"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Monday, June 9, 2014

Gold Comatose; Corn Sinks on China news

Watching gold trade today was worse than watching paint dry. At least the latter provides some satisfaction when the painter steps back and surveys his handiwork. The former, however, is stuck in no-man's land.

It looks to me like it is drawing some support from the ECB's action last week but that is about all that I can see at the moment.

The mining shares are stuck going nowhere as well.

India appears to be doing some buying as the price falls which is not unexpected. The key for the metal will be how eager Western based investors are eager to acquire the metal.

Other than that, it is a waste of time.

The grain market however had some news this morning that rattled corn bulls - it appears that China found some unapproved little gene critter, namely MIR162 in a shipment of DDGs. That is a big "No-NO' for the Chinese so they wasted no time in ordering no more import licenses for US-origin DDG's. I am a bit unclear on this second part but it appears that they are going to require some companies there to ship the recently unloaded batches back to the US. Corn took that news quite hard and surrendered a good portion of last Friday's short covering rally.

One will have to see if any of this impacts meal since DDG's compete with that on the feed side.

So far the weather for this year's bean and corn crop looks very benign. There is  plenty of rain and no major heat in sight at the moment. This afternoon we received the weekly crop conditions update from the USDA. Those of us who have traded grains for a long time refer to these weekly reports as the ones that the guy in the pickup truck calls or emails back in to the office while sitting on the side of the road in farm country after looking out of his window to see the rows along the road.

That being said, 3/4 or 75% of the corn crop is in Excellent/Good condition compared to 63% last year at this time. On the soybean front, this week is the first week of the conditions ratings for this year's crop and it came in very strong - 73% is rated Excellent/Good. The USDA did not give us a conditions rating report last year on the beans but suffice it to say for now, the crop looks very good.

The only thing that some guys may want to try to get some mileage on in the corn is the fact that the rating dropped 1% from its Excellent/Good rating last week. Most were expecting some mild improvement because of the abundant rainfall. However, when you have 3/4 of the crop with those ratings, it is hard to find anything that would considered negative for the crop right now.

Iowa and Illinois are the two biggies for corn ( not to slight Indiana, Nebraska, Ohio, Minnesota, etc) so it might be worth mentioning that there was a tad of deterioration in the Iowa corn crop that came out of the "fair" category into the "poor" and "very poor" categories.

Last week's "Fair" rating was 17%. This week it dropped to 15%. One percent went into the "poor" category bumping that up from last week's 1% to 2%. The other remaining one percent went into the "Very Poor" rating which was at 0% last week and now stands at 1%.

However, the "Excellent" category jumped this week to 18% from last week's 17%. That improvement came out of the "Good" category which gave up 1% to 64% after registering a 65% last week.

I am not sure how traders will react to that.

Illinois however was a different story. The "Excellent" category saw a FOUR POINT increase to 21% from last week's 17%.  Corn rated "Good" there was unchanged but it was in the "Fair" category that the four percent came out of to increase the Excellent rating. Last week it stood at 27% rated "Fair". This week that fell to 23% with those 4% points moving to Excellent.

By the way, the Indiana crop registered a 2% jump in the Excellent category with all of that coming out of the "Fair" category.

Corn is 92% planted compared to last week's 80% and last year's 83%. The five year average stands at 90%.

Planting is running a bit behind in Michigan, Minnesota. Wisconsin and North Dakota. My understanding is that it had been a bit cooler and wetter than normal up in along the northern tier. They are all well ahead of last year's slow pace however even though they are behind the 5 year average. 

All in all, I cannot really find anything to be negative on based on this week's ratings but who knows what these people will do at times?

Soybeans are now 87% planted compared to last week's 78% and last year's 69%. The five year average is 81% for this time of year. Beans are well ahead of last year and the 5 year average.

The percentage of beans that have emerged is 71%. That compares to 50% last week and only 46% last year. The five year average is 62%.

If the weather cooperates that bodes well for a good crop.

China news seemed to buoy beans somewhat in the session as news came out from USDA that they had booked a 117,000 ton purchase of beans for the 2014-2015 marketing year. Traders were busy bidding new crop beans up as a result. Get used to this market getting tugged back and forth between those who have a bullish demand side view and those who have a bearish supply side view. Further complicating trading in the beans is that persistent tight carryover which keeps the bulls coming back for more. This week's USDA report will once again be closely scrutinized for further evidence of tightening old crop supplies. The closer we get to the delivery period for that July contract, the more goofy things might get in there.

A quick note on the US Dollar - it moved higher today as the Euro seemed to trade more in line with the behavior that one might expect from a currency whose monetary overlords have made clear that they view any strength in it as unwanted and unwelcome. It still remains above support near the 1.35 level so the bottom is still intact. The Dollar flirted with the bottom end of its overhead resistance level near 80.70-80.80 today but could not extend past it once again. It sure is trying to do so. The Yen however is not cooperating as it has gone essentially nowhere the last 5 trading sessions.

The S&P 500 scored yet another all time high today as did the Dow which is now knocking on 17,000. What has my interest however is the Russell 2000 which is really looking like it wants to make another run at the 1200 level. Watch this key index closely - if it takes that level out, stocks are going to all head higher. and that is probably going to make gold's going even tougher.


  1. GDX was hammered hard at the bell.

    It's been rising in a bearish consolidation.

    50/50 chance it breaks down from here and goes into another "Terrifying Collapse" bringing on an "Financial Earthquake" for the mining industry, creating a "Path to Destruction" in the net worths of various mining executives.

    Ultimately resulting in "Enormous Chaos" at jsmineset and KWN, now struggling for survival.

    Meanwhile, its upward and onward for the TBTF banks like Wells Fargo, which printed world record, lifetime, all-time highs today.

    1. Mark,

      Glad I sold MNKD at $4 like you said I should....

  2. So Mark, palladium from $200-800 from '09-11 and you are bullish? Sure, we all know prices are made at the margin, but come on? Anything really going on in the car and truck business? No, I did not think so. But, maybe this is palladium again in 2000, or Minneapolis Wheat and Crude Oil in '08, so who knows, right? Pretty sad state of affairs that fundamentals have been rendered meaningless.

    1. Steve, just look at the auto stocks: F, GM, LAD, AN, etc.

      All are making new highs, confirming the insatiable demand by the U.S. Consumer for new automobiles.

      Palladium's strength also underpinned by Art Hill's analysis of the Base Metals ETF, which is showing signs of strength and on the verge of breaking out.

    2. Mark, do you know how much either platinum or palladium goes into car/truck catalytic converters? Trust me, even the donkeys running Chrysler and GM are not gonna get caught short here on this issue. Secondly, from where I stand, there is nothing other than business as usual as far as new sales goes, certainly not insatiable by any means. Maybe I am wrong.

      As far as I read, there was a launch of 2 Pd-ETFs, both in SAR.
      One of it by a bank who was very successful recently in accumulating capital with a Pt-ETF.

      For me it ist the same game we saw at the turn of the millenium (about...) when the authorities discussed the paperwork of the Ag-ETFs and meanwhile everyone could buy who believed in releasing of the ETFs legal design.

      For me it is no coincidence, that SAR mineworkers are on strike at this time. If the bosses of the unions meet investors who had known about the launch of the ETFs, it is a win-win game.
      Even for party #3 the mines (longterm margins), and party #4 the banks (turnover).
      regards, alex

  3. Silver is looking kinda heavy to me above 19.00 right now. What won't go up will go down or something like that. What say the brain trust?

    1. Silver support inf weekly bollinger band near real silver lows area 18-18.35 but no strength, not able to close above the 2day timeunit ma20 which is pushing prices down. Careful as long as 18-18.35 area holds if you are bear imho.

      SP500 : I hope we'll see a new high today but the series of consecutive highs is already quite impressive. If we do, I'll for sure reinforce my smallest short position and wait quietly for lower prices pretty soon. Question is : how much lower? If it's a mere 20 points, I won't be very happy :)

    2. P.S : my next 20% buy back on copper is near 297 now.

  4. I was wondering whether anyone had any thoughts about the relative strength of gold versus silver here?

    As I've said previously I am trying to build a long term physical position in gold. I've bought my first chunk and am currently fighting the urge to add more with gold at the $1250-ish level. My gut is telling me that there's a very good chance (75%?) gold will get down to the $1190-ish level, and a reasonable chance (35%?) it might make it to <$1100. (I have also not ruled out that it could still get to $1000, or less, but feel that's a <20% outcome? But I am also fearful that the price could go up before I finish accumulating! I.... MUST..... RE. SIST!!!

    Anyway, from the current level ($1252) these drops are 5%, 12% and 20%, which is quite a lot of downside risk.

    When I look at silver it feels to me that the downside could be more limited? Whilst gold still seems to be testing and breaking down through various support levels silver currently seems more reluctant to set new lows. It really doesn't seem to want to stay much below $19. If you overlay the above % drops on silver it gives targets of $18, $16.65 and $15.14. Whilst I think it's very possible that silver gets to $18 (60%? chance), I think it's far less likely it will actually get below $17 (25%?). The gold:silver ratio is currently at 66 and also supports this feeling - i.e. I suspect that the GS ratio will settle back nearer 60, which suggests a 10% outperformance on silver relative to gold. The industrial demand for silver currently seems to be stable and growing and given how much closer silver is to cost of production than gold the fundamentals seem stronger here too. From what I read the COT positions here are also more bullish?

    Does this feel right to anyone else? The reason I ask is that if I believe there is less downside risk in silver than gold and I may be able to feed my need to carry on steadily adding to my physical positions (which I wish to complete by the start of August) by accumulating silver at these levels lol! (And switch to gold at a later stage). All thoughts appreciated!

  5. you folks have to give it up. The gold trade is dead, dead , dead....there are plenty of other markets that traders need to focus on. There shouldn't be one more paragraph or comment about gold, Get over it, and move on !

  6. Copper fell for a fifth session in New York, the longest slump in more than three months, as demand concerns mounted amid slumping imports of the metal into China, the world’s biggest user.
    Bullion Tips

  7. I'm loving the sentiment in Gold and Silver here, this is where bottoms are formed. If most anything else doesn't start crashing soon get ready for a big move in Gold and Silver. Keep the negativity coming wasn't it Rothschild who said buy when there's blood in the streets.

  8. The main thing on my mind these days is whether to add some REITs via VNQ. And what to sell to make room for it.

  9. Mark, you are the winner and I am the loser; the world ran out of platinum and palladium today.

  10. Mark, Grandpa Russell has apparently lost all focus on Dow Theory, as all he now does is give history lessons; sorry Richard, but I think I have read and lived a little bit more than you, but hey, whatever

  11. ( For whatever it is worth ) the Elliott Wave Theory guys from Jawjah are calling for a nice bounce in Silver on an intermediate term basis; In any case, I have been averaging into HL (Silver/Gold), FSM (Silver/Gold) for last few weeks. ( Only gamblers, lucky folk and liars can actually pick the bottoms and I have failed miserabley). May be time to start buying some SLV too ?

    They claim that " Large Specs have been NET short for the first time in 11 years". ( I do not track this stuff so I cannot vouch.)

    I do like the stickiness of Ag on the downslide and I bought a few US Silver Eagles yesterday from JMBullion.com at slightly over $2.50 over spot;
    any time I can buy these for less than the price of a Lobster Entree at Red Lobster it is a deal.

    Re: Gold; the buying for the ( Hindu) marriage season is going to begin in India but that is going to be offset by the lower demand from farmers since the monsoon is now two weeks late and there are risks of lower crop yields resulting in lower discretionary cash to spend on Gold ( Silver may benefot though)


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