Maybe we should call China the Peoples Republic of Commodities. China, the last great hope for the commodity bulls and oil bulls in particular, set the market a twitter on rumors of a massive stimulus and the hopes of a massive commodity buying spree of epic proportions. Those rumors gained even more credence when China’s largest sovereign wealth fund alluded to the fact that they believed commodities were cheap and right for accumulation. Talk of accumulation brought signs of adulation from very discouraged commodity bulls that has had little go their way in this new era of Obama nation. Well, excluding the precious metals that really doesn’t signal good things for the industrial and agricultural sector. Oh sure, we can point to the incredible discipline of our merry band of conspirators in the OPEC cartel. You might even be impressed by the four week average for gasoline demand that surged to an impressive 9.0 million barrels per day putting demand an impressive 2.2 growth rate from a year ago. Yet it was China that caused the Industrial commodities and global stocks to soar. It was china that hinted it would spend money and drive global recovery dreams.
Can China and their huge cash reserves actually pull the global economy out of its global funk? Well traders want to believe it. This would be a change that they could really believe in as opposed to policies that have done nothing but destroy the global stock markets. Oh there are some that want to give President Obama some credit for yesterday’s first stock market rally in five days. Is Obama a market guru that gave his blessing to his minions that it is ok to buy stocks again? That maybe just maybe the entrepreneur and risk takers are not really all that bad after all.
Don’t bet on it. This was a wave of hope that China would stimulate the global economy and give cheer to commodity bulls near and far. Yet can China stimulate the global economy by going on a commodity spending spree? Can China actually grow unless the global appetite for Chinese goods increases dramatically? The Market was hyped up on hopes that l Chinese premier Wen Jiabao would dazzle us with a stimulating stimulus plan. But the Chinese premier pulled a Geithner when he failed to announce any addition to the $586 billion dollar stimulus disappointed the bulls by promising that China’s economy would grow despite the global slowdown but did not announce not announce any addition to the nation's $586 billion stimulus plan. What is a Geithner? Oh that when you drop hints you are going to announce something big and you disappoint.
Meanwhile, across the pond the Bank of England is creating money out of thin air! Get long Ink! The BOE cut its key lending rate to an all-time low of 0.5% from 1%. At the same time they have started a policy of quantitative easing by buying assets worth up to 75 billion pounds in an effort to boost the money supply. The EU followed that up by cutting rates by a half point to a record low 1.5%. Those cuts are giving the dollar an initial boost and pressuring commodities a bit. The Dollar now has an advantage as the FED has reserved the right but not the obligation to use quantitative easing. The longer the FED holds out the larger the perception will grow that US dollar and the US is the safest place to park your future. Dollar strength will temper commodity gains. In fact Bloomberg News reports that Saudi Arabia, OPEC’s largest producer, may oppose a further production cut this month as a stronger dollar boosts the value of revenue from oil sales. This is very bearish as many think that the market has priced in another production cut! Beware bulls!!
Saudi Arabia, OPEC’s largest producer, may oppose a further production cut this month as a stronger dollar boosts the value of revenue from oil sales.
We're short April crude from apprx 4570 - stop 5100.
We're short April heating oil from apprx 12342 - stop 12900.
Sell April RBOB at 13950 - stop 14300.
Sell April natural gas at 437 - stop 499.
