"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


Monday, May 12, 2014

Good Week for Corn, Bean Planting

The weekly USDA Crop Progress reports were issued this afternoon and they showed a big jump (expected by the way ) in both corn and bean planting. The US Corn crop is now 59% planted compared to 26% a year. It has ahead of the 5 year average of 58%. That is a huge jump from last week's 29% planted. 

I keep telling you how advancements in farm equipment have enabled today's US farmer ( the best in the world anywhere) to get their crop into the ground with incredible speed. Some of these guys are always ready to jam prices north as soon as they see the least bit of delay in planting but too many of them are stuck in the past.

Corn is 18% emerged compared to only 5% a year ago and the 5 year average of 25%. The crop is a bit behind but more seasonal temps should kick it higher.

Beans are now 20% planted compared to 5% a year ago and the five year average of 21%. A week ago only 5% of expected bean planting had been accomplished. Bean planting is essentially right on time and target.

Both numbers should provide some pressure to their respective pits but the price action during open outcry trading today took this into account to a large extent already. We will have to see if we get some additional downside in the Asian trade or if the numbers will provide only a bit of profit taking by bears.

Winter wheat showed 42% of the crop rated Very Poor to Poor, compared to 38% last week. That hot, dry weather took its toll on the crop. Traders expected to see this deterioration however with the thinking today being that the widespread rains over the weekend will keep the deterioration from worsening. Depending on the weather from this point out, we might have seen the worst of the winter wheat crop ratings.

It is 44% headed compared to last year's 28% reading and is just slightly behind the 5 year average of 46%. We might see wheat pop a bit higher in Asian trade off of these numbers. We'll have to see.

Gold Chart

A quick update for those interested in observing the price chart... the metal bounced from support near $1280 on continued Ukranian unrest. That continues to reinforce the significance of the level. If it goes ( on a closing basis ) watch for a significant round of speculative long side liquidation.

One thing I am noticing is the series of LOWER HIGHS being made in this market. Each time it manages a pop from Ukraine events, the high is made at a lower level. That tells me that the events there are losing significance in the mind of many traders and that it is going to take a much more severe flare up in tensions to enable the bulls to push past chart resistance levels. The region near $1320 should hold any bounce to keep the picture bearish. A push through that level, particularly if it can breach $1330 or so, would spook a lot more bears. If not, they will use the rallies to sell.

I am watching to see if gold can manage to sustain any sort of closing price above the $1300 level.

The HUI is stronger today holding above support between 218-215 but remains well off any resistance levels.

It's Yo-Yo Time

Up and Down; Back and Forth; Where she stops, nobody knows. That pretty much sums up trading in the precious metals. Both silver and gold continue range trading with the metals bouncing off of their respective support zones but unable to break free to the upside. For silver that support is near the $19 level and for gold it is our old friend, $1280. The result is a stalemate between bulls and bears.

Bulls are holding the metals where they need to hold them to prevent a strong sell signal and the start of a fresh leg lower but they are unable to kick the price out of the range either. The result is a big, giant, "Yawn" for most traders except for those who are quick on the draw and want to trade the range. Those who do should use a one hour chart combined with a 4 hour.

Gold initially was sold down sharply as there was not much, if any, violence associated with the vote over the weekend. Traders' first inclination was to dump the metal. However, the results, overwhelmingly in favor of separating, sparked a united condemnation by European foreign ministers. One of them, the Swedish Foreign Minister, Carl Bildt, dubbed them, fake figures from a fake referendum". He was echoed by his German counterpart who graced the vote by saying that, "it cannot be taken seriously".

Well, someone took it seriously there because the talk rapidly shifted into how to ratchet up the sanctions and how to go after those Crimean-based companies who might stand to benefit from a Moscow-annexation of the area in question.

With that, back up went the gold price as shorts once again ran for cover. This will more than likely continue to be the pattern at least until we get to the big presidential vote in Ukraine, which is now less than two weeks away. As I have stated many times now - as long as tensions continue to simmer over there, gold will garner buying support. Depending on how this issue is finally resolved, once those tensions are removed, gold is more than likely headed lower especially if US economic data improves. We just have to wait and see and react accordingly.

In the meantime, this is a trader's market. Do not form any long term opinions based off these day to day gyrations being induced by the ebb and flow of geopolitical events. One never knows how events will play out. Again, and this is a strong bit of advice - do not take too large of a position, either long or short unless you have some sort of masochistic streak and enjoy pain. Stay flexible and nimble or stay out altogether until the situation is resolved. There are lots of better markets to trade right now.

Shifting therefore to something more interesting, the grains are getting hammered today. It started last night as follow through from last Friday's bearish USDA reports ( for new crop - old crop bean report was considered bullish) continued. Aiding the negative sentiment was rather widespread rains through some key growing regions in the Plains. That brought about strong selling pressure in wheat, which has been supported by hot and dry weather injuring the crop. The rains are a welcome relief and traders are thus taking some of the risk premium out as they look for some improvement in the crop's prospects.

This afternoon we will get the planting progress numbers and traders will get another look at how things stand in relation to last year and to the 5 year averages.

The Dow scored yet another all time high today while the S&P 500 is approaching its all-time high today as equity traders are pretty much dismissing Ukraine as having any impact whatsoever on anything OUTSIDE of the immediate region. Only if events were to take some sort of serious turn for the worse, would we see stocks impacted by that situation. For now, stock traders are of the view that it will be a non-factor in most global equity markets as it is now firmly viewed as purely a regional matter. The consensus for now is that the economy continues to slowly improve.

Copper moved higher today after comments out of China that authorities there are committed to reforming its money market. Traders took those remarks as signs that the leadership remains desirous of economic growth and with that, PRESTO, gone were last week's losses. This is just more evidence of how the conflicting cross currents in many markets are whipsawing hedge fund computers back and forth. "If you snooze, you lose" is an apt adage to describe certain markets right now. Again, be careful with large positions or be prepared to get skinned. Hedge funds are losing money left and right in the commodity markets - don't follow suit.

WTI crude is hanging around the $100 mark.  The Dollar is a tad weaker and the yield on the Ten Year is up a bit to 2.65%.

More later...