Friday, August 22, 2008

Grain Prices Fizzle on Profit-Taking Before Weekend

As if typical prior to the weekend, many funds are liquidating their trades and taking profits, leading to mild price weakness. While grains are down somewhat, there has been no full-scale sell-off. This suggests to me that prices will remain fairly well-supported going into next week. Weather has been a bit too dry for good crop yields this week, which has also supported prices. We will all be watching the weather over the weekend for clues to trading next week!

And the Rally Continues

Stock indexes have once again rallied higher off the support level I pointed to in my previous post. Note also that stocks rallied at that same level earlier today (notice on left chart). This is a nice rally -- more and better than I expected!

S&P Finds Support at 1 Hr EMA

I had been watching the 1 hour EMA for possible support. It is depicted on this 15-minute chart as the green line supporting prices on the left chart. Prices have begun to find support and push higher. I expect a short-term rebound at this point. If we see only a consolidation, then it will be very short-lived. However, the over-riding economic concerns are likely to eventually lead to lower stock market prices, either today or early next week.

Well, Maybe We're Not THAT Convinced!

Following a very nice rally, stocks have sold off somewhat, although we're still well in bull market territory for the day. This is a very typical reaction to Chairman Bernanke's remarks. As the impact of the Fed Chairman's remarks fade, markets often reverse in the opposite direction. As the new week brings a fading memory to the markets next week, don't be surprised if worry begins once again to wear down the bullish sentiment. I also wouldn't be surprised if, over the weekend, we see more developments in the attempt to backstop Freddie Mac and Fannie Mae, which may give the market more impetus next week. And don't be surprised also, if we see more bank failures over the weekend. The FDIC tends to announce them after market close on Friday to prevent overnight panics.

...But Warren Buffett Disagrees, Sees More Inflation Ahead!

This morning, CNBC viewers were treated with a three-hour visit by Warren Buffett and many nuggets of his monetary wisdom. While I am personally not a fan of Buffett's atheism (he's not willing to pay the price to know what the rest of us have paid the price to know), I admire his brilliant financial mind and his great wit and humor. His wisdom, common sense, and gift for humor are a joy to listen to. I can't help but like the guy, as long as I keep my admiration to only those subjects for which he has proven himself worthy of respect. Politics is not one of those areas!

He said that the surge earlier this year of commodity prices is only beginning to be reflected in retail prices that must eventually be passed onto the end consumer. He gave examples from the businesses in his empire, and said that their margins have been squeezed so tightly that they have been forced to increase prices repeatedly to their retail dealers. He said that they have been forced to increase prices again and again, sometimes in rapid succession. He also said that the price increases have only just begun, and that much more -- and many more -- substantial price increases are coming. Inflation is not dead! It is not under control! Take it from a man who should know -- Warren Buffett!

Wall Street Concerns Eased By Bernanke's Remarks

Fed Chairman Bernanke's remarks at the Jackson Hole summit this morning have eased Wall Street concerns about a possible resurgent inflation. The Dollar has recovered some of yesterday's losses, and renewed commodity price strength has also eased.

We must remember that this same Fed is the one that told us that there was no credit crisis, that inflation was contained, and that there would be no contagion from the credit markets into the rest of the economy. This is also the same Fed that didn't see any of this coming last year! That's pretty cruddy credibility! Today's remarks sound more like spin than credible economics!

Commodities Back Off Across the Board

Commodities prices have backed off across the board today, with crude oil leading the way. Grains, softs, and gold have followed suit. The U.S. Dollar is stronger, also. There has been no follow-through buying strength with additional buying of commodities. This is suggestive of a consolidation that could last a very long time.

However, it is also common for commodity buyers to liquidate their positions on Fridays to avoid the potential risk of events over the weekend. These buyers will then reestablish their positions Sunday evening or Monday morning.

The grains, although lower overnight and selling off at market open, have showed surprising resiliency and some renewed buying vigor today.

(There Is No) Freedom of Speech or Press in Russia

One economist critical of the Kremlin, Mikhail Delyagin, was apparently given an appearance by mistake on a popular talk show. Before “The People Want to Know” program aired, Delyagin was digitally removed from the tape.

The show’s host, Kira Proshutinskaya, said she was embarrassed over this and other incidents, and admitted that networks are constantly intimidated by the Kremlin.

“I would be lying if I said that it is easy to work these days,” she told the Times. “The leadership of the channels, because of their great fear of losing their jobs — they are very lucrative positions — they overdo everything.”

I recall how the Soviets used to doctor photos to remove people from them. This looks a lot like the old Soviet mentality has returned to Russia. The above is a quote from the following news story about the absence of press freedom in Russia:

Press Freedom Absent in Russia

The Following is a news story about persecution of critical voices in Russia. This person was prosecuted for publishing an opinion to a BLOG!

Criminal Case Launched Against Russian Opposition Blogger

In Russia, Vladimir Putin has passed a law, article 282 of the Russian Criminal Code, that allows the government censors to classify anyone's speech as "extreme". It can therefore be censored and the person prosecuted. Imagine the number of KGB agents necessary to monitor millions of blog posts all over the internet each day! They're serious about censorship and silencing those with a different perspective! The sentence is two years in prison! His crime? Criticizing the Federal Security Service!

Here is another article about the office of Russia's largest radio media conglomerate being raided. Check out the photo of the hooded soldiers that conducted the raid in the article below. Often, Russian authorities won't shut down media source entirely. Instead, they will harass them and accuse them of various activities, including tax evasion. If that doesn't work, they prosecute them and send them to prison. The intent, of course, is intimidation!

Russian Media Group Offices Searched, News Program Cut

Thursday, August 21, 2008

Crude Oil -- $122

Crude just keeps rising. It is now up more than $10 from the low earlier this week, and more than $7.00 so far today!

Natural Gas Bottoms on Report

The price of natural gas rose today despite the fact that supplies rose in the latest government survey. When supplies increase, but prices rise, that's a pretty good sign of oversold conditions. With crude oil substantially higher today, natural gas appears to have been destined to follow! I've been watching for this!

Grains Limit Up Move

Commodities, including grains, are surging across the board. Grains touched limit up within 30 minutes of market open today. The bull is back with a vengeance!

Today -- Tumult and Turmoil!

With the amount of worry and turmoil in the market today, I expect that we will soon see another rescue or bail-out very soon. Here is a quick summary:

Dollar is Down, and if it remains this low, it will be in bear market again at day's end

Gold is Up $50/oz. in a few days

Oil is Up partly due to geopolitical supply fears, partly due to Dollar weakness

Treasuries are Down due to fear that the Feds will have to bail out Fannie, Freddie

Commodities Up almost across the board due to Dollar weakness

Turmoil in Treasuries

Wow! Check out this chart this morning. Treasuries have been selling this morning with vigor, causing interest rates to rise the most in days! Much of this is no doubt due to the slow-motion collapse of the capitalization of Fannie Mae and Freddie Mac. Expectations are for an almost certain take-over of the two institutions by the Federal Government.

"Me Too" Gold!

Gold has also now moved back into bull market territory! This is the daily chart. Up by $50/oz. this week!

Stocks Take a Tumble

Prior to market open this morning, the sentiment is absolutely morose. With oil more than $3 higher due to Russia's threats against Poland, and expectations that Fannie and Freddie are on their last legs, stock market index futures are nearly down by triple digits and sinking moment by moment, and the market isn't even open yet.

Bubble? What Bubble?!

Today, we are beginning to see the reemergence of a commodity price bull trend. These charts show the daily charts for corn and soybeans. Prices for both have moved significantly higher overnight. Notice also that prices have reversed and are moving higher over the past few days. The price of corn is higher seven of the past eight days! The bulls are back! How long it will last is anyone's guess!


Crude Oil Reaches Highest Prices in Weeks

Crude oil has reached $118.50 per barrel today. This is the highest price in weeks. Perhaps the risk premium of geopolitical events is once again pushing the price of oil into the stratosphere! Could this be one of Putin's purposes for invading Georgia? One certainly wonders if it might be at least one of the fringe benefits, from his perspective!

Note the daily chart below is now back in bull market territory! Personally, I would be surprised if we see prices go back to record territory anytime soon, but anything can happen!

"Everyone Lost"

Political opposition voices in Russia recently released a statement saying that in the war upon Georgia has no victors. “No one won from the war,” the opposition leaders write. “More precisely, everyone lost.”

Here is the full statement (see link below). They were incredibly courageous to issue it, considering how many members of the press and Putin political opponents have been murdered. It is estimated that among the press alone, more than 150 reporters have been murdered in Russia over the past 5 years just for criticizing the KGB King. That's about one every two weeks! Russia is the most dangerous place in the world to be a reporter. It's deadly to speak the truth about Vladimir Putin!

Russian Democratic Forces On the Georgia Conflict

Wednesday, August 20, 2008

Crude Oil Inventory-Related Selling Followed By Rebound

This is an interesting chart because the U.S. government inventory data this morning showed an unexpected rise in crude oil inventory. The price of crude sold off powerfully. However, the selling only lasted an hour, and crude oil prices have been rising steadily since, as shown on the 15 minute chart on the left. Unless some geopolitical or other event occurs to drive demand lower, it appears that the price of crude oil has bottomed. Prices have been trading within a fairly tight trading range for nearly two weeks!

Once a firm bottom has formed in any commodity, I change my focus from selling on rallies, to a strategy of buying on dips. This changing of the guard between a selling focus to a buying focus is the market psychology that causes consolidation trading such as we're seeing now on the daily chart for crude oil (see below). Note that the Klinger Volume indicator (green, bottom panel) is showing stronger and stronger buying, even though prices are relatively flat!

Mmmm! Those Golden Grains!

Finally the grains have broken out of their flatline status and have broken out higher. After forming such a firm bottom, I would have been surprised if prices had broken lower. This may well be the early stages of a new bull trend for grains. Grain prices have closed above the Exponential Moving Average five of the last six days. For wheat, it was nine of the past ten days! Sounds like an uptrend to me!

When prices are flat, that is no time to take one's eye off the ball. The longer prices remain flat, the more powerful the move will be when the breakout occurs. When the market is quiet is the most important time to stay focused and wait like a patient panther to pounce.

Interest Rates on a Downtrend

It never ceases to amaze me that anyone is willing to accept such paltry interest rates as the prices of treasuries continue to rise (interest rates and bond prices move inversely to each other), but such is the case. Don't they realize that they are losing money to inflation by buying these things? There is no end in sight to lower rates according to this trend. Perhaps one reason for this is that treasury futures purchases are also a barometer of fear. When people buy treasuries, they are often doing it for fear of losing their money by investing it anywhere else.

It's Ugly Today in the Grain Pits

This is absolutely untradable. Don't even try or you'll lose money!

Putin Sends in the Chechen Goons!

Russia Lost the Georgian War

As long as Putin's Russia continues it brutal invasion of Georgia, I will continue to post short updates on the status.

The Kremlin KGB Kings have sent Muslim Chechen gangsters into Georgia to brutalize and terrorize the Georgian people, despite the fact that they signed an agreement to withdraw one week ago. These mercenaries are so brutal in their conquests that even the Chechen puppet President begged Moscow to disband them. Putin refused. We also know that they are on the ground in Georgia because photos from the Kremlin of these thugs showed them on Russian armored personnel carriers with their battalion ID painted on the equipment.

We also now know that when Putin left Beijing suddenly, he was headed directly for the front lines of Russia's invasion of Georgia. He is personally directing the brutality and humiliation. Photos and video from Russia's state media showed Putin personally directing the invasion at the front. Since when is that in the job description of a Prime Minister, Mr. Putin? That has all the appearances of a dictator, not a diplomat!

Additionally, press photos yesterday also showed Georgian troops taken hostage by the Russians and hauled away blindfolded into Russia as political prisoners! Photos also showed the Russians stealing American Humvees owned by the Georgian military, and taking them into Russia also. They are now adding plunder and pillage to their war crimes!

We in the West had better wake up to realize that the bloodlust for power of the Kremlin KGB King will not long be contained within Russia's borders. Putin and his puppet-dog Medvedev will become more and more brazen and aggressive until they are checked. Europe is so worried about the oil and gas pipelines that they are being blinded by their need. If they don't establish their independence quickly, they will eventually wake up licking the feet of Putin, and being grateful for the privilege.

Vladimir Putin has the West's number. He knows how to manipulate the UN to block all diplomatic efforts to check his military conquests. He has repeatedly blocked all UN efforts to bring a halt to Iran's nuclear efforts. And he understands the weaknesses of Europe's desire for diplomacy better than Europe understands him. He humiliated President Sarkozy of France, agreeing to a ceasefire and withdrawal, and ignoring them as soon as the ink was dry.

Tuesday, August 19, 2008

And She's So Cute, Too!

I confess I've been cheering for this young lady to get a gold medal at the Olympics. She is just so cute, and so consistent as a gymnast. She has a great personality, too! Good job, Shawn Johnson!

Support a Free and Democratic Russia

Read about the persecution of Russia's opposing voices -- those seeking political freedom -- at this website:

The Other Russia

This website is maintained by Gary Kasparov, the former world chess champion, from inside Russia.

The Kremlin KGB Kings continue to persecute all dissenting voices relentlessly. At some point in the past, we were lead to believe that Russia had become a democracy with individual rights, a free press, and protections for all. This was reversed by Vladimir Putin and is now a myth, and Gary Kasparov and other courageous Russians are blowing the lid off the myth by revealing the monstrous nature of Putin's true nature.

Higher Interest Rates Courtesy of Inflation

Treasury auctions today ended with interest rates moving somewhat higher. Treasury prices were lower as a result. Despite the auction results and higher rates, the downtrend today looks weak to me. There's not much conviction, at least not yet. I wouldn't be surprised if the market discounts inflation and buys treasuries again over the next few days, unless commodities begin to rise and/or the Dollar collapses again. Like Fox "I Want to Believe" Mulder of the "X Files" television series, the market "wants to believe" in lower rates, regardless of inflationary pressures.

Grains: Market Ends Mixed

Corn closed higher(left), but soybean (middle) and wheat (right) prices were lower at the close today. What a good day to trade, however. I was both long and short, and the very smooth movements were reminiscent of trading the grains months ago. Liquidity was excellent!

Russia's Stock Market Beaten Up By Firm NATO Statement

Confront the Kremlin - excellent editorial by Oksana Chelysheva

Russia's stock market stumbled and fell by 5% today, in addition to the tumbling market over the past few weeks. U.S. stock markets haven't dropped that much in a single day for more than twenty years! has an excellent article on the subject today. Sorry, but I'm having difficulty grabbing the link. The terse NATO statement says that "business as usual" can not continue following the Russian invasion of Georgia. The chart says it all, however. Note the strong gap lower today!

Worry, Worry, Worry!

Fear and geopolitics appear to be putting a floor on the price of crude oil -- for now! Despite demand decay, worry that Russia's bullying could easily take control of all oil being exported from the Caucasus regions to Europe, is putting a floor underneath the price of oil today. OPEC rumors that the cartel may cut production is also having the intended effect. Crude oil prices are roughly flat for the past 10 days or so. Note that on the daily chart, below, prices have been fairly flat for several days. Unless demand skids even more, we may be close to the bottom. This is also fueling worries that the hoped-for rebound in stock markets, might not appear anytime soon. Stocks are down!

And Then Grains Get Crunched

And then, grains go bust! Wow, what an interesting day. Great volatility, despite the roller coaster market today.

Grains Go Ballistic

However, the grains across the board have gone ballistic and prices have broken out of their recent tight trading range. Perhaps this time, prices won't collapse tomorrow in a continuation of the see-saw price action of the past few days. Overnight, grains prices collapsed again, reversing direction from yesterday's day-time price behavior. However, today, grain prices have reversed again and moved substantially higher. The grain analysts were generally expecting lower prices this morning, so this is a surprise to everyone.
The chart above shows the same soybean daily chart as the one I posted overnight, but this time, instead of grains moving lower, prices are moving strongly higher. What a difference a few hours makes.

Help Georgia's People Rebuild!

Here is a link to the website of the Bank of Georgia. You can help the Georgian people begin to rebuild from the Russian invasion. Click on the link near the top of the page to contribute to the aid fund to help Georgian refugees displaced by the invasion by Russia. Please be generous!

Bank of Georgia

Wholesale Inflation Explodes!

Stock futures have plunged to triple-digit losses on the Dow this morning pre-market as wholesale inflation has surprised even the most pessimistic prognosticators. July PPI inflation reached 1.2%, showing that contrary to the Fed's expectations, inflation continues to accelerate higher. This is the highest inflation rate in 27 years! Annual inflation thus far has reached more than 8%, but the monthly figure suggests that the annual inflation figure is accelerating. While the wholesale inflation rate is often discounted by the markets, it is very significant because it is a leading indicator of what is coming down the road for consumer inflation! In fact, even the core inflation rate burgeoned to a rate of more than 8% on an annualized basis. The real inflation rate is about twice the reported figure. That bites! And it hurts!

$40 Billion Net Worth!

Putin's Imperial Russia

That headline is the estimated net worth of Vladimir Putin, the self-appointed Prime Minister of Russia. He had very little net worth at the time he became President of Russia. Not a bad salary for just 8 years in office! His own countrymen, based upon expert financial analysis of companies he owns or controls, and similar to that of Forbes magazine's calculations to estimate the net worth of the world's other billionaires, estimates that during his tenure in office, he has made himself into one of the world's wealthiest people solely through the activity of politics, a previously unheard-of feat. Wow! He must be some politician! If this net worth is accurate, then it places him as the world's seventh wealthiest person. It also placed him easily and squarely as Russia's wealthiest billionaire. It also places him well ahead of even the wealthiest members of the Saudi Royal Family, who have been in power for decades. Again, some politician!

At least part of that wealth came from using his office to confiscate the wealth of Russia's other billionaires, by throwing them in prison, confiscating their assets and selling them off. Doesn't that sound a little more like a tyrant... than a president? Is his middle name Amalickiah? I just wondered!

When confronted a few months ago by a foreign reporter and asked about his vast wealth, President Putin mocked the reporter, and the question, by smugly commenting that he was the wealthiest person on the entire planet, because he is so beloved by Russia.

That's a whole lotta love ... $40 billion worth!

Grains Markets Continue See-Saw Action

For the past four days, the grain markets, primarily corn and soybeans, have continued their action of being solidly higher one day, and solidly down the next. We have seen both limit up and limit down days over this period of time. In reading the analysis of other grain traders who use fundamental analysis, it amazes me that their analysis swings almost daily from very bullish to very bearish from one day to the next. This seems to suggest a consolidation pattern and indecision, in a market which has no preference that moves the market solidly in one direction or another. We see, in both corn and soybean markets, a solid price floor being built, below which prices do not dare venture. Apparently, commercial hedgers see that these prices provide them with such a bargain that they are buying with fervor when prices reach those levels.

This is really quite typical behavior for grains toward the end of the summer. We are seeing almost daily updates regarding the condition of the corn and soybean crops. For example, the progression of the corn through the silk, to the blister, to the milk, followed by the dough stage, and then the dent stage, and finally to the maturity stage, are carefully monitored and compared with previous years. The one over-riding message thus far this season is that the maturity levels of the two crops, corn and soybeans, are well behind their normal maturity at this late stage in the season. This makes them highly vulnerable at the end of the season to early frosts or an early winter. If an early frost damages the crop, yields could very suddenly by sharply cut within just a few days. All of this risk tends to put a solid floor under prices. Eventually, it could send the market into a new bull trend if yields are cut during the late September, early October time frame. Until the grains are harvested and inside the grain silos, the risk is largely to the downside for yields, and thus, to the upside for prices.

Monday, August 18, 2008

More Fretting Over Freddie

A Barron's article today predicting that weak capitalization will wipe out stockholders of Fannie and Freddie is weighing down the financial sector again today. The Dow is down about 185 points. No more bliss in the stock markets for the moment.

Endgame Nears for Fannie and Freddie

Oil Sells Lower, But Without Compensating Stock Rally

This is somewhat surprising today. We have seen a solid sell-off of crude oil over the past two hours, but without a compensating stock market rally. Other factors are also weighing down Wall Street.

Dow Gets Dusted

Wow! Sentiment shifted instantly from moderately bullish pre-open to dumping the Dow and other stock indexes once the market opened. Good day to sell! But it will come back. I don't see any strong market-moving events so far this morning. You can't keep a good Dow down for long!

Yo-Yo Grains

The past few days, grain prices have been up and down like a yo-yo. Grains moved up strongly last Thursday, and down strongly on Friday. Now overnight, grain prices were higher again. During times like these, when there is no clear trend, I stay out of that market. I'll find something else to trade that is trending. Anyone for shorting the British Pound? That's been a good trade lately!