Those of you who follow the grains ( have there been a lot of markets to follow these days or what?) know by now the issues surrounding soymeal, which has been pulling the entirety of the grain floor higher, in spite of the fact that we are on our way to bringing in record harvests.
The sheer ferocity of this recent rally - ( I do not even like to use the word, 'rally' when dealing with this because this is not a rally - it is an event almost akin to what some refer to as a Black Swan - it came out of nowhere catching an awful lot of people completely by surprise) - and its SPEED has been breathtaking.
Notice that the meal market has now put on, in one month's time, what it took four months to lose! And folks wonder why some of us old time traders either have no hair or have it all turning grey!
A couple of things - there is no concrete sign as of yet that this thing is ready to move lower. It did however put us on notice that a $105/ton rally in 4 week's time might be asking too much. It seems as if there are some willing sellers up above $400.
Traders began to see that last evening and perked up somewhat with today's export numbers the assigned culprit for some profit taking. I cannot tell at this point whether or not we have had some decent farmer selling of new crop beans today and this selling is related to hedge pressure or if this is just a round of profit-taking by the funds.
I do know that a boatload of shorts were swamped, sunk, obliterated, shot through, stabbed, mugged, dismembered, chain-sawed, buried alive, and just about any other Halloween-like actions one can use to describe what is a horror show that acts as if it was choreographed just in time for Halloween tomorrow.
This is a short squeeze the likes of which one witnesses every now and then in our commodity futures markets and which leave indelible impressions upon either those who were fortunate enough to survive them and those who were less fortunate and had their dream of becoming a commodity trader meet an untimely end. I have no doubt that many traders were ruined this month and some commercial firms took some severe body blows as a result.
In looking over the ADX, the Directional Movement Indicators are showing some signs of upward fatigue. Notice in the bottom panel that the +DMI ( Positive Directional Movement Indicator) turned lower and crossed below the rising ADX line. That is a warning sign.
Again, this is not a sign that a top is in but it does put the bulls on notice that the easy money might be coming to an end. Two-sided trade might be the new order. We'll see.
The RSI, in the second panel, hit the severely overbought level near 80. I am usually not a big fan of "overbought" or "oversold" levels because markets that reach those heights or depths reach them for a reason; however, the fact that this is doing so, when the situation in regards to the meal is a temporary one, has me taking notice.
The move lower today took the reading below the overbought zone, but just barely. One could make the case that with the overbought reading corrected, this market could simply remain near current levels for some time now and undergo a correction in time and not much in price. Again, that is unclear.
Lastly, a look at the same chart this time including the Bollinger Bands. Notice that price has been well ABOVE the upper line of the band for the entirety of this week. That is not something that happens very often. The interesting thing to note about this, that a normal "correction" could be expected to take such a market down to the middle line of the bands which is sitting near $336. That is some $54 below the settlement price of today! Tell me that this market has not gone bonkers! WOW... is that enough volatility for you?
There is no telling what we are going to get Friday so hang onto your hats. This has become one EXTREMELY DANGEROUS and UNSTABLE MARKET.
Lastly, the moo-moos did it again! What did they do? They set yet another all time high.
Take a look-see:
Take a bow October Cattle - you go off the Board tomorrow as one in the record books! I doubt I will ever see your likes again old friend! My oh my - what a move in the cattle -
The overall US economy may not be that strong but the boys in cattle country are living like kings for the moment. Hey, they deserve their day in the sun however as many of them were hit very hard back a couple of years back when back to back drought years across cattle country, first in the Southern Plains, and then in some places across the Midwest, forced many of them to liquidate their herds incurring serious losses. The combination of scorched pastures and high priced corn was simply too much. Those who survived are now enjoying the feast years but a reminder might be in order - the seven skinny cows in Joseph's dream recorded in the book of Genesis devoured the seven fat cows! Nothing ever lasts, especially in the livestock business.
"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
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