Commodity Futures update November 9 - 13

The S&P 500 continues to press up against the 1100 mark but has yet to make a daily close above.  With the US $ index churning lower and Gold at all time highs, it is a little suspicious that the S&P cannot eclipse and hold the 1100.  Economic reports from the US and Canada continue to come in very weak, highlighted by last Fridays US non farm payrolls report and Canada’s employment report both which were a very bearish surprise, and yet equity markets have stabilized and moved higher.  A dramatic sell off could still be in the cards but for the time being the trends remain up.

Grain markets have been anything but stable as of late.  Up until a few weeks ago it seemed to be a weather market rallying and falling as the forecast was changed.  But it appears that commodity funds have come back to the party and are buyers.  On Tuesday the USDA issued their Crop production and supply/demand report.  The report came in quite bearish on Soybeans and Wheat and neutral to slightly bullish on Corn and after some post report volatility everything pressed higher. 

The relationship between the US $ and the equity markets still seems quite strong, and until that relationship breaks down the C$ will continue to take its direction from equities.  After selling off to $0.9212 the loonie touched $0.9599 in intraday trading and settled the week right around $0.9550.  If the S&P can indeed break and close above 1100 par will once again be within sight. 

Natural gas is weak getting weaker despite its extremely oversold nature.  The December contract broke its yearly low on Friday morning bottoming out at $4.287 before settling slightly higher to end the weak.

Weakness can be attributed to mild winter weather and an enormous supply glut that seems to be getting larger and larger.  The hurricane activity that threatened offshore drilling was initially bullish, but the outlook soon turned positive as Ida lost her steam and changed course.  The damage done was minimal at worst.  Despite shutting down about one quarter of production as a precautionary measure, the weekly nat gas injection was still larger than expected coming in at 25 bcf.

The trend is still down.  Until winter sets in and we see a continuous draw on gas supplies, and until industrial activity picks up, prices will continue to trend lower.  Look for a bounce to correct some of the oversold status, but treat it as just that.

Crude began the week trading higher, but by mid-day Tuesday, decided that it was time to sell off.  Technically, downward sloping resistance and momentum indicators provided a firm top.  However, inventories are also high and rising, and the massive build in crude and crude products, combined with the large drop in the refinery rate to under 80%, added to the selling pressure.

An interesting article by CBC highlighted an oil industry insider and their claim that the supply outlook looks quite a bit worse than others would have you believe.  The insider states that officials are choosing not to release information with the intention of keeping oil prices from rising too high too fast.  Of course, this is just an initial report; we’ll have to wait for more details to be released.  We wouldn’t place too much value on the statement just yet.

We are currently watching: Coffee, Cotton, C$, Nat Gas, USD Index, Crude, Gold, OJ, Sugar, Silver, Grains

For Price Quotes and Charts, you can check out our website: www.rbcds.com/ng.espeseth

Thanks for reading,

Regan Espeseth and Derrick Ng

Regan Espeseth, Investment Advisor

306.956.7812 | regan.espeseth@rbc.com

Derrick Ng, Investment Advisor

306.956.7804 | derrick.ng@rbc.com

Web site: www.rbcds.com/ng.espeseth

RBC Dominion Securities Inc.

410 22^ND Street East, Suite 1070

Saskatoon SK  S7K 3S5

Nov 9 -13	Open	Close	High	Low	%Change
Dec Chicago Wheat	4.98	5.40	5.42	4.97	+8.43%
Dec Corn	3.66	3.90	4.03	3.65	+6.56%
Nov Soybeans	9.45	9.87	10.01	9.45	+4.44%
Nov Canola(tonne)	393.2	390.7	393.2	386.2	-0.64%
DEC Crude Oil	77.87	76.32	80.51	75.57	-1.99%
DEC Gas	4.605	4.393	4.690	4.287	-4.06%
RBOB Gasoline	1.9319	1.9140	1.9940	1.9061	-0.93%
Gold	1098.0	1116.1	1119.1	1096.0	+1.65%
US/C$	.9315	.9520	.9599	.9303	+2.20%

This commentary is based on information that is believed to be accurate at the time of writing, and is subject to change. The information provided is intended only to illustrate certain historical prices and is not intended to reflect future values or prices. Regan Espeseth & Derrick Ng are Investment Advisors with RBC Dominion Securities Inc. Member CIPF. ®Registered trademark of Royal Bank of Canada. Used under license. RBC Dominion Securities is a registered trademark of Royal Bank of Canada. Used under license. ©Copyright 2009. All rights reserved.