r e l a t i v e // strength

gold and grains 9/28

Gold had a possibly significant break out from a trading range by following through in the 606+ area for the Dec contract. In the overnight, gold surpassed 610, but has since subsided. If the momentum on the upside does not result in a push higher than where we are now, there could be slippage back to the 600 level and a plunge to challenge 580, 576, and 560 could be upon us. It all seems to depend on the swiftness of the decline. A slow drift might perpetuate the relatively meaningless movement we've seen recently - without any significant motivators for rallies or declines besides the technical heard.

Watching 606, 600, 580, 576, and 560. Low targets are conceivable but absolutely not a given.

The grains were weaker in trade Wednesday. Overnight they were a little stronger, but only gave back a portion of the gains from Wednesday. Seasonaility points to the potential for a slide to begin very soon. This may be more true for beans than corn. Everyone and their brother is clammoring about demand for corn and the ethanol craze etc. With beans, we seem to have an abundance and the question mark that remains is how South America will react acreage-wise to our price levels. Don't forget the rediculous state of their economy with interest rates through the roof.

If corn can continue with earlier strength to get through the 260 area basis Dec then we could see follow-through into the mid to high 260s. If, however, the current failure (down 5c on Wednesday) is perpetuated by declines into the 248-252 range then we could see a challenge to the 240 area. Despite what the demand bulls will tell you, even that 233.50 contract low would be within striking distance. If yields are relatively strong going forward, then the premium that was quickly factored into this market will be removed even more swiftly.

Sugar may have bottomed for the shorter term, with some strength returning in the last couple of trading days. Longer-term this thing could easily reach down into the 8-9c area.

Cattle is a difficult mix right now. The expected bearish report from Friday 9/22 hit the market with expectations having already been factored in. More analysis on this market is required to make an intermediate term call.

posted by jared @ 6:13 AM