Friday, January 16, 2009
Cotton prices on Friday maintained their upward drive as spinners and mills continued to make panic buying in the backdrop of a sudden bullish change in the world cotton scene, analysts said.The both perceptions of a short crop and revival of new year demand from the leading cotton importing countries is said to be the chief factor behind the snap price flare-up.
Corn prices surged on U.S. trading and pared some of its recent losses. The grain climbed amid concerns a drought in South America could cause damage to supplies.
March corn futures rose to $3.91 per bushel, up 25.6 cents on the session. Despite the rally, corn lost almost 5% for the week. On a long-term basis, the grain has lost more than 50% of its record high of $7.9925 reached on June 27.
Soybeans for March delivery also surged...
Grain and Stock Update
Renewed questions about U.S. banks’ viability are pushing regulators toward a new plan that would remove toxic assets from bank balance sheets, in what may become the biggest effort yet to unfreeze lending.
President-elect Barack Obama’s advisers see an increasingly grave banking crisis and are considering proposals far more sweeping than any steps that have been taken so far, according to people who’ve discussed the outlook with them.
Here is the full story.
The government said earlier today it will invest $20 billion in Bank of America and guarantee $118 billion of assets to help the company absorb Merrill and prevent the financial crisis from deepening. The agreement is part of a commitment to “support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Thursday, January 15, 2009
From Farm Futures:
South America’s weather problems are the number one concern for corn, soybean and wheat traders longer-term. USDA’s bearish crop report on Monday essentially meant that we could delay a battle for acres for a year, if South America would come through with a good crop. However, the current drought has already significantly cut corn production for our largest export competitor and it’s beginning to hurt soybean production. The duration and intensity of the current South American drought will shape the scope of the U.S. acreage battle as spring approaches.
“State legislation that slowed down the onset of new foreclosure activity clearly had an effect on fourth quarter numbers overall, but that effect appears to have worn off by December,” said James J. Saccacio, chief executive officer of RealtyTrac. “The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners.
“Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami. And the recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.”
Here is a related Bloomberg story.
Wednesday, January 14, 2009
Here is a good summary by Marketwatch.
Monday's market was about surviving USDA's bombshell and /Tuesday's/ was about sorting the severely wounded from the slightly injured. Corn took a beating once again, while soybeans and wheat managed to bounce modestly on weather concerns. Yet, all suffered from bearish signals in the outside markets and ongoing index fund portfolio rebalancing.
Fund managers may still have every intent to own corn, soybeans and wheat for 2009, but bearish chart signals could tempt them to wait until a bottom is found to establish their long (bought) positions. Meanwhile, Wall Street is in the dumps once again, worried that the current economic crisis could struggle throughout much of 2009. That tends to add to bearish sentiment at a time when the market is already vulnerable.
The bright spot continues to be weather related, with adverse growing conditions providing support for both soybeans and wheat. Ironically, the rapidly rising new-crop soybean/corn price ratio may leave the U.S. desperately short of corn acres this year, with farmers reluctant to pay high input costs without a better promise from the market. That could lead to quite a wake up call for the market when USDA releases the results of its producer planting intentions survey on March 31 if things don't turn soon.
Tuesday, January 13, 2009
He has posted it under the heading, "Lies, Damned Lies, and Government Unemployment Numbers":
There are some who see a ray of hope in the recent jobless claims reports, which have dropped back to “only” 467,000 in initial unemployment claims, down from 491,000 for the last week, after being over 500,000 for several weeks. Those numbers are seasonally adjusted. That hope disappears if you look at the actual numbers. For the current reporting week ending January 3, 2009, the advance number of initial claims came in at 726,420. Last week’s advance number was 717,000. We have been above 600,000 new initial claims every week since the third week of November. Continuing claims jumped massively, by 744,000 to 5,316,124...
In December, the number of unemployed persons increased by a seasonally adjusted 632,000 to 11.1 million and the unemployment rate rose to 7.2%. Since the start of the recession in December 2007, the number of unemployed persons has grown by 3.6 million, and the unemployment rate has risen by 2.3% and is now at 7.2%.
I happened to be watching CNBC at the time of the release of the data, and several commentators remarked how much better the number was than they thought it would be. I wish they were right, but again, the actual numbers showed a loss of 954,000 jobs, over 50% more than the headline number reported in the press release. And that assumes that new businesses created 72,000 jobs from the birth/death model that I so frequently write about. It is possible that almost 1 million jobs were lost in December. I doubt the market would have liked that number.
I should note that the Bureau of Labor Statistics does not hide that number. You can find it if you dig for it. But most analysts seem to prefer just to take the press release and go with it. And most of the time that is fine. But in times like this, when trends are changing, you miss the bigger picture and get misleading data...
If you add people who have part-time jobs but would like a full-time job, and what are called marginally attached workers, the current rate is already 13.5%.
Even Mauldin's figures don't state the full total in a single figure. If we add the number of reported jobs losses and the assumed jobs created that weren't really created, the total jobs lost in December were:
1,026,000 jobs lost -- and that's one month!
Corn gapped lower this morning, and continued to drop throughout the trading session. This is significant because corn and soybeans often tend to trade somewhat in lock step with each other, so when one or the other moves independently of the other, it is very noticeable. Wheat moved higher at the open, but like soybeans, slowly edged lower since. Wheat has now closed near the flatline for the day. This also suggests bearishness. I wouldn't be surprised if more selling/liquidations occur over the coming days, driving prices still lower. Of course, a weather event could change everything -- literally overnight! We will now be trading weather through mid-May 2009.
The daily chart (above) for soybeans shows how strong yesterday's limit down price thrusts were, but it also depicts visually how weak today's attempt at a rebound was. If, following a strong one-day move that crosses over the Exponential Moving Average (in this case, crossing below the EMA yesterday), prices attempt a rebound back toward the previous trend (in this case, soybeans had been on a solid uptrend throughout December and early January), but fails to cross back over (above) the Exponential Moving Average within the next few days, a confirmed new trend (in this case, a downtrend) is confirmed. The fact that the rebound did not cross back above the EMA into bullish territory, increases the probability of a confirmed downtrend. Once an EMA crossover occurs, I will only trade the direction of the new trend, in the hopes of entering the new trend at a fairly early stage to maximize my profit. Since today's rally appears to be faltering, by shorting grains today, I hope to take advantage of the early emergence of a new downtrend in grains, if it occurs. I will continue to place short-only trades as long as the closing price remains below the EMA, or until prices crawl back above the EMA and create a fresh uptrend.
A consolidation is obviously a possibility as well with these strong movements in price. It is possible that for several days, price may move erratically back and forth within a range. If a downtrend is not confirmed within a day or two, I will pull back and stop trading until a new trend asserts itself and is confirmed. If the Bollinger Squeeze indicator turns red (not shown), this is an indication of a consolidation pattern and tells me that I should stop trading that futures instrument and watch for a new trend to emerge.
Even though soybeans closed higher today, the daily chart clearly shows the weakness of today's higher close. Corn continued to drop significantly throughout the session, confirming a downtrend, and wheat, while rallying with soybeans early in the session, closed nearly flat, signifying potential further weakness ahead. Since corn futures have greater open interest than the other grains, its movements tend to carry more weight in my decisions. It's lower close today creates a bias in my mind for further downside potential.