Hot Rolled Futures: Good Riddance to that Story

The S+P has stumbled in the last week, if you can call retracing 1.5% off the highs in a 175 percent 6 year rally stumbling! As I mentioned two weeks back, we were likely to test resistance at 1800 for a bit before retracing slightly. Since this market doesn’t even recognize retracements anymore, we didn’t bother, we just went right through it to a high of 1812.50. We are last 1784.5 at the close today. 1775 is an important support, and if breached, will cause, dare I say it, a retracement probably to the 1688 zone.

In commodities, in general, we have had short-cover rallies. In Copper, we closed $3.258/lb up from the $3.14-3.175/lb range we were in two weeks back, or a 3.25% rally from the lows. In Crude, we closed $97.34/bbl up 6% from the $91.77/bbl low we put in a week back. I had thought we would hold the $94.5/bbl zone, but we didn’t, however, the push lower appears like it was short-lived, at least for now. We have also seen an impressive rally in Nat Gas. In part, traders squaring up short bets before the yearend are causing the movement. Ever increasing lack of liquidity in commodities, due to Dodd Frank regulations pushing banks to the sidelines, is exacerbating some of the moves. Today Deutsche Bank announced their departure from commodities. Deutsche, even just a little over year ago was one of the biggest financiers of metal in the world, so their exit is a significant example of the effect of new regulation on the banking industry, now affecting our industries.