The past two sessions have featured a glut of data, some strong, some soft, yet most of it is essentially meaningless in the ongoing price discovery as we wait for the FOMC meeting decision to be released this afternoon at 1 PM CST. Today we saw better than expected housing and building data as well as strong weekly job data. Juxtapose that against the much weaker Philly Fed manufacturing data and one can see why the majority of markets are sideways. The consensus is essentially a coin flip as to whether or not the Fed will move. Furthermore, the Fed simply raising rates is not the only thing that will move the market. The committee could leave rates unchanged yet change the sentiment going forward in halfheartedly committing to moving at the October meeting. The press conference following the decision could have a major effect on either continuing the knee jerk reaction to the decision or potentially reversing that direction.
The energy markets have been rather volatile this week though they all remain firmly in the ranges of the past several weeks. The sharp rally in crude has been pegged to the decrease in inventories in the EIA report that showed -2.1 MBBS versus the expected build of over 1 MBBS. However, the stronger than expected build in refined products more than offset the 3 plus million barrel miss in the WTI. At worst, the math would suggest a relative non-event in the inventory picture, so why the nearly 3 dollar range? It is a bit hard to say exactly except that the data does suggest a strong demand here in the US, despite the global slowing that included a further downgrade of the Japanese economy yesterday by Standard and Poors. The grind higher in the equity markets did seem to produce a coat tail rally for the energy markets as well. The most likely suspect in producing the rally was as simple as a technical trigger after Tuesdays session produced a bull flag that yesterday’s trade violated to the upside sending the price sharply higher. Yet the WTI remains in relative 'no man’s land' as the price needs to trade above 48.50 to break out on a longer term basis or trade below 42.25 to go lower.
Natural gas inventories were as expected today following yesterdays sell off from 2.76 down 10 cents to 2.66. The price remains within the tight range as any real rallies are constantly met with selling and any selling is bought. The fundamentals remain in neutral as well as any technical triggers that could push the market out of the current tight range. Trade below 2.60 or above 2.82 are needed to have any chance of directional follow through.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors.