Mixed Start to the Last Day of the Year

On December 31, 2012 by TradingDesk

It’s a mixed start to the last day of the year. No deal was reached on budget talks in Washington, and yet US stocks are set to open higher, after 5 straight sessions of losses. Chinese manufacturing data hit their highest level in over a year, and yet most Asian markets are lower. Energy values are down, led by Brent crude, which is off nearly 1%. Volumes continue to be extremely low, and today’s action is more likely to be influenced by book balancing than by any trend.

As we head into 2013, the fallout from the budget impasse will still be the major catalyst for price action. That being said, if hedge funds have reduced their long exposure in commodities by the most in nearly a year, giving them dry powder in case any sort of spring rally does form. Seasonally, IF product prices did bottom out in December, we would expect rallies in the range of 40-50 cents before the spring peak. That being said, if equities continue to melt down, forcing more liquidation of levered commodity bets, expect our summer lows to be tested again very soon.

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