Friday, April 18, 2008
Wet weather continues to create planting delays for corn across much of the grain belt. Corn hit new all-time highs overnight, but then sold off as the Dollar appreciated, starting today's session below yesterday's settlement price. Soybeans, after appreciating last night, sold off to starting the day session flat this morning. Wheat, after showing strong buying in the past few days on volume indicators, is also showing renewed weakness today, although still off the most recent low prices. Weather appears to be more favorable for wheat harvest (thus suppressing prices), while still delaying planting for corn (supportive of prices).
My hunch is that this sell-off is likely to continue today, especially since many traders perceive risk in carrying positions over the weekend. However, I am prepared for anything. I really don't know what will happen. These are manic-depressive markets, and anything could happen over the weekend. Remember Douglas' first fundamental truth: Anything can happen!
Commodities have taken a big hit overnight as the US Dollar has strengthened. Crude oil, gold, and grains have all moved broadly and significantly lower. Google had blow-out earnings report, followed by Citigroup having a less-awful-than-expected earnings report, and Caterpillar announcing a strong earnings report, that have resulted in the stock index futures moving strongly higher.
This, in turn, has strengthened the US Dollar and created a broad sell-off in Dollar-based commodity prices. LIBOR and short-term interest rates have also risen significantly, continuing the selling of Treasuries in anticipation of the end of the Fed's easing cycle. This is not going to help the housing sector, as interest rates are continuing to rise in recent weeks, after reaching their lows exactly on month ago today!
What a difference a day makes! It was just last Friday that the horrible earnings report of GE caused a sell-off of stocks. Isn't it amazing how connected the financial instruments are around the world? And isn't it amazing how connected they are to the value of the US Dollar?
Thursday, April 17, 2008
Corn ended the day flat, with the same settlement price as yesterday. What are the odds of that happening?
Eventually, I plan to open another trading account, most likely with Interactive Brokers. I want to test my ideas about whether it is more profitable to place long-term trades or trade intra-day exclusively. Right now, I trade primarily intra-day. I suspect that I am making much more money trading both long and short, than I would if I were to place only long-term trades on the daily charts. I will continue to trade using TradeStation software, but I will place long-term orders on another PC through another broker. Since I've used IB before, and I know their trading platform, they would be a logical choice for me. They also allow me to trade equities through them, including overseas exchanges.
Current Soybean Bull Trend at Risk
The soybean bull is at a key junction point on the daily charts, and if prices don't continue to push above the resistance point (of the Upper Bollinger Band) and continue to close above the EMA, I expect prices to collapse, and most likely, we will see range trading and price consolidation for the medium-term future. Today was important because prices continued to close above the Exponential Moving Average, thus keeping the bullish trend intact. Still, for the bull trend to continue, prices must push higher than the most recent high of $14.15 set on April 15th, and eventually, prices must push higher than, and close above, the Upper Bollinger Band, which is currently at about $14.20. Right now, the Bollinger Bands on the daily chart are going flat, suggesting a consolidation pattern.
Even the Bollinger Bands on the weekly chart are suggesting that a consolidation is a higher probability than a renewed bullish trend. If prices push through $14.20 and continue to close higher, then the Upper Bollinger Band on the weekly chart, currently at about $15.00, would be the next price target. This is why I say that soybean prices are at a key inflection point over the next few trading days.
Watch the weather!
Corn, soybeans, and wheat are all higher after light overnight trading. This is the overnight chart for wheat.
Soybean prices yesterday failed to break through the Upper Bollinger Band on the daily chart, a key resistance level. However, prices haven't closed below the Exponential Moving Average, either. It remains to be seen whether this will occur. This is a key inflection point for soybeans, but it will undoubtedly be driven by weather-related news.
Crude oil has once again hit another new record high overnight, but has since moved lower on a stronger US Dollar, and is trading below yesterday's close for the time being. Gold has shown similar price action.
Wednesday, April 16, 2008
I have no idea what has caused the selling of soybeans this morning. This does not appear to be a fundamentals-induced sell-off, unless it is a phenomenon of the broader financial markets. In fact, weather in the grain belt continues to hamper planting operations, with only 2% of corn having been planted at a point in the crop year when 12-20% is typical. Ground in the grain belt is still wet, and more rain is expected by the end of this week, with additional rain systems developing. This will hamper corn planting, but could possibly hamper even soybean planting at some point. That would be very bullish for grain prices.
Wheat prices are relatively stable to slightly down, and corn prices are down also, but only slightly.
But does the reason matter? No! The market told me to sell, so I sold!
The Goldman Sachs Commodity Index futures are reaching fresh all-time highs today, suggesting even higher commodity prices.
Housing starts for March were down 11.9%.
Tuesday, April 15, 2008
Corn, Soybeans Rise on Panic Buying
Here is another from the New York Times, admittedly not one of my favorite news sources (since it often has the appearance of being politically-driven, rather than news-driven):
Fuel Choices, Food Crises, and Finger-Pointing
Why don't we all write Congress and help them wake up?
Soybeans prices have been in a bullish trend now for the entire month of April, pushing steadily higher almost without correction.
Wheat also appears to be close to a break-out upward again, with volume indicators suggesting that prices will move higher soon.
With all three of these major grains moving higher (rice has been shooting upward without retracements since January), the grains ETFs may soon start to move higher at an even faster pace. Food prices are going to go higher at an even faster pace. There will be even more rioting in the streets around the world.
After moving lower for the past few weeks, buying interest for wheat has been rising recently, so perhaps wheat is approaching a rebound soon. All the primary grains were up modestly overnight on thin volume. Rice hit new records.
Core was restrained to 0.2%. No surprise there, since the government ignores food and energy costs. Treasuries are selling off in response.
Higher food costs are causing price riots around the world, inflation is raging even in countries with strong currencies (like Europe, Australia), but our government continues to try to persuade us that inflation is contained here.
There is a widespread myth that higher commodity prices are being driven by speculators. In a recent article on seekingalpha.com, the case was made that COT reports from the CFTC indicate just the opposite -- that speculative interests in the commodities markets are flat over the last year. Of more than 3000 funds in existence, only about 50 have been buying commodities, with very little change year-over-year. COT reports show that it is commercials -- companies who hedge and take physical delivery of commodities -- that are increasing their long positions in the commodities markets.
Monday, April 14, 2008
It seems almost cliche to say that crude oil has reached another all-time high record, but such is the case in trading tonight, reaching a new high of $112.48. The G7 summit's inability to halt the falling US Dollar is pushing commodity prices higher again, with anticipation of higher prices pushing crude oil higher still. Grains are trading modestly higher tonight also, with rice reaching two new records in the last two days. The broad-based GSCI Commodity Index futures are also nearing their all-time record high.