Today's USDA report generated a negative reaction in the beans, and especially in the meal, when the dust finally settled at the close of pit session trading. The report showed a slight increase in yield but that was fully priced into the market.
Essentially, the way I am reading the reaction to this report, is that it did not contain enough of a bullish surprise to justify beans levitating up at current levels. After all, we have seen them put on more than $1.50/bushel over the last few weeks. With a run like that, it would have taken a strong bullish surprise to generate much in the way of determined buying up at these levels. The beans did not get that in the report and it looks as if their inability to extend the bump higher after the first few seconds of the report, started some profit taking from some of those heavy speculative longs.
I do not want to count them out too soon however as those who have been buying them are looking more at demand issues rather than supply issues. they have been able to use a recent torrid export pace by China, coupled with logistical issues in the eastern portion of the belt, to obliterate a great deal of the shorts, not to mention pushing even harder on their profitable longs.
However, in watching the chart performance of the January meal, we may have, and I am not convinced just yet, seen a top in this complex. The meal led it up and the meal will lead it down, if indeed it is going to do so.
I am not focusing so much on the December meal because that particular month might still be impacted by the transportation bottlenecks and has seen some very wild buying and selling as it swings back and forth. However, most in the trade expect whatever remains of those issues to be cleared up sometime before the end of the year, and maybe by the end of this month. Thus we are looking past the December meal and focusing on the January meal.
That month missed a textbook outside reversal day lower by 10 cents today. The strict definition of such an occurrence is when a market that has been in an uptrend, makes a new high, exceeding that of the previous day, and then proceeds to move steadily lower throughout the session scoring a low EXCEEDING the previous day's low. Ideally it also CLOSES below that same previous day's low.
Look at the chart and you can see that the January meal exceeded the high from Friday, then moved lower throughout the session, taking out Friday's low in the process and then closing at $364.70 compared to Friday's low of $364.6.
So it did not quite make that close below the previous day's low. Yet the range it established was well outside of Friday and it occurred on extremely heavy volume.
I am also noting that the market ran up to the near the 75% Fibonacci retracement level where it failed. Also, today's high failed to reach the $384 level essentially establishing the potential for a double top with a weak right side.
All this gooblygook might not mean anything much to some but for those of us who study the charts, it does look like a serious chink in the armor of the meal bulls has been inflicted. Yet, as treacherous as this market has been of late, I am not getting too dogmatic about it just yet.
We'll have to watch subsequent price action and see what we get and then perhaps we can get some confirmation, one way or the other.
A quick note on gold.... the violent short covering rally of Friday reversed rather quickly today as soaring equities and sinking commodities, along with a resurgence in the Dollar, brought a large amount of selling back into the metal. Mining shares gave back nearly every single bit of the gains made that day as well.
We'll probably range for a while unless we get a stronger signal from another outside market to work with. Bears will try to take it back down to $1130, while bulls must get the price above $1180 to have a shot at doing something more than a one day wonder.
Dan, as we have often said, it can be hazardous to your health to try and fade the front month beans. We both know the transportation issue is way overblown but the algos are in charge. Charts do not look half bad but fundamentals are hugely bearish. I fade the March.
ReplyDeleteThe Lies and Distortions continue
ReplyDeleteA lot can be learned from observing how simple fallacies become fossilized into pseudo-facts, and then used as the bedrock foundation for further untruths, which stackmone upon another until the whole ludicrous edifice teeters and crashes to the ground
Such is the case with Craig Roberts' recent nonsense, which Dan has totally eviscerated but which refuses to lie down and, like bunny-boiler Glen close in Fatal Attraction, keeps coming back at you long after it should be dead
Take thevevolution of one simple misstatement of fact, which can be easily proven wrong
1. A few months a piece of erudite research was being circulated apparently "proving" that, over a period of years, Gold prices regularly rose in "overnight" Asian trading, only to be systematically and repeatedly suppressed around the time of the London Fix. The analysis appeared to show that a trading strategy based on going Long at Londons close and Short when London opened the next day would produce consistently superior returns to the counter-trade alternative http://www.bloomberg.com/news/2014-02-28/gold-fix-study-shows-signs-of-decade-of-bank-manipulation.html
So, upwards during Asian hours, smashed down every day once the Queen was awake and able to give her secret Masonic instructions to the Rothschilds
2. Unfortunately, that analysis turned out to be flawed and didn't catch on, so adopting a different tack, Craig Roberts started to assert that these smackdowns were occuring when the Asian physical markets were closed. This - as I pointed out yesterday - is also untrue, because not only do Singapore and Shanghai have afternoon sessions which are in full swing at 2pm, Dubai is also open for business at that time, and there is a significant amount of activity going on in the Gulf right now: anyone who has lived and worked in Dubai will know that a lot of this volume originates from Iran, which has been receiving Gold for Oil from, for instance, Turkey and India http://en.m.wikipedia.org/wiki/Dubai_Gold_%26_Commodities_Exchange
3. So, the allegation then morphed into the suggestion that Japan and China were "at lunch" when the trades took place at 3pm and 2pm respectively. All of them. And maybe the Singaporeans were all taking a nap, and the Arabs all outside smoking in the car park at 10 am? (5th paragraph http://www.globalresearch.ca/the-silver-market-in-crisis/5413121 )
4. OK, so that doesn't work, so lets stretch reality a little further and hopenobody notices. We now find from Goldcore that these trades in fact occur in The Twilight Zone "after trading in Asia has finished and Europe is not yet open for business."
Ladies & Gentlemen, it is my unfortunate duty to tell you that such a time does not exist - even ignoring Dubai, the Shanghai Gold Exchange afternoon session ends at 3.30pm (page 27 of the official SGE handbook) and the Shanghai Futures Exchange even later ( http://www.shfe.com.cn/en/AnnouncementandNews/SHFENews/911318955.html ) which corresponds to 8.30am in Eurooe, 7.30am in London and 10.30 am in Moscow, at which time European markets are very much open for business
These are FACTS which can be checked: and these are LIES, which can safely be ignored ~ http://www.zerohedge.com/news/2014-11-10/banks-rig-gold-and-silver-prices-never
OB
DeleteA while back we had a couple people on who lived in Singapore. The gal who seems to be in a business related to yours also took issue with the overnight while everyone is sleeping meme.
IMHO is pandering to the fears of a parochial USS centric market segment.
Hi Mike
ReplyDeleteBelfast is cold, dark, bleak and rainy; I envy anyone living in Singapore. The problem here is that, from October to May, the sun is a distant memory and life devolves into a quest to see how many layers of thermal undergarments you can cram under a wateroroof macintosh