Livestock: Live cattle futures are still incredibly strong. The high grain prices are taking their toll on lean hog futures, but have yet to impact live cattle. The fundamentals look good for cattle as lower supplies are in the pipeline and demand remains strong. Hogs definitely had some damage done on the charts.
Energies: The odds pointed to a breakout above the 3-week consolidation in crude oil futures and we got it. This is a crazy market, but you don’t want to fight it when it starts another leg higher. The path of least resistance is now focusing on $150 oil.
It is important to get back to basics with crude oil and all of the energy commodities. This means that you need to tell yourself again that these markets are in a bull market and prices tend to rise. I don’t necessarily agree with the fundamentals at this point, but bull markets really don’t care. They will emphasize the factors that support prices going higher and ignore the factors that should make prices move lower – that’s just the way it is.
Crude oil was pushed higher by OPEC’s president stating that oil could hit $150 to $170 this summer. Add that to the numerous calls from other big players of $150 to $200 oil and that is all traders will think about. Then, we have people calling for $300 - $400 oil if Israel and Iran go to war. Is this hysteria or just conditions of a bull market?
Softs: Coffee futures hit a 3 ½ - month high last week after the market broke out of its 3- month consolidation. The market looked good after the technical breakout, but many traders are wondering – why? Brazil is in the midst of a massive harvest this year and supplies should be ample. The question is whether the fundamental or technical traders will win here.
Cotton futures traders will be closely watching the acreage number from the USDA on Monday. Traders are expecting the USDA to lower the acreage number to about 8.9 million acres. Cocoa futures continue hitting new highs, but look very overdue for a correction here.
Metals: Gold futures had everything going in their favor last week. The stock markets were hit badly and the flight-to-quality factors kicked in. The lack of the Fed to raise interest rates hit the Dollar and helped gold immensely. The door is wide open for inflation to be a problem in the years ahead and gold is the place to be.
The normal fundamentals continue to look good for gold. There are still production problems in South Africa due to lack of electrical power, demand is strong and production is getting even more expensive. Expect prices to move much higher for gold, silver and platinum over the years.
