markets and news tuesday, july 25, 2006
More confirmation that we are in the midst of a buyer's market in real estate. August is likely to be a wild ride. We've had a cool down in gold that could easily reverse and re-ignite. Crude closed substantially lower. Corn has bumped up with beans lately because of lower than expected crop progress report (minor decline in good/excellent rating for corn, but 6% downgrade occurred in key growing state of Iowa). A bearish cattle on feed number Friday caused a sell-off Monday.
Lots of activity.
Corn did not stay in the low 250s for long (basis dec contract). Tonight were back up near 257 where there's significant resistance. The ever-expanding demand base for corn is likely to keep this thing alive. Fund long positions have been culled... should they reenter on the long side then we could see a rally along with the beans in August. Causative factors for corn may include:
- further increases in demand. Chinese import more than expected down the road.
- steeper declines in crop conditions that the market is factoring in
- re-establishment of longs by the funds
- hot and dry 10-day forecasts
Since we're almost out of the July "corn" window and moving into the bean window of August. The fireworks could be subdued, but remember that it was only a few weeks ago we were looking at 284 for dec corn. Support at 247.75 seems to have some fortitude. Only time will tell.
markets sunday, july 23, 2006
Corn and beans are weak based on perfect weather conditions. There is some persistent dryness, but rains last week provided significant relief... at least in traders' minds. As I look at the forecast on Sunday morning, I see that the extended forecast has "lost" a lot of the moisture that was there late last week. All of the sudden, a wet, mild week is shaping up to be warmer and dryer than expected. It'll be important to see how the market digests the changes tonight.
- Corn is approaching support levels in the high 240s basis the dec contract.
- Beans are approaching the key month of August. It should be a wild ride. Bearish fundamentals are hanging over the market, but there are plenty of bulls looking to push prices higher.
- Cattle could face pressure in the near term. Cattle on feed came in on 7/21 at 104% a year ago.
- Sugar may have further to go on the downside before moving higher.
- Dec cotton might be a good sell in the high 50s. The broad trading range seems to be low 50s to upper 50s.
Weather models in Europe and the US have not agreed for a while now. How this week plays out could be very important in determining the intermediate term movement of the grains. Corn will likely turn into a follower of beans as the key bean window is fast approaching.
markets monday, july 17, 2006
Corn started stronger in Monday night's trade, then ended on a neutral note. Beans were slightly higher and the gold market has been churning back and forth a bit. The market still isn't sure what to make the of new conflict in the Mideast. Odds are good that the churning will continue
- Sugar seems to be working on finding a base of support.
- Cattle were again weaker.
- Dec cotton may soon find support and present a buying opportunity.
Weather will continue to dictate the tide in the grains. Temperatures in the corn belt look to be more mild after mid-week. We'll see if that comes to pass or not. Tuesday's action could be telling in the corn market as to whether the breakthrough in support can be sustained. If there's no confirmation, then the bulls might regain some enthusiasm. If we linger in the same area or drift lower, then the bears might have enough ammo to start the seasonal slide with a bang. Either way, it's likely to be very choppy and frustrating to trade.
Iowa "feels" incredibly dry...
... but that doesn't mean it
is. Moisture deficit readings may not indicate the same, but parts of Iowa feel very, very dry. The coverage of rain in the Sioux Falls, SD area have been decreased; however, the number of days that have potential for moisture have increased since Friday's trade. If we do see some moisture through the corn belt this week, then the seasonal slide may begin. Should dryness persist and jitters remain high, then we could take out the previous high and go for the next resistance threshold. In any event, this trader believes the following week to be key.
With soybeans having their key period in August, any dryness now may overflow into that key window and buoy the corn along with the beans. It's been said that top pickers get their hand slapped. This is a good one to wait for some degree of confirmation. As we saw last week with dryness one day and a little rain the next day, there is a lot of room for whipsawing volatility. Buyer
and seller beware.
volatility will continue to be the norm
Corn was all over the map this week... probably frustrating as many traders as possible. We hit 284 on Dec corn and the market has since backed off nearly 8c. It looks like the 10-day forecast has gotten a little dryer since the market close on Friday. We'll see how it looks Sunday evening before the trade reopens.
- cattle closed lower Friday. The strength in corn will likely continue to have an inverse relationship with livestock. It'll also be interesting to see how the most recent (7th) case of mad cow in Canada will play out.
- beans may be building some potential energy for their "big mover" month of August. If dryness persists in the grain belt for the balance of July, then we could open August with a bang.
- Sugar may retest lows before setting up a possible buy. I'm watching the October contract.
- Cotton may head churn south a little further before the Dec contract turns into a potential long position.
- weakness in hogs could persist for a while... the number of daily kills in hogs is downright amazing.
August is shaping up to be an absolutely bonkers month for traders. There is an underlying basis of support with the bean market that has held since the beginning of the year. With prices staying where they are despite the much talked about bearish fundamental picture, one has to wonder what else there is to this market. One trader I heard about was touting the "safe bet" of selling $7 call options on beans. Personally, that would require me to step out of my comfort zone as a trader. A market that has been dormant like beans for the past few months is likely to be comparable to a sleeping dragon that will some day awake with a firey vengence.
grain belt gets more dryness
If you check out the 5-minute corn chart for overnight trade Monday night, you'll see a gradual and steady appreciation in price. The market closed just below 280. The extended forecast is calling for extremely hot and dry conditions in the most moisture deficient areas of the corn belt. By this weekend, a lot of predictions are in the triple digits. I'm watching this one closely, because you know that at the first sign of any appreciable moisture, this market will tank, but it also wouldn't take much to "scare" traders over the 296, 298 to 300 levels for the Dec contract. No one knows what will happen but it'll sure be interesting to watch it unfold.
If the gains can be maintained and possibly expand today (Wednesday's trade) then the market may get excited about taking out the previous contract high in the 287 neighborhood. If that were to come to pass then the high 290s and 300 mark may not be far off.
November beans closed in the 640 area (again over night), which many people thought they'd never reach again. The may be something behind this bean market... it has failed to break since early in the year, which doesn't necessarily mean that it won't, but it's interesting that it's held on and is now, in fact, quite strong.
Gold is trading higher this morning. There is a certain feel in the marketplace that the very recent renewal of anxiousness is boosting some of these markets. How many farmers that sell corn off the combine do you think are expecting to get 280 for their deliveries for this year's crop? That's an important question to ask yourself. On the same token, another important question is: "how high is high enough."
whipsawing continues in the grains
The weather market that is currently upon us continues to jerk corn around. Any dry forecast causes premium to be re-factored into the market. If the 10-day forecast looks dry and hot, then we could see December corn back into the high 270s or low 280s... possibly much higher. No one really knows because at this point it's all about mother nature and how much fear she can strike into the hearts of traders.
Any rally in the grain pits should be watched closely when trading livestock. If the market thinks dry then the cattle market may die. We've seen some pretty high levels in feeders lately that just don't have the "feel" of lasting terribly long.
wild evening trade july 4, 2006
The overnight session started off very strong, then fizzled out to close even after getting as low as 265 and change for the December contract of corn. The market is gearing up with expectations of building in some more weather premium, which may in fact occur, but
look out for how quickly that premium will evaporate with moisture to the dry areas of the belt. This is a "second chance" on some put options below the market. The strength in the last couple of trading sessions has made these options more affordable. It all depends on where you see value.
Gold market didn't pay too much attention to the North Korea missle news. It seems like many of the markets already have so much "global terror" premium built in that it takes quite a bit to excite price movement beyond minor premium additions. That's not to say that gold won't make a run for previous highs, but it's overbought and due for a correction to the downside. Any downside correction may provide a nice value buy for call options over 700 in strike.
Beans have seen a lot of movement lately, but with their key window coming up in a few weeks this is likely only the beginning of the show.
Live cattle and feeders seem to be correcting. These markets could flash more sell signals in the coming sessions. Mild temperatures in the midwest for the next few days should limit the craziness in the grain pits, but lookout if the extended forecast turns hot and dry.
markets monday, july 3, 2006
I've read on multiple trading sites that Monday's action could well mean little to nothing in the bigger picture of things. Reason being that trading volume is historically low when you have a day sandwiched between the weekend and a holiday.
- Corn: moisture again missed or had very light coverage in the Iowa area of the grain belt.
- Beans: a solid rally Sunday night that carried forward Friday's bump higher may run into short term resistence, so watch for hesitation or a set back. If weather watchers continue to see spotty moisture, then the bean traders will factor in weather premium--quickly!
- Cotton: bearish numbers didn't seem to break the market on the downside. The December contract may be clammoring for support.
- Gold: Sunday night was able to maintain its gains and add a little more through the night.
Monday may not mean too much in the bigger picture. Be on the lookout, however, if we have a reasonably hot and dry 6-10 day forecast when trade resumes on Wednesday then the grain markets will be itching to move a leg higher. Right now there is a lot of potential energy.
weather market underway
Corn and beans are in the midst of a nice Sunday night rally before the holiday on Tuesday. Threats of dryness persisting in the midwest caused about 5c to be factored back into each market at the open. These are good markets to watch for a quick factoring in and out of weather premium. If a 6-10 day forecast comes up a little dry, look for a quick spike--on the flipside, a wet forecast would cause a large bit of that premium to be factored out... just as long as we get though pollination without too much crop stress.
Other interesting markets right now:
- The daily and weekly feeder cattle charts show a market that is potentially overextended. The reopening of some key export markets might justify the strength, but I'm looking for another opportunity for a put strategy below the market.
- Weekly live cattle charts have had a steep ascent recently. There may also be an opportunity for a put strategy here.
- Lean hogs have had some recent strength. The weekly charts are key to watch in all three of these livestock/meat markets.
- Sugar may soon be poised as a value buy. A breakout to the upside would renew some strenth and there is plenty of room on the upside for a challenge of resistence.
- As always, the current weather market makes corns, beans, and wheat nice markets to enter and exit with limit and stop order strategies. Corn bulls are just itching to get back into the 270s and, possibly, 280s (dec contract)... who knows if they can get there.
This year should be interesting to watch (even if, at times, from the sidelines). With the new demand picture for corn, the market's action this year may provide a roadmap for future trading--but perhaps the 06/07 year will be more telling in that department.
Gold has recovered fairly quickly in recent trading sessions. The August contract is trading around $620/oz tonight and it's very thin trading (lower volume) compared to what it has seen in recent months. If trading volume picks up because of this recover, then the market has a chance of making a run at previous highs. It feels a little overextended on its most recent push higher.
midwest moisture independence weekend
The midwest has gotten spotty rains the weekend before the 4th... so far. This post is being written early Sunday and things could definitely change before the markets open tonight, but the radar looked "busy" last night and nothing really happened in most areas. It'll be interesting to see how the market factors the rain totals in. The market is building a base right now that plenty believe will not hold because growing conditions have been fantastic thus far, but my bias is that it'll only take two or three 6-10 day forecasts with hot, dry conditions to make this market retrace to levels not seen for a few weeks.
The rains during the week ending June 22 are said to have cushioned the corn crop condition ratings. If these ratings begin to decline then we may very well see some of the weather premium factored back into the market (possibly quickly).
