Saturday, August 2, 2008

Two Solid, Overlooked Trends

Here are charts for two trends that I have overlooked and missed. Both caught me by surprise, but the second one especially. For many years, the Mexican Peso was considered to be a weak currency. Not any more!

South African Rand
Mexican Peso

Bank Failures Continue

The FDIC has shut down another bank, this time a small one in Florida.

Friday, August 1, 2008

Happy Birthday to You!

One year has now passed since the subprime mortgage blow-up and the credit crisis began. I can't help but wonder if the government hadn't intervened, and intervened again, and again, and again, would things have been different? No one knows, including me. However, since the average recession lasts about 9-10 months, might we have had a recession that would now be over without all the delaying interventions of the government? Might we have avoided the collapse of the US Dollar, and the commodity inflation that has caused so much economic turmoil? Only history will know. But we'll always wonder, won't we?

In any case, Happy Birthday to you!

Corn and Soybean Prices Crushed

Wow! Corn and soybean prices have dissolved this morning. This is the largest move in the grains within the past week.

Tough Talk and Crude Oil Shoots Skyward

The Israelis are making it known once again today that they will not tolerate Iran to produce nuclear weapons. They are also providing some evidence that Iran is getting very close to achieving that objective. Crude oil is reaching new price highs at $128.60/barrel for the past week, more than $8 above recent lows.

Thursday, July 31, 2008

Last Minute Freefall to End July

What an unbelievable way to end the moth of July, with a stock market freefall into the closing minutes of the trading session today. The bulls and bear battled back and forth all day today (left chart). I was long twice and short three times during the course of just one trading session. But at the end of the day, the bears took their blood today. Whew! The Dow was down over 200 points in the closing moments of the day.

Be prepared for a very volatile day tomorrow, with the jobs report setting the tone for the trading day.

Stock Futures Have a Permabull Bias

Today, as I anticipated in my previous post, stock index futures are rebounding stoutly after rather severely gloomy economic GDP and jobless claims data. If there was any good news today, it was that the news was all in the distant past. I always expect this with stock index futures. I wouldn't be at all surprised if stock futures end up higher today, despite the ornery news.

The only current news today -- unemployment claims -- was even worse than the GDP data, but it is completely overshadowed by the GDP data. I suspect the GDP will be discounted by traders in the market. "Oh, that's old news. Things are better now," they'll say. Things are not better now, if unemployment claims are rising and accelerating. Understanding this psychology is helpful, because it allows traders to take advantage of this over-ebullient sentiment and fade the market at the right time.

Personally, I think this is evidence that the market is not always right. It is evidence that the market may be influenced -- shocked -- in the opposite direction when additional news in the futures continues in a dismal and dour direction. The rubber band will eventually snap back in the other direction. The fact that these shocks occur and that prices reverse suddenly is evidence that the market was dead wrong about the state of the economic prospects. They then think, "Oops! I was wrong. I'd better change directions!" Shocks occur in the market when participants learn en mass that the market was wrong. It was moving in the wrong direction. However, my opinion doesn't really matter. All that matters is what the market does. Price action always trumps my opinion. I am genuinely and blissfully irrelevant!

This is one reason why I try to nullify my own biases. I don't try to predict the future of market prices. I try instead to respond to the market. Predicting the markets creates bias that blinds me to what market forces are telling me. That's why I'm content to be blissfully irrelevant. It's more profitable!

One of the fascinating aspects of the stock index futures is that they always tend to want to go higher. They are strongly biased to move higher. Personally, I don't care what direction the market moves, whether up or down. Unlike the stocks themselves, I can take either a long or a short position in the futures markets, and it doesn't make any difference which. The stock market requires me to "sell short" the market, and then exit by covering those shorts. There are different effects and ramifications which I won't delve into here. But with the futures markets, buying or selling is treated equally. I buy to go long, and I sell to exit. I sell to go short, and I buy to exit. Easy! Simple! With stocks, it is somewhat different. Again, I am not going to be more detailed than to say that it is different.

Stock price inflation is welcomed and encouraged by our government and society. So is housing inflation. Commodity price inflation isn't. All government interventions within the past year have been designed to create stock and housing price inflation, and to cut off commodity price inflation at the knees.

This bias towards higher stock prices is a fact of the markets. Knowing this fact empowers traders to take advantage of this wonderment and profit from it.

But since I have an inquisitive nature, I want to know why this phenomenon exists. Why do stock markets always have a bias toward moving higher? There may be several reasons why this circumstance exists. I am ruminating on what some of those might be. But I don't have time to ruminate in writing, at least not right now. I'm too busy trading. I'm too busy making a living.

Ripple Effects of Today's Disappointing Economic Data

The ripple effects of today's disappointing economic data can't be underestimated. However, since this unimpressive data is contrary to the more upbeat markets of the past few days, perhaps it will be short-lived. News that shocks the market contrary to the current trend tends to last only a few days, and often just a few hours. Of course, a disappointing jobs report tomorrow could reverse the more cheery sentiments of the past few days. Only the future knows the futures!

So far here are the ripple effects:

Gold -- sharply higher
US Dollar -- solidly down
Foreign Currencies -- mostly higher
Crude Oil -- Rising Strongly (weaker USD)
Grains -- market not yet open, but likely to open higher on weak USD
Stock Markets -- Down, but I wouldn't be surprised to see a rebound

GDP Revised to Negative in Q4 '07, Disappoint in Q2 '08

The stock market futures dropped this morning following the release of GDP data by the U.S. government. It indicated that GDP for Q4 '07 was negative instead of the previously-reported positive data. This is significant, because the most common definition of a recession is two consecutive quarters of negative GDP. This is devastating news to those who have been claiming throughout 2008 that the U.S. was not in recession because we hadn't seen any quarters of negative GDP. These optimistic souls have had the rug pulled out from under them today.

GDP data for Q2 '08 also disappointed. This is particularly disappointing when we take into account that the stimulus checks were sent out in Q2. Without those, GDP would very likely have been negative. It was superficially positive, however. I say "superficially" because when inflation is taken into account, it is also negative. The government's calculation method doesn't take inflation into account.

Jobless claims are also very troubling today.

I would like to comment more, but it's time to trade, not talk.

More on Speculation in Commodity Markets

I just posted the following response on another blog:

I would expect nothing more from a liberal. Blind ideology. No facts, no data, no empirical evidence. Just pure opinion stated as if it were a fact. Just quoting testimony before Congress doesn’t mean that the testimony is factual. You conveniently omit all the contrary testimony in a selectively opinionated manner.

Often, the “blame-the-speculators” crowd will cite the existence of large funds as a priori proof that they cause prices to increase. This is like saying that because one sleeps in the garage, one must therefore be a car. WRONG! The fact is that coincidence is NOT causality.

All the data, all the facts, and all the empirical evidence suggest that speculators are not the cause of high energy prices.

No credible analysis suggests that China and India are the SOLE causes for the rise in crude oil. There are numerous reasons, all of which together represent not just one or two, or even three or four, variables contributing to higher fuel prices. They are a perfect storm that almost guarantee high prices for energy.

Only two sources have factual data — the CFTC and the futures exchanges. Both have repeatedly released the data that indicate that speculators have not been the cause of high fuel prices. They have repeatedly used the facts and the data to disprove the OPINION of Mark Cooper of the CFA who you quoted. Why did you not quote THEM? They have the data! Why do you ignore the facts and the data? We both know it is because the facts don’t support your opinion.

During the past year, speculators have been reducing their size and positions in the market, while prices have skyrocketed. The commercials, who take physical delivery and use the oil in their products, have increased their presence. That’s the fact, and it doesn’t support the opinion that speculators cause high prices.

Speculators are outnumbered by a factor of 5:1 by commercials in the crude oil markets. Of those 20% who are speculators, the CFTC and exchange data indicate that at any given time, about half the speculators are short. Thus, the speculators who are long represent only about 10% of the market. Hard to manipulate the market with such a small position, isn’t it? But that’s the fact.

The fact is that the futures markets are already amazingly transparent, despite OPINIONS that they aren’t. All companies in the market of a certain size or larger must already file various reports, making their size and positions in the market very clear. This data is gathered and published weekly by the CFTC. That’s the fact.

There are more facts, but somehow, regardless of the facts, I suspect that those who ignore those facts won’t really care that the facts and the data don’t support their OPINION.

The fact is that one of the variables, in addition to the China/India factor, is the blunt coercive banning by a liberal-controlled U.S. Congress, of additional domestic production of increased capacity in the U.S. Government policy is a factor that, unlike speculators, IS contributing to higher oil prices. It is not coincidental that over the past two years, during which time such policies have been amplified, crude oil prices have risen, while domestic oil production continues to fall.

It is also a fact, as stated by a few shameful but honest liberal policy-makers, that one of their methodologies for imposing their Global Warming Inquisition, is to block additional production with the intent that it will drive prices higher and speed the transition to renewable forms of energy production. That’s a fact. This is a blunt, coercive, and sickeningly shameless was to control the American people.

The fact is that another variable — gross and unbridled overspending supported with Kenesian economics and bloated M3 money supply creation — is devaluing the U.S. Dollar and inflating the price of crude oil and other commodities. When those commodities are priced in the world markets in Dollars, and those Dollars are being devalued by devastating monetary policy, prices will continue to go higher. They HAVE to! It simply takes more Dollars to buy the same quantity of oil. Both Republicans and Democrats in Washington are equally responsible for this contributing factor to higher prices."We're all Keynesians now," Nixon said. Sure enough!

The fact is that this year, Congress has mandated that 1/4 of all corn production in the United States MUST be used in ethanol production. When 1/4 of the largest agricultural crop in the world is diverted into one use by congressional fiat, it has far-reaching ripple effects. For example, as farmers convert more and more acreage to corn production because of the higher prices, less acreage can be used for production of wheat, tomatoes, potatoes, and all other agricultural food products. That causes food inflation, not just corn inflation. That’s the fact!

These three causational factors, interestingly enough, were created by Congress. Congress is perhaps the single largest causational factor in creating higher oil prices. But since when does a politician take responsibility for inflation — or anything else, for that matter? (Obama can't seem to bring himself to admit he was wrong about anything, including the surge in Iraq. Obama speaks with silver tongue -- and it's forked in the middle. I was wrong about the surge in Iraq. I was opposed to it. I was wrong.) Thus, they point the finger of blame elsewhere, because they know that THEY and their policies are the true causes. By distracting the finger of blame from themselves, they protect what they really want — POWER. They are more interested in power and party, than in helping the American people become energy self-reliant.

I could go on and on, but frankly, it’s time to trade. Time to make a living.

The fact is that blaming speculators will not add one barrel of oil to global production. It WILL add to prices!

Wednesday, July 30, 2008

Crude Oil Rises More Than $5

I guess the vacation from high crude oil prices is over. Thanks, Congress!

One (or Two) Picture(s) Worth 1000 Words

Need I say more?

Crude Oil

Crude Oil Rallies Today

The EIA report this morning was bullish for crude oil today. Now that prices have fallen, traders are worried that slackening demand will increase again as gasoline falls below $4 at the pump, and crude oil prices are somewhat higher today as a result. This was undoubtedly the great factor in the downside breakout in the stock indexes, too.

Downside Breakout From Triangle

There it is. The breakout was downward!

Triangle Sets Up for Breakout

This chart pattern shows a setup for a breakout soon in stocks. Note the triangle pattern on both the 15 and 3 minute charts. While the upward momentum of the past few days would suggest a great likelihood of an upside break-out, the strong downward volume on the 15 minute chart (red line, bottom panel, left chart) suggests weakening price momentum. That's very strong volume pressure downward! The fact that the daily chart is in consolidation, crude oil is higher today, and prices are close to the upper Bollinger Band on the daily charts are also factors suggesting an eventual break to the downside. We'll be ready when it happens!

Surprise! Housing Bill Expands Government Power!

I have been reading somewhat this week regarding the housing bill that Congress passed last weekend, and that President Bush changed his mind and agreed to sign. Did you know that it expands the power of government to use Federal funds and eminent domain to take the property of private landowners, including homeowners? Surprise!

In addition, the new housing bill also expands the power of the Federal government to monitor your online activity, including purchases and credit card activity. Surprise again!

So what does a housing bail-out have to do with monitoring your internet activity?

Good question!

Good ADP Sends Stock Futures Higher

A surprisingly good ADP employment report this morning has sent the stock futures leaping higher. More good news, which may fuel today's trading activity!

Fed: "Fragile Circumstances" Require Rescue #3 This Week

The Fed this morning has decided to continue to extend the length of the "temporary" emergency lending facilities into next year. The facilities that were originally planned for only 28 days have now been extended not only beyond 28 days, they have now been extended for at least the next six months! They have also begun a new additional rescue vehicle, unheard of before, and extended and expanded the swap facilities with the European Central Bank. I guess this means that the Fed sees the crisis continuing at least into next year. With the additional powers that the Congress seems determined to give the Fed, the creature from Jekyll Island is rapidly growing into the monster from Jekyll Island.

I always try to look between the lines when events like this occur. Many investors react only to the headline, and the stock index futures are trading sharply higher as a result. However, that reaction is very short-term, lasting literally no more than a few days, and most of the time, just a few hours. I like to ask myself what prompted this action by the Fed. What does the Fed see that makes this action necessary? If circumstances were good, then such Fed actions wouldn't be needed. But in this case, the Fed has explicitly stated that economic circumstances as "fragile". I'll take them at their word.

Tuesday, July 29, 2008

"It's a Bull!"

Isn't he cute? Corn and soybean prices are showing more and more price strength. This is remarkable given the powerful recent downtrend that was reinforced in crude oil and other commodities today. Grains are bucking the commodity downtrend for the past few days, so there must be good reasons for it. On a day when crude oil gave up about $4/barrel, the Dollar was the strongest we've seen in a month, and other commodities gave up ground, grain prices moved broadly higher!

Will this bull grow and strengthen? Or will it flatten into a consolidation and range trade? I don't know! But I'm trading this bull for all its worth!
On the left is tonight's tick chart, which is trading sideways to higher for the last 3 days. On the right is the daily chart, showing growing volume to push prices higher. The August 12th USDA report will decide the trend for grains for the rest of the harvest season, but hot Midwest weather is beginning to show signs of trouble for crop yields.

Candlestick Patterns -- Powerful Tools of Sentiment

This chart shows a chart pattern that uses Japanese Candlesticks. These "smart" little time interval depictions can provide very helpful information regarding the direction of the markets. There are various websites across the Internet that provide very good instruction on the use of candlesticks as indicators.
This chart shows one known as a bullish engulfing pattern. When a candle reverses such that the body of the new candle completely encompasses the price range of the previous candle that was moving in the opposite direction, then it is considered to be a sign of a reversal. In this chart, the long green maribozu candle at the right of the encircled area has a price range that completely encompasses the prior red candle. If the new candle "engulfs" more than the previous candle, then the force and validity of that reversal is enhanced. In this case, the green candle engulfs not only the previous red candle, but the previous seven red candles. The resulting bullish reversal is proof of the power of this pattern.

The engulfing pattern is a very strong sign of a significant reversal in the opposite direction. Often, a candlestick pattern on one time frame (this one is 3 minutes) will be matched with another candlestick pattern on another time frame (perhaps a 15 minute chart), thus reinforcing the reversal sign. Traders would be wise to learn and use candlestick patterns, because they are a powerful tool in the arsenal for recognizing short-term market sentiment, especially reversals. They can help us make more money by identifying early reversals, and they can save us money by protecting us from reversals against our positions.

I printed various japanese candletick patterns from various websites and put them in a binder, which I study regularly to sharpen my acuity to recognition of these patterns.

Remember the Rout on Rice?

I'll bet most people don't know about the rice rout because the news media hasn't reported it. However, perhaps you remember this past Spring when the cost of rice rocketed to unprecedented heights, and prices reached more than $22.75 per bushel. Have you ever wondered what happened to the grain that seemed to be made of gold?

It is now selling for only about $16.50 per bushel! That's a 27% drop in price, and it's still falling! (Note also in this chart the "spike", as I mentioned earlier today is typical for physical commodity tops.) Funny, isn't it, that the news media doesn't mention this now! Why happened to the news stories about the rice rout?

Commodity Downtrend Continues, But Congress Still in Stupor

While the U.S. Congress is obsessed with blaming speculators for the recent price spikes in commodities, the reality is that commodities are in a significant downtrend. The train left the station weeks ago, and Congress is behind the curve as usual. They have been left in the dust. Ironically, I find it to be the paragon of egotism that Congressional leaders are trying to take credit for lower prices in commodities. Senate Majority Leader Reid tries to blame speculators for the high prices, while simultaneously trying to take credit when prices fall by claiming that it was the threat of action against them that spooked them and brought prices off their highs. If speculators caused the run-up in prices, then shouldn't they also be given at least some credit for the price collapse? These ego-driven political madmen try to blame others for inflation, while taking credit to themselves for price deflation. What absolute idiocy! The truth is just the opposite!

It was their policies that devalued the Dollar, their policies that banned domestic energy production, their policies that created food-to-fuel mandates that drove food commodities higher, etc. It was Congressman Reid's (and his cohorts') policies that created the inflationary mushroom cloud. It was the high prices themselves that have eroded demand so severely that Americans are being forced to cut back on driving -- and even eating -- so much that prices have now declined. Of course, a few of Senator's Reid's friends have admitted, in a few moments of shocking and shameful honesty, that this was their strategy for controlling prices all along. They admittedly wanted high prices to force painful prices on Americans so they would cut back. Americans, abandoned by their elected representatives, have brought down prices by cutting their consumption of all sorts of food and energy commodities. Americans have brought down the demand side of the equation through sheer pain, but without the help of their own Congress.

These guys are close cousins of Hugo Chavez, and don't even know it. Perhaps it's the in-breeding that makes such egotism so pervasive. Permanent brain damage seems to be one result. The saddest thing about all this is that the downtrend will be only temporary because Congress is doing nothing about the supply side of the equation. The inflationary and destructive policies remain in place! Thus, because the supply remains in dubious question, prices will inevitably spike much higher again in the not-too-distant future. This price respite will only be temporary unless Congress wakes up! Congress remains asleep at the switch despite the fact that the train left the station long ago. They were too blinded by their lust for power and party loyalties to bother hopping on at the station.
This daily chart for the Rogers International Commodity Index futures is one of the more liquid broad-spectrum commodity indexes, and the trend is still very clearly down. I don't day trade this one, but it is very liquid and excellent for trading over the longer-term on the daily charts. It's noteworthy that today, we have breached the price support level established with the lows of May and early June. With the gap downward and the two candles on July 8th and 9th, traders were making a quick exit as prices then spiked upward one last time to touch the upper Bollinger Band on July 11th. It was straight down from there!

Bowl Bottoms, Spike Tops

Physical commodities are known for an interesting phenomenon that I refer to as "bowl bottoms, spike tops". I believe I may have learned of this concept from Chick Goslin's book, "Trading Day By Day". This phenomenon occurs particularly with physical commodities because as prices rise in a parabolic way, eventually high prices destroy demand, following which prices tend to plunge rapidly downward. Thus, this is called a "spike top". On the other hand, when prices are in a downtrend, they tend to slowly lose momentum and gradually bottom out as demand begins to slowly and steadily build until prices begin to drive higher once again.

Wheat example #1
Wheat example #2

Dollar Shines

It's hard to believe that over the weekend, the US Dollar was being badly beaten, and today, the Dollar is rocketing to its highest level in a month. The Dollar is also benefiting from the downward pressure on the price of crude oil today. This is a good day for improving overall market sentiment.

Condolidating and Indecisive

This daily chart for the S&P 500 Index futures appears to be showing signs of settling in to a range trading phase. Day trading will be the order of the day until a new break-out occurs. There appears to be fairly strong support at the 1200 level for the S&P 500 also. Treasuries also appear to be consolidating into a tight range. It's possible that this sideways trading may be in anticipation of GDP and payroll announcements later this week. Perhaps one of them will stimulate a larger break-out.

Crude OIl, Consumer Confidence Fuel Stock Rally

What a nice surprise today. Both a collapse in the price of crude to reach new lows, coupled with a surprising rise in consumer confidence, have lifted the stock indexes with a very nice rally today. It seems that lately, receiving two adrenaline shots of good news on the same day, has been very rare. We should take advantage of it. Nice rally today!

Consumer Confidence will probably only have a short-term impact. However, continued demand decay for crude oil could have a more lasting and beneficial influence on stocks.

Stock Rally
Crude Collapse

Monday, July 28, 2008

Dow Dips 239 Points

Government Bail-Out Du Jour

Treasury Secretary Paulson just finished a press conference in which he unveiled yet another attempt by government to stabilize the housing market. This chart shows the initial reaction to buy the Dow (see the circle in the left chart). This one only lasted a few minutes, surprising even to me. The positive reaction in the stock market was short-lived, and the stock market indexes have once again sold off, where they are currently down about 200 points on the Dow thus far today.

Next U.S. President Faces $500 Billion Budget Deficit

What an inauguration gift! By the time the next U.S. president takes office, he will be facing nearly a $500 billion budget shortfall. That's 1/2 trillion Dollars -- for a single year! What a staggering amount! (Lest anyone accuse me of overstating the official amount of $490 billion, I would remind them that this amount does not include the supplemental amount for the War in Iraq.) The American people have a very jolting wake-up call coming. Eventually, the credit card must reach its credit limit. Much of it may come in the form of inflation as their currency collapses and the Fed responds with ever greater amounts of fiat money, either via printing press or treasury notes (debt). They're all Keynesians now!

Here is the Bloomberg story today:

U.S. Deficit to Reach $490 Billion in 2009

Sometimes I wonder about the sanity of anyone who would want to be the President of the United States at this moment in time. It must be the power they want! No sane person would want the crushing responsibility or the comparatively paltry salary to goes with it! It seems to me that anyone that would seek the office must, by a priori evidence, be considered unbalanced, insane, and therefore unfit for the office. Wouldn't you just have to crazy to want the office?

The Founders established the electoral college, which has been corrupted by the two political parties, so that a person could be recruited for the office who might otherwise have never sought for it. They envisioned an electoral process in which some of the best people in the country would recruit the person who would best serve the people, rather than the one with the fattest coffers or the biggest mouth. This is how George Washington was selected as the first U.S. President. He was never a member of a political party. He despised them. He even warned about political parties in his farewell address to the nation. He had the foresight to know how desctructive they would prove to be. You would have thought he wrote the speech yesterday.

You can read it on the Yale Law School website here:

Washington's Farewell Address

This speech is not light reading. Like the other Founding Fathers, George Washington was a highly educated man, with an intellect unmatched by nearly any other mind in human history (except his contemporary Founders, who were universally some of the greatest minds and most noble of characters ever known amongst humankind).

Grains Turn Negative

This is the chart that genuinely surprises me today. Grain trading is mixed this morning, with wheat having sold off significantly, soybeans relatively flat (having sold off of overnight trading levels), and corn slightly higher. However, this chart is the composite of the three grains combined with sugar, and it shows significant selling activity this morning. This chart is for the DBA ETF. The large spike at the start represents overnight price activity before the stock exchanges opened this morning. This sell-off is surprising to me, especially considering that crude oil has risen significantly today. Corn, soybeans and sugar are considered to be biofuels, so they tend to track the price of crude oil somewhat. Not today! This sell-off is occurring despite some of the best grains analysts in the business having forecasted higher grain prices across the board today. The futures markets never cease to catch me by surprise.

Stocks: Straight Down

Only a stock short is seeing green on this chart today. While this surprises me somewhat, given some of the good earnings reports out today, I'm not surprised that this appears to be the verdict of millions of investors across the world on the U.S. government's latest bail-out effort. Or perhaps this is more a reflection of the rise in crude oil prices today.

I am also surprised that treasury futures, which represent U.S. government debt, haven't sold off. They are still being used as a safe haven for times when stocks don't seem safe at all.

Eventually, when the debt burden becomes so onerous that the financial markets lose confidence in the capacity of the U.S. government to pay its obligations, then global investors will begin to dump treasuries, and the U.S. Dollar will become a pariah currency. I don't expect that to happen suddenly, or quickly, but certainly eventually. Profligacy eventually receives its just desserts.

Sunday, July 27, 2008

Dollar Drubbing

The US Dollar is taking a bit of a beating tonight in active Asian trading. Here are the Euro, Yen and Australian Dollar (Aussie) in overnight trading, all rising steadily against the US Dollar. One certainly must wonder if the Dollar's dip is due to market reaction to the huge bail-out engineered over the weekend by the U.S. Congress. More crippling debt doesn't inspire much confidence in the greenback, or the capability of the U.S. economy to manage the debt burden that is growing exponentially. This should send a message to the Congress, but chances are, they won't listen.


Evening Trading Phenomenon

Until tonight, I had never previously noticed this phenomenon. I only noticed it because of the existence of tick charts. Time interval charts would never have revealed this occurence. Of all the various futures, including treasuries, stock indexes, crude oil, gold, and grains, the most actively-traded futures during the evening hours are the grain futures. Yes!

Look at the tick chart shown on my last post. While the charts printed fully across the entire screen on the grain charts, the tick charts for treasuries and stocks, crude oil and gold, only printed about 3-5 candles. While the grains printed enough trading activity to print 40-50 candles, even the highly-liquid S&P 500 and treasury futures printed only 4 candles during the same period. Wow! Interesting!

Grains Consolidating for New Thrust to Higher Prices?

Over the past few days, after significant downward price pressure and a downtrend for the past several weeks in the grains complex, technical signs are building that prices are consolidating and commercial hedgers are using the price collapse to buy at bargain prices. Corn, soybeans, and wheat, after moving higher on Friday, are also up significantly in Sunday evening trading as well. Heat stress on the plants due to hot weather is being attributed.

It certainly appears that the downtrend in grains is over. Higher prices are probably forthcoming, and unless the August USDA crop report nest week shows that crop yields have unexpectedly increased, then we have likely already seen the lowest grain prices for the year. Corn declined more than 29% from its high June 27th. Imagine that! A decline of nearly 30% didn't even gain mention in the news media headlines! The daily chart for soybeans is shown below. The chart for wheat has already begun a new uptrend.

Dow Drops in Early Evening Trading

Stock market indexes, in early Sunday evening trading, have dipped lower. The Dow is down 30 points, which isn't huge, but is surprising for early Sunday evening trading.

Is this what we should expect following the latest bail-out from Washington? Now that the government has unlimited taxpayer funds to buy shares of Fannie and Freddie, under Treasury Secretary Paulson's plan, shouldn't we have expected the opposite from investors when the futures markets reopened Sunday evening? Is there something we should learn from this, that global investors are getting early jitters from the latest government rescue plan? What kind of new precedent it this, when the government is authorized to spend unlimited amounts of cash from the Federal Treasury to buy the stock of private corporations that have gone astray? Has anyone other than me lost count how many bail-outs and rescues we've seen since the credit crunch began one year ago? They seem to be coming more quickly and more frequently with every week that passes, don't they? The Founders must be crying in their graves for the Republic that they created!

Idea: If I owned shares of Fannie and Freddie, I would use this as my chance to use the government's unlimited buying power to dump my shares at an artificially-elevated price. Every time the Treasury buys shares of the two, once prices started to drop again, I'd be selling for every penny I could get. After all, the elected representatives of the people have decided to place this market risk onto the backs of hard-working Americans, so why not let them accept that risk?

Who knows? I might even use the government's intervention to drive the share prices of Fannie and Freddie higher as a way to ride an uptrend in the prices, dumping them once the prices start to consolidate or collapse. A few days ago, I mentioned that it is the job of a trader to find a trend, and then ride that trend in whichever direction it goes. Why not ride the trend of unlimited funds to drive share prices higher for these two stocks?