A Hot Finish For Stock Index Futures In December

This Week's Futures Commentary:

The Greatest Commodity Story Ever Told

You are about to hear a story about the greatest commodity story ever told. Well ok, maybe it isn't the greatest commodity story ever told and perhaps I am inspired by the season but it is the greatest commodity story of our generation. It is the story of natural gas and the shale gas revolution. Yesterday Natural gas went below $4.00 MMBTU the lowest price in the month of December since 2001. That came even after the EIA reported a withdrawal from storage of 164 Bcf in a December whose chill has been colder than normal...Perhaps that is because supplies are an astounding 9.9 percent above the five year average a feat that would have been impossible just a few years ago. Oh sure you may have heard this story before the one where US natural gas production had peaked out. How our dwindling supplies and sharply rising gas prices of gas was one of the biggest threats to the US economy. We were warned from Canada our biggest foreign supplier that if push came to shove and it was a very cold winter they might have to cut the US off. Countries like Iran and Russia who owned some of the world's largest proven reserves of gas were talking about forming an OPEC like cartel to press their advantage of the Gas starved U.S.A. The situation was bleak.

A Hot Finish For Stock Index Futures In December

The month of December in Chicago is typically very cold, but for stock index futures, it has been very hot.

According to data from Standard & Poor's, since 1945, the S&P 500 has gained an average of 1.7% in December making it the preferred month for investors, versus an average gain of 0.66% for the entire year.

Sam Stovall, who is the Chief Investment Strategist for Standard & Poor's Equity Research Services, has outlined additional bullish seasonal tendencies for the last month of the year.

Historically, the S&P 500 Index has been able to advance by an average of 1.5% in December following the mid-term elections. In addition, the index increased an average of 2.9% during the Decembers, when there were price gains in the months of September and October in advance of the mid-term elections. Of course, that has been the case this year. Overall, there is an uncanny tendency for stock index futures to put in a strong performance in December.

If You Hop On The Corn Market Now, Will You Be Going Up Or Down?

The latest USDA corn supply/demand report issued on Friday, December 10th did not contain any changes compared to the November report. But, does this mean the report did not tell us anything? On the contrary, I thought the report spoke volumes in regard to projected corn demand. Being more specific, the report left projected corn use unchanged at a record large 13.4 billion bushels. What this tells me is that current corn prices have not started any type of demand destruction. Recall, that in periods of tight supply, the function of prices is to move high enough, and stay there long enough to effectively ration tight supplies. In other words, in periods of tight supplies, corn prices need to move high enough to assure some kind of slowdown in corn demand, be it in exports, ethanol production, feed consumption or all three. Evidently, corn prices in the $5.25 to $6.15 range, the range of prices during November, are not high enough to start any kind of demand destruction.