Commodity Price Analysis

Here is a fascinating article about the evolving turmoil and change in the world's financial markets.

Commdities Boom? You Ain't Seen Nothin' Yet

I am constantly amazed that so many people try to predict the future. I neither agree nor disagree with the assessment in the above-linked article. I honestly don't know. I just try to watch the charts and do what the markets tell me they want. This is an insightful analysis of the predicament that we find ourselves in.

Here is another:

Higher Margin Requirements Won't Dent Ag Bull

This second one sure appears to be right on the mark, since the dent in agricultural commodity prices appears to have been short in duration. Many commodities are already showing resurgent signs of price strength.

Global Demand for Grains

Interesting article from Qatar's English-language daily news service. Take note in the article now many different countries are panicking to secure sufficient foodstuffs for their peoples:

Rising Grain Prices Panic Developing World

Terrible Corn Trading, But Treasuries & Stocks OK

Grain trading in general today has been poor, but with the noted exceptions. This chart of corn is a good example. Both soybeans and wheat have both manifest wider than usual spreads, making it more difficult to trade profitably.

I have preferred to trade the 10-year Treasuries and S&P 500 mini today. Both have remained very liquid and have shown excellent movements that were reliable. I also like trading these two instruments because even if I traded 100 contracts, it would barely budge the price. It is extremely difficult for any party to influence prices by themselves.

Wheat Goes Ballistic!

Soybeans Breakout!

Soybean prices have found firm support today at yesterday's settlement price, and have now broken out higher.

The Incredible Sinking Soybeans

On the back of very little new grains-related news, expectations this morning were for relatively mild trading conditions and low volume. The strikes at Brazil's Paranagua port and the unresolved, albeit temporarily postponed, strike in Argentina, both continue, thus providing price support for soybean exports from the United States. However, soybeans have sold off quite forcefully at the open. I have no idea why, but as I've said before, the reason is irrelevant. The only thing that matters is that it has happened. Nevertheless, yesterday's settlement price has thus far proved supportive, and prices remain higher for the day thus far.

I am making some changes to my charts in the past few days, adding back in the 7 and 23 period MAs (2nd panel) from Cahen's methods. I had deleted them because the Bollinger Moving Average is nearly identical to the 23 period Moving Average (the Bollinger MA is just a 21 period MA, vs. the 23 period MA), but I am finding greater value in visualy having the two MAs together in a single panel.

Jobs: Down 80,000

Unemployment rate for March rose to 5.1% from 4.8% Furthermore, the higher-than-expected new claims reported yesterday were not yet included in this number, suggesting that I may get worse. The reported 80,000 job loss was larger than expected.

The job losses for January and February were also revised downward by an additional 67,000 jobs, and the household survey shows a stunning job loss even greater than the headline -- a 434,000 loss. The main survey tends to omit small businesses, while the household survey captures this aspect of the job market. This makes the household survey tend toward greater accuracy.

This is a poor jobs report. If there is any good news here, it is that that market expects that the worst in the economic news may be past, and there is the sentiment that the Fed has gotten ahead of the curve and things will soon be on the mend.

Triptych -- For My Friend, Oilivier! Bienvenue!

C'est le graphique de triptyque d'aujourd'hui pour le grain.

Corn Rebounds Stronger Into Close

This is a very good example of a set of parallels. Corn was the only grain I traded today. Spreads were too wide, and trading was too erratic, to trade soybeans or wheat. Prices closed below $6 -- with settlement literally just one tick shy -- but I suspect we'll see prices close above that level very soon.

Fundamentals remain strong according to this Washington Post article:

Grain Prices Rise on Supply Concerns

Prices Back Off After New Record

This is typical behavior following a new price record.

Corn: New Record $6 Bushel

Corn Picks Up Steam

Finally, corn is beginning to show some signs of price strength, and is picking up steam.

Sideways Trading

Some of the grains are showing poor liquidity today, due to thin-volume trading, including both soybeans and wheat. This chart for wheat is perhaps symbolic of this phenomenon. Even spreads have widened for wheat and soybeans, which is rare during the day session, in my experience.

Other markets are showing similar signs. Even gold prices have flattened and liquidity is fairly poor at this time.

Under circumstances like this, I will trade for just a few ticks in either direction on the most liquid markets, which are the 10-year treasury and S&P 500 Index futures. I am willing to take just a few ticks of profit.

I suspect that much of this flat trading is due to the on-going testimony of Fed and SEC officials before the Senate Banking Committee today. Financial market participants are hanging on almost every word of these officials for information about future movements of the markets.

It's Ugly Out There

Today is an example of a day that trading conditions are so poor that it would be a waste of money to try to trade the grains. After a few small trades, I've begun to look for other instruments to trade. Gold is currently looking good.

Grains Open Relatively Flat, Without Conviction

Soybeans and corn have opened the days session nearly at the levels that they ended yesterday. Wheat is higher than yesterday's settlement, but flat from the day's open. I have yet to place a trade.

Still no $6 Corn on May Contract

Corn reached $598 6/8 in overnight trading. Fundamentals remain bullish. Perhaps the $6 handle will topple today during the day session.

I am anticipating fairly subdued trading in grains today compared to recent weeks. No heavy or changed news.

Ouch! Jobless Claims Spike to 407,000!

Here is the Martketwatch link

Jobless claims have surprised the market this morning and risen to 407,000, with the weekly average rising also.

The stock market today is not going to like this. It may also bode poorly for the payroll report tomorrow. If jobless claims over the next few weeks continue on a downward path, stocks will likely fall, and the US Dollar will very likely plunge again as well. And that will drive the Fed to lower interest rates further, and commodities will likely surge higher again. Sounds like a broken record.

And we all thought we had hit the bottom.

Let's hope tomorrow's jobs report is better than expected, and that future jobless claims surprise to the downside.

Soybean Parallels Continue Into Evening Session

The Bollinger Band parallels pattern for soybeans has continued into the evening trading session without any sign of let-up. I must keep in mind, however, that continued soggy weather in the grain belt will tend to be bearish for soybeans, if farmers are forced to grow soybeans instead of corn. Soybeans have already surfaced as the most active grain for trading this evening.

Corn Battles to Break the $6 Barrier

Corn prices couldn't break through the $6 price handle today, even though new all-time record highs, and new all-time closing highs (for a front month contract) were both reached. Eventually, they will, especially if rainy weather forecasts continue for the grain growing regions of the United States. This would make corn planting less likely, but might also increase the likelihood of more soybean acreage (too bad, however, that soybean seeds are also in short supply this spring). I wouldn't be at all surprised if the $6 handle was broken during overnight trading tonight, especially since the day session ended so close to its highs for the session. Fundamentals for all the grains remain bullish, based upon tight world supplies, continued political unrest in South America, rainy growing conditions, and (once again) a weakening US Dollar. One of my favorite news sources even suggested that we may have already seen the low prices for all the grains for the entire growing season. He thought that prices would go nowhere but up from here.

Soybeans: Picture Perfect Cahen Parallels

Here is a picture perfect "parallels" pattern (left side) as described in Cahen's book, "Analyse Technique et Volatilite". Because the moving averages in the second panel haven't begun to contract toward one another, this set of parallels may continue during the evening session tonight. Parallels are the most profitable pattern that Cahen teaches in his book. However, they are also the most difficult to trade, because they tend to move in a lengthy, sustained trend rather than a short burst, as the bubbles do. They tend to have more erratic up and down movements within the higher trend. Note that only about 10 of the 42 candles in this chart move upward in a forceful way. Interestingly, however, we also notice how well they remain contained between the Exponential Moving Average and the Bollinger Bands. Exiting a set of parallels is also more complicated than a bubble pattern. Cahen recommends exiting the pattern based upon the two moving averages in the second panel. If it appears that the two moving averages will cross within the next three candles, he suggests liquidating 50% of one's position. He says to exit the remaining positions once prices close below the Bollinger Moving Average. Often, a set of parallels on one time frame will be composed of a set of bubbles or smaller sets of parallels on the next lower time frame (see the right side of this chart). I prefer to trade the bubbles on the lower time frame, entering and exiting various times.