on the spot market the export premiums seem to move despite missing any support of freight prices. After corn prices drop again below 350 this opens the room for testing 340 or even 330 in the coming weeks.
With the cancelled European sugar quotas the market doesn‘t have a bright future ahead. The prices in Europe are still strongly diverging from the global sugar markets altough the move will have to come after the minimum sugar prices in Europe where also ending with the quota system. The prices tested 15.50 twice and recently dropped back. Give the oversupply and missing any short term weather threats, sugar will probably revisit the bottom of the uptrend channel which could be also broken on the way to tes new lows this year however the prices at or below production cost will bring drop in supplies in the long run.
Good Luck and remember to watch your risk and be consistent
Mr. Tech Man
DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016.
Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com