Thursday, May 8, 2014

FCPO: Continuous Weakness Ahead 8th May 2014

Thursday, 8th May 2014. Palm oil futures is heading down for another session this week judging from further weakness in overnight Soy oil yesterday. Other news to follow.

"- U.S. stocks ended Wednesday’s choppy trading session generally higher, though selling of shares in Internet companies and high-growth companies resulted in a loss on the Nasdaq Composite. Markets recovered early morning losses after Federal Reserve Chairwoman Janet Yellen reiterated that the central bank anticipates keeping interest rates very low, even after employment and inflation return to healthy levels. Also read: Yellen stays upbeat but is watching housing. The Nasdaq Composite COMP -0.32% recovered most of the steep losses and finished the day 13.09 points, or 0.3%, lower at 4,067.67. The S&P 500 SPX +0.56% ended the day at up 10.49 points, or 0.6%, at 1,878.21. The Dow Jones Industrial Average DJIA +0.72%  gained 117.52, or 0.7%, to 16,518.54 by the end of the session."
"-Asian stocks declined sharply on Wednesday, with Japan leading losses on a firmer yen and a sell-off overnight on Wall Street. Following substantial losses in U.S. markets, Japan’s Nikkei Average JP:NIK +0.79% tumbled 2.9% at the close, while the yen USDJPY -0.08%  strengthened against the dollar as the dollar bought ¥101.502 from ¥101.678 in the previous day. Hong Kong’s Hang Seng Index HK:HSI +0.27%   finished 1.1% lower, South Korea’s Kospi index KR:SEU +0.01%  ended down 1%, China’s Shanghai Composite IndexCN:SHCOMP -0.89%   fell 0.9%, and Australia’s S&P/ASX 200 AU:XJO +0.64%  lost 0.8%.
"-Gold futures settled below $1,300 an ounce on Wednesday for the first time in nearly a week, as generally upbeat comments from Federal Reserve Chairwoman Janet Yellen on the U.S. economy helped dull safe-haven demand for the metal. Reports of talks aimed at resolving the Ukraine-Russia conflict also pressured gold prices. At last check, gold for June delivery GCM4 -0.04%  fell $19.70, or 1.5%, to settle at $1,288.90 an ounce on the Comex division of the New York Mercantile Exchange. That was the first close for a most-active contract below $1,300 since May 1, FactSet data show. July silver SIN4 -0.40%  lost 30 cents, or 1.5%, to $19.34 an ounce."

"-Palm Reserves in Malaysia Jumping for Second Month on Output
By Swansy Afonso  May 7, 2014 11:04 AM GMT+0800 
 Palm oil stockpiles in Malaysia, the world’s second-biggest supplier, probably advanced for a second month as output climbed to the highest level since December. Inventories increased 3 percent to 1.74 million metric tons in April from a month earlier, according to the median of six estimates from plantation companies, analysts and traders compiled by Bloomberg. Production climbed 3.3 percent to 1.55 million tons, while exports rose 4 percent to 1.29 million tons, the survey showed. The Malaysian Palm Oil Board will release the official data on May 12. Expanding stockpiles may pressure prices in Kuala Lumpur, which tumbled 12 percent since reaching an 18-month high in March. Futures usually weaken toward the middle of the year in anticipation of bigger output in the second half, Maybank Kim Eng Securities said in a report yesterday.
“Exports are expected to be slightly better in May because of Ramadan demand,” said Chandran Sinnasamy, head of trading at LT International Futures Sdn. in Kuala Lumpur. “But looking at the supply, it doesn’t seem like the stockpiles will fall much and will bottom out at 1.6 million tons in May.” Futures rose 0.3 percent to 2,576 ringgit ($793) a ton on the Bursa Malaysia Derivatives by 10:57 a.m. in Kuala Lumpur, the first increase in six days. Prices jumped to 2,916 ringgit on March 11, highest level since September 2012. Exports rose 1.3 percent to 1.22 million tons in April, according to Intertek, a cargo surveyor.

Ramadan Demand
“June could see a revival in prices on the back of better demand and plantations workers going on leave” for Ramadan, which could affect output, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental Singapore Pte. Communal meals typically boost demand during the Muslim fasting month of Ramadan, which starts in June this year and concludes with the Eid festival.
Global palm oil imports will climb to about 10.5 million tons in the April-to-June quarter from 9.6 million tons in the first quarter, Hamburg-based researcher Oil World said April 29. Importers will need to replenish stockpiles of vegetable oils made from soybeans, sunflower and palm in the next six months, it said."

FCPO- Bears Are Controlling The Tempo

Nothing much I can share with you for this week unless there is a new sign of price recovery. But there is none so far when the benchmark month continue to dive down below 2,600 since last previous Friday. These kind of gap down signifies market role has change significantly from sideways to Bearish. Palm oil futures would head to new low if the previous low at 2,558 level taken out today. The possibility for the July contract to break previous low level is greater as there Soy oil went down to settle below 41 cents per pound. To make things worse, sluggish export data reported for April vs March 2014 was not encouraging any price recovery at all. A mere 1.3% increase in demand for the month of April does not even come close to reduce current stockpiles. Moreover, we are anticipating stockpiles to increase soon with the upcoming MPOB report on the 10th May. Technically, more lower lows and lower highs have formed throughout the past week. More chances to go Short would arise when the market does recover from here.  For today trade plan, although I doubt the July contract would head up there, trader can try and go Short around first pivot resistance level at 2,587. Price could retrace down to 2,558~2,550 level before leveling up. 2,530 would be the worse case scenario if the Bears run out of control. To conclude, overall outlook for palm oil is Bearish with inevitable increase in stockpiles and weak price action on overnight Soy oil.

Daily Pivot Point
R2= 2596
R1= 2587
S1= 2567
S2= 2556
 Disclaimer: Information and opinions contained in this report are for educational purposes only. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness.


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