USDA gave us the regular weekly update on the conditions of the crops during this year's growing season this afternoon.
Here are the breakdowns:
THIS WEEK LAST WEEK
Good Excellent Good Excellent
Corn 59 17 60 15
Soybeans 60 13 62 12
Compared to last year, the corn crop is 76% Good-Excellent compared to 75% last week and 64% last year. The crop is 97% emerged compared to 92% last week and 91% last year. The five year average is 96%.
In the big TWO ( Iowa and Illinois) the corn crop improved in the state index reading where 100 is regarded as normal. Illinois stands at 109 compared to 108 last week and 106 last year while Iowa came in at 110 compared to 109 last week and 110 last year.
Soybeans are rated 73% Good-Excellent compared to 74% last week and 64% for the same week last year. The emergence rate stands at 83% emerged compared to 63% last year and the five year average of 77%.
At the state index level, Illinois dropped to 106 from 108 last week which is still above last year's reading of 102. Iowa saw conditions drop to 108 from 109 but well above last year's poor reading of 95.
The slight drop in soybean ratings is due to excessive rains in some areas of the states. Generally speaking the low lying areas or the ones with heavier soils tend to show declines when excessive rainfall results in those areas "ponding". The widespread rains however mostly remain very welcome among the majority of growers.
All in all the corn and bean crops remain off to a good start especially compared to last year. Warmer weather and abundant moisture are the ingredients to produce big crops. With all this rainfall some areas have been receiving, a bit of heat would actually greatly benefit the crop. One would be surprised at how fast these crops can grow when conditions are right!
We'll see how the markets respond to the index ratings in Asian trade this evening. I tend to put very little faith in what Asian price action does as it is too thin and leaves the grains open to "game playing" by large speculators. Those of you long time grain traders know exactly what I mean.
The big test will be the opening of the pit session tomorrow ( Tuesday) and how they trade throughout the session.
Monday, June 16, 2014
Markets Pausing to Evaluate Developments in Iraq
Weekend news out of Iraq added a fresh twist to that already volatile situation. Reports indicate that Iran is getting involved as one of its spiritual leaders issued a call to fellow Shias that it was their duty to fight against the Sunni terrorists.
That seemed to get enough people involved that the ISIS jaunt down the nation was halted for the time being.
The Kurds moved into areas in the north so for now, the situation, while far from being resolved, is at least not as serious as it seemed late last week. Do not mistake what I am saying here - no one believes that there is "stability" in the region but on a relative scale, things today seem to be a bit less "horrific" may be perhaps a better way of putting it.
Whatever - the point being that the Crude oil market, which was poised last week to shoot vertical with the trading community terrified that there was going to be an imminent downfall of Baghdad and all manner of crude oil supply disruptions, seems a bit more sanguine about the events this morning.
I have been tracking both the crude oil market and the gold market in conjunction with one another to try gauging the "fear" factor a bit better.
Take a look at the HOURLY chart of Crude oil compared to the Gold price. When the ISIS offensive began garnering headlines Crude oil began rising and gold right along with it. That pattern has been continuing since the events first came onto traders' radar screens. Now that crude is weakening a tad, gold is also having trouble maintaining its upward momentum as well. The two seem to be trading in fairly close lockstep with each other.
Overnight in Asian trade gold bulls were able to reach the buy stops just above the $1280 level in gold and they set those off but once that buying was finished, the bids seemed to fade, along with crude oil weakness, and gold fell back below $1280.
Bulls need to keep prices at a level above $1280 to generate enough upward momentum to keep setting off each layer of buy stops as well as attracting fresh geopolitically driven buying.
The weakness in the mining shares is also feeding into the lack of aggressive buying over at the Comex at this point in the session.
Grains are all weaker today as heavy rains fell over the weekend in key growing areas. New crop corn is trying to hold near $4.40 but still looks heavy. July beans are leading the downside move in beans as bull spreads continue to come off.
More later...
That seemed to get enough people involved that the ISIS jaunt down the nation was halted for the time being.
The Kurds moved into areas in the north so for now, the situation, while far from being resolved, is at least not as serious as it seemed late last week. Do not mistake what I am saying here - no one believes that there is "stability" in the region but on a relative scale, things today seem to be a bit less "horrific" may be perhaps a better way of putting it.
Whatever - the point being that the Crude oil market, which was poised last week to shoot vertical with the trading community terrified that there was going to be an imminent downfall of Baghdad and all manner of crude oil supply disruptions, seems a bit more sanguine about the events this morning.
I have been tracking both the crude oil market and the gold market in conjunction with one another to try gauging the "fear" factor a bit better.
Take a look at the HOURLY chart of Crude oil compared to the Gold price. When the ISIS offensive began garnering headlines Crude oil began rising and gold right along with it. That pattern has been continuing since the events first came onto traders' radar screens. Now that crude is weakening a tad, gold is also having trouble maintaining its upward momentum as well. The two seem to be trading in fairly close lockstep with each other.
Overnight in Asian trade gold bulls were able to reach the buy stops just above the $1280 level in gold and they set those off but once that buying was finished, the bids seemed to fade, along with crude oil weakness, and gold fell back below $1280.
Bulls need to keep prices at a level above $1280 to generate enough upward momentum to keep setting off each layer of buy stops as well as attracting fresh geopolitically driven buying.
The weakness in the mining shares is also feeding into the lack of aggressive buying over at the Comex at this point in the session.
Grains are all weaker today as heavy rains fell over the weekend in key growing areas. New crop corn is trying to hold near $4.40 but still looks heavy. July beans are leading the downside move in beans as bull spreads continue to come off.
More later...
Saturday, June 14, 2014
Hedge Funds Routed by Large Reportables in Copper
I have to admit, I am always fascinated by the Copper market. As I have said many times here, I watch it and crude oil as my two key indicators for judging the strength or better - perceived strength or lack thereof in the global economy.
Not too long ago I began posting charts of the Commitment of Traders positioning in the red metal because I had noticed what was a rather unusual occurrence. The two groups of large speculators, which dominate the markets, were at odds on which direction the metal was heading. It is not unusual to see these two groups have a somewhat different positioning in a market. What was different however was the fact that their bets as to which direction copper was headed were nearly identical but on opposite sides of the market.
I remarked at the time that one of these groups was going to be a big winner and the other a big loser. I am happy to report ( can you tell what my attitude is towards hedge funds? ) that the Large Reportables made mince meat out of the Hedgie boys.
Here is the latest COT chart showing the rout of the hedge funds. You can see their bet on rising prices backfired big time. Out they have come as long liquidation from this group has kicked in as the price has continued to move lower. Look at the sharp fall in the net long positioning of the hedge funds! It has been cut by nearly 75% in just two weeks!
The Large Reportables have been booking profits into their selling as they cover profitable shorts.
Here is the chart of the actual metal itself. Observe the sharp retreat in price as hedge funds bailed out.
Copper has managed to hold into the first level of support shown on the chart. That extends down to just above the $3.00 mark. If the bears, who are currently in control of this market, are able to take the price down through this level, they have the increasingly probability of kicking off a trending move lower. That would portend a rather ominous slowing of the global economy. With the mixed data that we keep getting, whether it be here domestically or globally, I would think that the odds favor more of a holding pattern here in Copper rather than a trending move but I am open to either possibility. The chart pattern and price action will tell us which scenario to expect.
It is entirely possible that we see Copper heading one way ( Lower) and Crude oil, my other key indicator market, heading the other ( Higher). It all depends on events in Iraq and whether or not the market feels that there is real potential of crude oil supply disruption as a result. If crude oil prices continue to move higher, it will not be long before traders/investors begin to read that as a negative influence on overall economic growth. I would suspect that sentiment will be reflected in copper breaking below support.
I honestly do not know how events over in Iraq are going to play out. With Iran talking about getting involved over there, we have another factor to consider.
What an enormous mess!
Not too long ago I began posting charts of the Commitment of Traders positioning in the red metal because I had noticed what was a rather unusual occurrence. The two groups of large speculators, which dominate the markets, were at odds on which direction the metal was heading. It is not unusual to see these two groups have a somewhat different positioning in a market. What was different however was the fact that their bets as to which direction copper was headed were nearly identical but on opposite sides of the market.
I remarked at the time that one of these groups was going to be a big winner and the other a big loser. I am happy to report ( can you tell what my attitude is towards hedge funds? ) that the Large Reportables made mince meat out of the Hedgie boys.
Here is the latest COT chart showing the rout of the hedge funds. You can see their bet on rising prices backfired big time. Out they have come as long liquidation from this group has kicked in as the price has continued to move lower. Look at the sharp fall in the net long positioning of the hedge funds! It has been cut by nearly 75% in just two weeks!
The Large Reportables have been booking profits into their selling as they cover profitable shorts.
Here is the chart of the actual metal itself. Observe the sharp retreat in price as hedge funds bailed out.
Copper has managed to hold into the first level of support shown on the chart. That extends down to just above the $3.00 mark. If the bears, who are currently in control of this market, are able to take the price down through this level, they have the increasingly probability of kicking off a trending move lower. That would portend a rather ominous slowing of the global economy. With the mixed data that we keep getting, whether it be here domestically or globally, I would think that the odds favor more of a holding pattern here in Copper rather than a trending move but I am open to either possibility. The chart pattern and price action will tell us which scenario to expect.
It is entirely possible that we see Copper heading one way ( Lower) and Crude oil, my other key indicator market, heading the other ( Higher). It all depends on events in Iraq and whether or not the market feels that there is real potential of crude oil supply disruption as a result. If crude oil prices continue to move higher, it will not be long before traders/investors begin to read that as a negative influence on overall economic growth. I would suspect that sentiment will be reflected in copper breaking below support.
I honestly do not know how events over in Iraq are going to play out. With Iran talking about getting involved over there, we have another factor to consider.
What an enormous mess!
Friday, June 13, 2014
Commodities Getting Some Money Flows
Trying to keep track of the vagaries of these markets in this goofy era is becoming a near exercise in futility. Sentiment flops back and forth faster than the lead in some basketball games changes hands.
Take Copper as an example - yesterday it was fearful of the impact of high energy prices on global growth so down it went. Today, or I should say overnight, there was news out of China that Industrial Production there rose 8.8% in May from a year earlier. During the month of April, it rose 8.7%.
Some immediately seized on that number and jumped into the copper market in a buying mood. Forget the fact that that was last month's number and that futures markets are generally regarded as "FUTURES" markets, not "PAST TENSE" markets. Forgotten in the increase of 1/10 of a percent were the issues with the double and triple counting of Copper in Chinese warehouses for loan purposes and the current debacle in Iraq.
But it was not only copper that was bid higher today. I am not really sure what the heck was going on but for a good part of the session, one has hard-pressed to find a single commodity futures market in the red. Money was coming into nearly every one of them for some odd reason. Why I say, "odd", was because the US Dollar was actually higher today, unlike yesterday when it was not a beneficiary of any safe haven play. Today it was. Go figure.
Regardless, take a look at what this surge in energy prices, courtesy of ISIS in Iraq, has done to the GSCI.
It has pushed the index up towards the top of a mini-range near 662-663 which has held it for the last three months. If the market was worried about higher energy prices slowing global growth yesterday, which it was, today it could care less. "She loves me; She loves me not". These markets are turning an entire generation of traders into 3 minute bar chart junkies.
One could say that there might be some sector rotation out of equities and into commodities, but, if traders really are worried about higher crude oil prices cutting global growth estimates, the last thing one would want to do would be to pour money into growth sensitive commodities. Bonds, yes - commodities?
This is further proof in my mind that today's markets, dominated as they are by unthinking computers, more often than not have the attention span of a dwarf gnat.
You see extreme shifts in sentiment within hours instead of within weeks or months. All it takes is a few big buy or sell orders to get the ball rolling and the computers take over and that is all that matters in that market for the rest of the day.
As an example - we received the USDA Supply and Demand reports this Wednesday revealing a larger global supply of soybeans than the market was anticipating. Also, abundant rainfall and good growing weather induced USDA to up the yield per acre number above most analyst expectations. So, on Wednesday and Thursday the beans, ( both old and new crop) were reacting to a bearish report and bearish weather. Today, someone got the ball rolling to the upside again leaving the pit reporter scratching his head trying to come up with a reason for the move higher. The best the poor fellow could do was to say that the "weather has been so good no one believes it will continue and thus people started buying". See what I mean?
Kick in a few big buy or sell orders in these computerized markets and you can pretty much take any market anywhere you want it to go at any time. And notice - this is not being done by players involved with the feds - it is just the nature of the modern market. The key to successful trading used to be understanding the fundamental behind the markets in which one plies their business - not any more - the key has become anticipating what hedge fund computers are going to do and WHEN they are going to do it. Get that right, and you can make a tidy sum even if you happen to be completely ignorant of the difference between a sheaf of wheat and an ear of corn or a pod full of beans. Hedge funds ARE THE MARKET. Don't forget that.
I would not mind it all that much because at one time the large funds ( not hedge funds in general) were run by some knowledgeable guys who intimately knew the markets in which they traded as far as the fundamental factors went. I know - I used to trade against and with them. Today's hedge fund managers are mostly clueless. Take away their mechanical thinking device ( aka computer) and they are helplessly ignorant of anything remotely resembling a fundamental. What is the sad reality is that they could care less about it! Who needs any fundamental knowledge when computers are running the show based on the last price print.
I am noticing here later in the session that gold has now moved into positive territory as have the mining share indices. This reminds me a lot of the recent Ukraine situation during which traders were afraid to be short ahead of the weekend not knowing what might transpire. In the event of Iraq, traders are becoming increasingly worried that this ISIS group is going to take Baghdad. If things go from a disaster over there to an even worse disaster, no one wants to be short.
Gold is knocking right on the door of chart resistance near $1280. As a matter of fact, it has reached initial resistance near $1277. If gold can push past $1280 and hold those gains, it looks to me like it is going to make a run towards $1295 and possibly $1300.
If the Bears are going to be able to prevent a large shorter squeeze from taking place, they will need to hold the line right here; right now. If not, they will be forced out allowing the market to run to the resistance area noted above.
That this is taking place in gold, and in the rest of the commodity sector for that matter, while the Dollar is actually firm, is noteworthy. The Dollar looked as if it was ready to rock and roll to the upside as it was into that resistance zone near 80.70-80.80 but then Iraq struck and down it went once again. Of course, as it went down, the Euro was moving higher but that reversed today with the Euro moving away from the 1.360 level and hovering almost smack dab in the middle between 1.360 and 1.350 which is a key support level.
Feeder cattle, ( fats as well ) are both very strong and that is helping to keep the commodity indices higher. Feeders are soaring into stratospheric levels with floor traders all aghast that they can possibly move to these levels. Funds are pushing everything on the other side of the market out of their way as their buying orgy continues. These things are becoming dangerous if you ask me however.
Shorting them has turned out to be disastrous for the general public which was holding almost the entirety of the short interest in this market. Hedge funds know that and are bleeding them into submission.
Unleaded gasoline has moved a bit lower this afternoon but still remains above the $3.00 mark. Better go fill up your truck this weekend before they raise the price at the pump next week ( if they did not do so already).
I will get some COT stuff up later as my schedule permits.
Take Copper as an example - yesterday it was fearful of the impact of high energy prices on global growth so down it went. Today, or I should say overnight, there was news out of China that Industrial Production there rose 8.8% in May from a year earlier. During the month of April, it rose 8.7%.
Some immediately seized on that number and jumped into the copper market in a buying mood. Forget the fact that that was last month's number and that futures markets are generally regarded as "FUTURES" markets, not "PAST TENSE" markets. Forgotten in the increase of 1/10 of a percent were the issues with the double and triple counting of Copper in Chinese warehouses for loan purposes and the current debacle in Iraq.
But it was not only copper that was bid higher today. I am not really sure what the heck was going on but for a good part of the session, one has hard-pressed to find a single commodity futures market in the red. Money was coming into nearly every one of them for some odd reason. Why I say, "odd", was because the US Dollar was actually higher today, unlike yesterday when it was not a beneficiary of any safe haven play. Today it was. Go figure.
Regardless, take a look at what this surge in energy prices, courtesy of ISIS in Iraq, has done to the GSCI.
It has pushed the index up towards the top of a mini-range near 662-663 which has held it for the last three months. If the market was worried about higher energy prices slowing global growth yesterday, which it was, today it could care less. "She loves me; She loves me not". These markets are turning an entire generation of traders into 3 minute bar chart junkies.
One could say that there might be some sector rotation out of equities and into commodities, but, if traders really are worried about higher crude oil prices cutting global growth estimates, the last thing one would want to do would be to pour money into growth sensitive commodities. Bonds, yes - commodities?
This is further proof in my mind that today's markets, dominated as they are by unthinking computers, more often than not have the attention span of a dwarf gnat.
You see extreme shifts in sentiment within hours instead of within weeks or months. All it takes is a few big buy or sell orders to get the ball rolling and the computers take over and that is all that matters in that market for the rest of the day.
As an example - we received the USDA Supply and Demand reports this Wednesday revealing a larger global supply of soybeans than the market was anticipating. Also, abundant rainfall and good growing weather induced USDA to up the yield per acre number above most analyst expectations. So, on Wednesday and Thursday the beans, ( both old and new crop) were reacting to a bearish report and bearish weather. Today, someone got the ball rolling to the upside again leaving the pit reporter scratching his head trying to come up with a reason for the move higher. The best the poor fellow could do was to say that the "weather has been so good no one believes it will continue and thus people started buying". See what I mean?
Kick in a few big buy or sell orders in these computerized markets and you can pretty much take any market anywhere you want it to go at any time. And notice - this is not being done by players involved with the feds - it is just the nature of the modern market. The key to successful trading used to be understanding the fundamental behind the markets in which one plies their business - not any more - the key has become anticipating what hedge fund computers are going to do and WHEN they are going to do it. Get that right, and you can make a tidy sum even if you happen to be completely ignorant of the difference between a sheaf of wheat and an ear of corn or a pod full of beans. Hedge funds ARE THE MARKET. Don't forget that.
I would not mind it all that much because at one time the large funds ( not hedge funds in general) were run by some knowledgeable guys who intimately knew the markets in which they traded as far as the fundamental factors went. I know - I used to trade against and with them. Today's hedge fund managers are mostly clueless. Take away their mechanical thinking device ( aka computer) and they are helplessly ignorant of anything remotely resembling a fundamental. What is the sad reality is that they could care less about it! Who needs any fundamental knowledge when computers are running the show based on the last price print.
I am noticing here later in the session that gold has now moved into positive territory as have the mining share indices. This reminds me a lot of the recent Ukraine situation during which traders were afraid to be short ahead of the weekend not knowing what might transpire. In the event of Iraq, traders are becoming increasingly worried that this ISIS group is going to take Baghdad. If things go from a disaster over there to an even worse disaster, no one wants to be short.
Gold is knocking right on the door of chart resistance near $1280. As a matter of fact, it has reached initial resistance near $1277. If gold can push past $1280 and hold those gains, it looks to me like it is going to make a run towards $1295 and possibly $1300.
If the Bears are going to be able to prevent a large shorter squeeze from taking place, they will need to hold the line right here; right now. If not, they will be forced out allowing the market to run to the resistance area noted above.
That this is taking place in gold, and in the rest of the commodity sector for that matter, while the Dollar is actually firm, is noteworthy. The Dollar looked as if it was ready to rock and roll to the upside as it was into that resistance zone near 80.70-80.80 but then Iraq struck and down it went once again. Of course, as it went down, the Euro was moving higher but that reversed today with the Euro moving away from the 1.360 level and hovering almost smack dab in the middle between 1.360 and 1.350 which is a key support level.
Feeder cattle, ( fats as well ) are both very strong and that is helping to keep the commodity indices higher. Feeders are soaring into stratospheric levels with floor traders all aghast that they can possibly move to these levels. Funds are pushing everything on the other side of the market out of their way as their buying orgy continues. These things are becoming dangerous if you ask me however.
Shorting them has turned out to be disastrous for the general public which was holding almost the entirety of the short interest in this market. Hedge funds know that and are bleeding them into submission.
Unleaded gasoline has moved a bit lower this afternoon but still remains above the $3.00 mark. Better go fill up your truck this weekend before they raise the price at the pump next week ( if they did not do so already).
I will get some COT stuff up later as my schedule permits.
Thursday, June 12, 2014
Crude goes One way; Copper goes the Other
I hope you enjoy paying high prices at the gasoline pump because they are back on their way once more.
Take a look at the following chart and you will see what I mean. This resurgence, ( completely avoidable) has sent crude oil prices soaring and that means that the products are following right behind.
I have noted an area of resistance on the chart near $3.10 - $3.11, which if bettered, will send gasoline to a test of last July's high just above $3.15.
Here is the issue before us - rising energy prices often confuse traders because many have come to regard them as evidence of inflationary pressures. The problem in this economy is that it is so weak, so fragile, that rising energy prices will act in the exact opposite fashion - they will serve to depress growth and drive the price of key commodities lower.
Here is an updated chart of our pal, "Dr. Copper".
Can you see what it is saying? I have made some notations on the chart detailing the fundamental news that has been the driver of each move lower recently.
Today's Iraq news was interpreted as bearish for global growth because of the surge in energy prices and the "tax effect" it will have on growth in general.
The move lower in copper was affirmed by the sharp drop in interest rates as the yield on the Ten Year fell below 2.6% after it had been managing a slow but steady climb out of the ceiling near the 2.40% level late last month.
Stocks in general also responded to the Iraq developments by selling off. All three indices that I follow, the Dow, the S&P 500 and the Russell 2000 were down around .6%.
The HUI was one of the exceptions as the gold sector had a nice day.
The index broke above the resistance level near 218-220 and has now extended into the former range trade that was marked by a top near 228-230 and the bottom near 218-220. Let's see if this index can push up to the top of that former range and possibly breach it or if it stalls out and retreats lower. Near term momentum is now with the bulls and as long as the ISIS is on the move and succeeding, gold and these shares should find some decent buying support.
I want to continue to keep a close eye on the Copper market. If that thing breaks down, it could spell some real trouble coming our way. Higher energy prices could very well squash any nascent recovery dead in its tracks.
By the way, this is just one reason in my mind that should convince American citizens that it remains imperative we fully develop our own bounteous supply of domestic energy sources. That includes building that Keystone pipeline to bring Canadian crude ( our stable friend and neighbor to the North) down to our refineries along the Gulf Coast. Frankly I am weary of having the price of gasoline held hostage by events that transpire in that most volatile and backwards regions on the planet ( the Middle East). Far too many who live there are caught in some sort of time warp and seem to revel living in 8th century AD conditions and thinking. One has to pity some of the younger folk there in particular who have seen the freedoms that the West currently enjoys and might not ever live long enough to experience them. What a tragic waste of human potential.
Take a look at the following chart and you will see what I mean. This resurgence, ( completely avoidable) has sent crude oil prices soaring and that means that the products are following right behind.
I have noted an area of resistance on the chart near $3.10 - $3.11, which if bettered, will send gasoline to a test of last July's high just above $3.15.
Here is the issue before us - rising energy prices often confuse traders because many have come to regard them as evidence of inflationary pressures. The problem in this economy is that it is so weak, so fragile, that rising energy prices will act in the exact opposite fashion - they will serve to depress growth and drive the price of key commodities lower.
Here is an updated chart of our pal, "Dr. Copper".
Can you see what it is saying? I have made some notations on the chart detailing the fundamental news that has been the driver of each move lower recently.
Today's Iraq news was interpreted as bearish for global growth because of the surge in energy prices and the "tax effect" it will have on growth in general.
The move lower in copper was affirmed by the sharp drop in interest rates as the yield on the Ten Year fell below 2.6% after it had been managing a slow but steady climb out of the ceiling near the 2.40% level late last month.
Stocks in general also responded to the Iraq developments by selling off. All three indices that I follow, the Dow, the S&P 500 and the Russell 2000 were down around .6%.
The HUI was one of the exceptions as the gold sector had a nice day.
The index broke above the resistance level near 218-220 and has now extended into the former range trade that was marked by a top near 228-230 and the bottom near 218-220. Let's see if this index can push up to the top of that former range and possibly breach it or if it stalls out and retreats lower. Near term momentum is now with the bulls and as long as the ISIS is on the move and succeeding, gold and these shares should find some decent buying support.
I want to continue to keep a close eye on the Copper market. If that thing breaks down, it could spell some real trouble coming our way. Higher energy prices could very well squash any nascent recovery dead in its tracks.
By the way, this is just one reason in my mind that should convince American citizens that it remains imperative we fully develop our own bounteous supply of domestic energy sources. That includes building that Keystone pipeline to bring Canadian crude ( our stable friend and neighbor to the North) down to our refineries along the Gulf Coast. Frankly I am weary of having the price of gasoline held hostage by events that transpire in that most volatile and backwards regions on the planet ( the Middle East). Far too many who live there are caught in some sort of time warp and seem to revel living in 8th century AD conditions and thinking. One has to pity some of the younger folk there in particular who have seen the freedoms that the West currently enjoys and might not ever live long enough to experience them. What a tragic waste of human potential.
Iraq Cities Fall to Terror Groups - Oil soars
Watching this disaster unfold before our eyes makes me sick beyond words can express. To realize how many of our men and women gave their lives or were horribly wounded and left crippled and shattered to secure the cities that have now been handed back on a platter to the terror groups looking to form their long cherished Islamic Caliphate, fills me with disgust and contempt towards an administration that has no comprehension how reckless its foreign policy is.
Better yet, it has no foreign policy whatsoever. Since when does one secure a country and then abandon it without having any sort of Forces Agreement in place?
Our top military generals who understood the region and were involved in the war effort there, all warned that this is exactly what would happen. They were ignominiously ignored by an administration that has snatched one defeat out of the jaws of victory after another.
Now what? I remember seeing those Iraqi citizens with their ink-stained fingers voting for their leaders. Now some of them are being beheaded.
Look, whatever your view towards the Iraq war might have been, it is now a fact that our troops have seen their blood, sweat, tears and sacrifice thrown away and spat upon by their commander in chief. Imagine if this is what we had done after WWII? I was watching one soldier's interview last evening who had fought in battles to secure these exact cities say he now understood something of what the troops who had fought in Vietnam felt when they watched the helicopters leaving Saigon.
Crude oil is rightfully now pricing in a disruption to world oil supplies as a result of the barbarians on the move.
Gold is rising higher as fear now settles in upon the world once again over the possibility of the major oil regions in the South of Iraq eventually falling under their control. One owns gold for these very reasons but if I hear a single gold perma-bull crowing about their yellow metal god rising and rejoicing on that account, I think I will spit out of disdain. The more I try to put myself in the place of those soldiers whose deaths have been so cheapened by this administration, the more I want to weep for my nation.
What a wretched and yet completely avoidable disaster. I feel like I am watching a slow motion train wreck of my beloved country unfolding before my eyes. In every area of the US, we are witnessing a disintegration of all that we hold dear. I am not sure what is worse - that this is happening so blatantly or the fact that nearly 50% of the US citizenry is completely ignorant of the demise of the nation. While they sit and watch their damned reality TV shows their nation is falling apart.
From a technical chart standpoint, crude oil has broken out above key chart resistance near $105 and is currently at a nine month high! Look for this market to be well supported as long as the Iraq oil fields and production are vulnerable. Who knows where this market might run at this point? It is now at the mercy of events on the ground in Iraq. As of yet, I have read of no planned response to the ISIS advance. Maybe our current administration will wait until Baghdad falls and then come up with something, whatever that might be.
In contradistinction to the trumped up sensationalism that was reported on the perma gold bull sites when it came to Ukraine, anything that impacts the world oil markets is a much more serious concern. Notice how bonds are being bid higher, equities are falling and crude is soaring. Markets really do worry about anything that deals with a major oil producing region because crude oil is the life-blood of the world's economic engine.
Copper is sinking lower on the news as it fears higher oil prices potentially choking further an already sluggish global economy. We were reminded of this with total's retail sales and the jobless numbers. Both served to reinforce the notion of an economy that remains fragile. Then one throws on top of that the potential for higher oil/energy prices, and it is not hard to understand the "oil tax" effect on growth.
Silver is following gold today instead of copper and has managed to best some selling near the $19.25 level that was holding it in check. With hedge funds on the net short side of the silver market, there is definitely some short covering occurring with this Iraq development.
Gold has easily punched through $1270 as the bears run for cover on this news. Now the big question is whether or not the bulls can take it up through $1280 and hold it there. If they can, we have something going.
I will get a chart of gold up later today _ I want to see how it handles itself later in the session and want to watch the mining shares to see if they can take out any key chart resistance levels. Letting the dust settle somewhat after these news events rock markets is sometimes the best thing to do before formulating a trading response. One can move in and out very quickly to take advantage of some short term price spikes or drops, but making a longer term strategic decision around something so volatile as this is unwise. Be careful that you do not build too large of a position in anything. Besides, it does not take much to make some nice short term gains when markets move this much anyway as a little can go a long way.
Better yet, it has no foreign policy whatsoever. Since when does one secure a country and then abandon it without having any sort of Forces Agreement in place?
Our top military generals who understood the region and were involved in the war effort there, all warned that this is exactly what would happen. They were ignominiously ignored by an administration that has snatched one defeat out of the jaws of victory after another.
Now what? I remember seeing those Iraqi citizens with their ink-stained fingers voting for their leaders. Now some of them are being beheaded.
Look, whatever your view towards the Iraq war might have been, it is now a fact that our troops have seen their blood, sweat, tears and sacrifice thrown away and spat upon by their commander in chief. Imagine if this is what we had done after WWII? I was watching one soldier's interview last evening who had fought in battles to secure these exact cities say he now understood something of what the troops who had fought in Vietnam felt when they watched the helicopters leaving Saigon.
Crude oil is rightfully now pricing in a disruption to world oil supplies as a result of the barbarians on the move.
Gold is rising higher as fear now settles in upon the world once again over the possibility of the major oil regions in the South of Iraq eventually falling under their control. One owns gold for these very reasons but if I hear a single gold perma-bull crowing about their yellow metal god rising and rejoicing on that account, I think I will spit out of disdain. The more I try to put myself in the place of those soldiers whose deaths have been so cheapened by this administration, the more I want to weep for my nation.
What a wretched and yet completely avoidable disaster. I feel like I am watching a slow motion train wreck of my beloved country unfolding before my eyes. In every area of the US, we are witnessing a disintegration of all that we hold dear. I am not sure what is worse - that this is happening so blatantly or the fact that nearly 50% of the US citizenry is completely ignorant of the demise of the nation. While they sit and watch their damned reality TV shows their nation is falling apart.
From a technical chart standpoint, crude oil has broken out above key chart resistance near $105 and is currently at a nine month high! Look for this market to be well supported as long as the Iraq oil fields and production are vulnerable. Who knows where this market might run at this point? It is now at the mercy of events on the ground in Iraq. As of yet, I have read of no planned response to the ISIS advance. Maybe our current administration will wait until Baghdad falls and then come up with something, whatever that might be.
In contradistinction to the trumped up sensationalism that was reported on the perma gold bull sites when it came to Ukraine, anything that impacts the world oil markets is a much more serious concern. Notice how bonds are being bid higher, equities are falling and crude is soaring. Markets really do worry about anything that deals with a major oil producing region because crude oil is the life-blood of the world's economic engine.
Copper is sinking lower on the news as it fears higher oil prices potentially choking further an already sluggish global economy. We were reminded of this with total's retail sales and the jobless numbers. Both served to reinforce the notion of an economy that remains fragile. Then one throws on top of that the potential for higher oil/energy prices, and it is not hard to understand the "oil tax" effect on growth.
Silver is following gold today instead of copper and has managed to best some selling near the $19.25 level that was holding it in check. With hedge funds on the net short side of the silver market, there is definitely some short covering occurring with this Iraq development.
Gold has easily punched through $1270 as the bears run for cover on this news. Now the big question is whether or not the bulls can take it up through $1280 and hold it there. If they can, we have something going.
I will get a chart of gold up later today _ I want to see how it handles itself later in the session and want to watch the mining shares to see if they can take out any key chart resistance levels. Letting the dust settle somewhat after these news events rock markets is sometimes the best thing to do before formulating a trading response. One can move in and out very quickly to take advantage of some short term price spikes or drops, but making a longer term strategic decision around something so volatile as this is unwise. Be careful that you do not build too large of a position in anything. Besides, it does not take much to make some nice short term gains when markets move this much anyway as a little can go a long way.
Wednesday, June 11, 2014
Gold Chart
Gold has been trekking slowly higher on low volume as it inches away from support at $1240. Calls for slower global economic growth seem to be putting some firmness in the market as some shorts pull out and move to the sidelines with some bargain hunters moving in as well. Also, the ECB's recent move to provide some monetary stimulus, while knocking the Euro lower, has chased a few shorts out of the gold market in spite of the continued weakness in that key currency.
Notice on the chart that price has managed to move back into the first of three FORMER support zones which were violated to the downside. Gold pushed through the first of these and is knocking on the lower boundary of the middle support zone.
For the bulls to be able to shift the sentiment more towards their liking, they will need to take price back through $1277 for starters but for a more convincing feat, $1280.
For now, the low volume makes this current recovery look more like a dead-cat bounce but any break through $1280 that remains above that key level will have to be respected.
In looking over the ADX, it shows the bears still remain in control but the current leg lower has been halted near $1240. That zone is shaping up to be just as important as $1280 had been. As I have written previously, below this level, a goodly number of hedge fund positions from earlier this year will be underwater.
So far, it seems this is the pattern that we can expect to see in gold - a slow, steady grinding move lower instead of any sharp falls in price. The price drops, then stabilizes, then drops some more, then stabilizes, etc. I think this is mainly a function of the extended move lower for nearly the last three years and the remaining stubborn and persistent bullishness on the part of some of the large hedge funds that moved onto the long side earlier this year. Most of those who have given up on gold have already done so and are in equities. Those that persist in gold are a bit more ideologically persistent and will only exit reluctantly if successive support levels give way.
Keep in mind that a market can find a long term bottom and still not make any sharp moves to the upside. Instead it can continue meandering back and forth, working essentially sideways for quite some time ( quite longer than many traders have patience for ). Some seem to think that once a market bottoms, it is off to the races once again. Nothing could be further from the truth. As a matter of fact, most markets do not as a general rule put in spike reversals without a abrupt shift in fundamentals but instead slowly transition from bear markets or bull markets through a period of consolidation ( sideways trade ) which can last for a fairly long period, before then entering a solid trending move in the other direction. Sometimes the initial trend actually resumes.
When it comes to gold this has been perfectly illustrated when the market topped out in August 2011 just above $1900. It experienced a sharp selloff, then stabilized above $1530 whereupon it moved sideways for nearly 1 1/2 years when it was stuck in a range between $1800 on the top and $1530 on the bottom. Then it dropped out of that range falling over $300 all the way to $1180 whereupon it once again entered another period of sideways trade which it has remained in for nearly a full year now. The top of that range is up near $1400 and the bottom remains near $1180.
There is really no telling how long gold might remain in this "RANGE TWO". It could be for months or it could be for years. No one really knows. If we compare the secondary range to the initial one, this current one has at least six more months to go (wouldn't it be nice if markets were all that well behaved - we would all be so wealthy we could retire the national debt all by ourselves).
Within these broad ranges there exist smaller, tighter ranges. Those tend to show up better on the Daily Chart. Just keep these things in mind whenever someone gets too wildly bullish or too wildly bearish.
Gold is stuck in a very broad range with the shorter term charts showing a bearish pattern for the time being. If gold were to take out the bottom of the former range near $1280, then it would have the potential to move back up towards the top of that range near $1320. Again, as noted above, a break below $1240 however would give the potential for a move all the way back to $1200.
By the way, GLD has not given us any updated numbers for some time now.
Notice on the chart that price has managed to move back into the first of three FORMER support zones which were violated to the downside. Gold pushed through the first of these and is knocking on the lower boundary of the middle support zone.
For the bulls to be able to shift the sentiment more towards their liking, they will need to take price back through $1277 for starters but for a more convincing feat, $1280.
For now, the low volume makes this current recovery look more like a dead-cat bounce but any break through $1280 that remains above that key level will have to be respected.
In looking over the ADX, it shows the bears still remain in control but the current leg lower has been halted near $1240. That zone is shaping up to be just as important as $1280 had been. As I have written previously, below this level, a goodly number of hedge fund positions from earlier this year will be underwater.
So far, it seems this is the pattern that we can expect to see in gold - a slow, steady grinding move lower instead of any sharp falls in price. The price drops, then stabilizes, then drops some more, then stabilizes, etc. I think this is mainly a function of the extended move lower for nearly the last three years and the remaining stubborn and persistent bullishness on the part of some of the large hedge funds that moved onto the long side earlier this year. Most of those who have given up on gold have already done so and are in equities. Those that persist in gold are a bit more ideologically persistent and will only exit reluctantly if successive support levels give way.
Keep in mind that a market can find a long term bottom and still not make any sharp moves to the upside. Instead it can continue meandering back and forth, working essentially sideways for quite some time ( quite longer than many traders have patience for ). Some seem to think that once a market bottoms, it is off to the races once again. Nothing could be further from the truth. As a matter of fact, most markets do not as a general rule put in spike reversals without a abrupt shift in fundamentals but instead slowly transition from bear markets or bull markets through a period of consolidation ( sideways trade ) which can last for a fairly long period, before then entering a solid trending move in the other direction. Sometimes the initial trend actually resumes.
When it comes to gold this has been perfectly illustrated when the market topped out in August 2011 just above $1900. It experienced a sharp selloff, then stabilized above $1530 whereupon it moved sideways for nearly 1 1/2 years when it was stuck in a range between $1800 on the top and $1530 on the bottom. Then it dropped out of that range falling over $300 all the way to $1180 whereupon it once again entered another period of sideways trade which it has remained in for nearly a full year now. The top of that range is up near $1400 and the bottom remains near $1180.
There is really no telling how long gold might remain in this "RANGE TWO". It could be for months or it could be for years. No one really knows. If we compare the secondary range to the initial one, this current one has at least six more months to go (wouldn't it be nice if markets were all that well behaved - we would all be so wealthy we could retire the national debt all by ourselves).
Within these broad ranges there exist smaller, tighter ranges. Those tend to show up better on the Daily Chart. Just keep these things in mind whenever someone gets too wildly bullish or too wildly bearish.
Gold is stuck in a very broad range with the shorter term charts showing a bearish pattern for the time being. If gold were to take out the bottom of the former range near $1280, then it would have the potential to move back up towards the top of that range near $1320. Again, as noted above, a break below $1240 however would give the potential for a move all the way back to $1200.
By the way, GLD has not given us any updated numbers for some time now.
USDA Supply-Demand Report Day
USDA released its Supply/Demand numbers this AM. Based on those, they are expecting a record US corn crop of 13.935 billion bushels on a yield of 165.3 bushels/acre. The 2013-2014 ending stocks are expected at 1.146 billion bushels, down from their last estimate of 1.157 billion. The 2014-2015 carryover is expected to total 1.726 billion bushels.
Soybean production should total 3.635 billion bushels this year using a 45.2 bushel/acre yield. Analysts had been looking for a 3.267 billion bushel crop using a yield of 45.0 bushels. Carryover is expected to jump significantly to 325 million bushels, up from the current marketing year's 125 million bushels. USDA once again lowered those ending stocks in the beans which has been the wild card that is keeping this market trading in such a schizophrenic fashion. Traders are simpy unsure of how to deal with such a tight carryover in the face of a huge new season crop. The spread action is resulting in contortions and erratic swings in price.
USDA also raised global bean production to 299.99 million metric tons. That is up from the current marketing year's 283.79mmt. Brazil registered an increase of 2.5mmt to 91mmt.
USDA lowered total global wheat production to 701.62 million metric tons. They did however raise total global wheat stocks to 188.61 million metric tons up from their last month's 187.42 million metric ton forecast.
On the domestic front, USDA pegged total wheat production to 1,942 billion bushels which was actually well below analyst's average of 1.959 billion. However they raised both the 2013-2014 and the 2014-2015 ending stocks for wheat. The current marketing year jumped 10 million bushels to 593 million from last month's 583 million. Next year's carryover is expected to be 574 million bushels, up from May's projection of 540 million bushels. Wheat was hit hard on this data especially KC wheat.
All in all, other than the tight soybean carryover for the current marketing year, one would be hard-pressed to find anything friendly in any of these reports. It is however good news for consumers and for the livestock and poultry industries.
Hog producers out there, take advantage of the rally in the 4th quarter hogs/early Q1 2015 hogs and the sell off in corn and beans to continue locking in some expected production and securing some feed coverage when you do. You will guarantee yourself some outstanding profits and be able to sleep quite well at night. Your margins are outstanding right now so do not let them slip away from you. Scale into those hedges and leave out no more than 25-35% for gambling purposes. Any sort of unexpected bearish surprise in this month's Quarterly Hogs and Pigs report will have you kicking yourself in the rear end repeatedly. You can always leave your upside open with some well-managed option plays such as bull call spreads if you want to do some speculation but do not forget that you are a producer, and not a speculator.
Gold was supported in the overnight session on news that the World Bank cut its global economic growth forecast to 2.8% for the year. That is down from their January forecast of 3.2%. The Bank blamed emerging market countries for their unwillingness to deal with counterproductive policies. The report also mentioned concerns about China's housing market. Gold seemed to draw some safe haven buying on that news which continued into the Western session trading.
The Gold Volatility Index actually fell lower making yet another multi-month low. It sure does appear as if gold has entered its "summer doldrums".
That general "safe haven" theme could be seen in the stronger Yen once again ( the idea that the Yen is a safe haven is laughable but the markets have transformed the currency into a safe haven for some reason). Also, bonds ticked higher on the news with the result that interest rates dropped lower. US stock markets moved lower on that news and have also remained lower as I type these comments. "Caution" is the theme of today.
It is interesting to note that copper was weak on the news but that silver decided to move with gold instead of the red metal.
Once again Crude oil is back to throwing off mixed messages about the state of the US economy when compared to copper. US EIA data showed a 2.6 million barrel drop in oil inventories. Someone is using the stuff and keeping this market supported. If the economy was completely in the tank as some are suggesting, we would not be seeing crude oil prices staying this well supported. I am keeping a close eye on that $105 level. It has thus far been acting as an overhead cap but if it goes, $108 comes into play.
The miners ticked higher today with the HUI inching towards overhead chart resistance beginning near 215.50 and extending to 220. It looks like it is setting up a range trade for now.
I am, however noting that as the session is wearing on, gold and the miners are surrendering some of their gains. Both remain in the black at the moment but they have certainly faded from their session-best levels.
The US Dollar, as viewed through the prism of the USDX, once again made a try at the 81 level but could not clear it. It has been in a slow, grinding-like trend higher but really needs to push past that 81 level to make a run at heavier resistance near 81.45 - 81.50. It has managed to best its initial resistance level near 80.70-80.80 and so far is holding above there. I do believe that if the greenback can clear 81.50, gold will not hold at $1240. We'll see. Just an opinion and we all know here what opinions about markets are worth. Price action is the ultimate arbiter.
Further along the currency front, the Euro is continually its descent towards chart support near the 1.350 region. That support extends down to 1.348 or so. I should note here that there is some chatter about the Euro being used a "funding currency" ( aka - carry trade) in regards to other European currencies.
Soybean production should total 3.635 billion bushels this year using a 45.2 bushel/acre yield. Analysts had been looking for a 3.267 billion bushel crop using a yield of 45.0 bushels. Carryover is expected to jump significantly to 325 million bushels, up from the current marketing year's 125 million bushels. USDA once again lowered those ending stocks in the beans which has been the wild card that is keeping this market trading in such a schizophrenic fashion. Traders are simpy unsure of how to deal with such a tight carryover in the face of a huge new season crop. The spread action is resulting in contortions and erratic swings in price.
USDA also raised global bean production to 299.99 million metric tons. That is up from the current marketing year's 283.79mmt. Brazil registered an increase of 2.5mmt to 91mmt.
USDA lowered total global wheat production to 701.62 million metric tons. They did however raise total global wheat stocks to 188.61 million metric tons up from their last month's 187.42 million metric ton forecast.
On the domestic front, USDA pegged total wheat production to 1,942 billion bushels which was actually well below analyst's average of 1.959 billion. However they raised both the 2013-2014 and the 2014-2015 ending stocks for wheat. The current marketing year jumped 10 million bushels to 593 million from last month's 583 million. Next year's carryover is expected to be 574 million bushels, up from May's projection of 540 million bushels. Wheat was hit hard on this data especially KC wheat.
All in all, other than the tight soybean carryover for the current marketing year, one would be hard-pressed to find anything friendly in any of these reports. It is however good news for consumers and for the livestock and poultry industries.
Hog producers out there, take advantage of the rally in the 4th quarter hogs/early Q1 2015 hogs and the sell off in corn and beans to continue locking in some expected production and securing some feed coverage when you do. You will guarantee yourself some outstanding profits and be able to sleep quite well at night. Your margins are outstanding right now so do not let them slip away from you. Scale into those hedges and leave out no more than 25-35% for gambling purposes. Any sort of unexpected bearish surprise in this month's Quarterly Hogs and Pigs report will have you kicking yourself in the rear end repeatedly. You can always leave your upside open with some well-managed option plays such as bull call spreads if you want to do some speculation but do not forget that you are a producer, and not a speculator.
Gold was supported in the overnight session on news that the World Bank cut its global economic growth forecast to 2.8% for the year. That is down from their January forecast of 3.2%. The Bank blamed emerging market countries for their unwillingness to deal with counterproductive policies. The report also mentioned concerns about China's housing market. Gold seemed to draw some safe haven buying on that news which continued into the Western session trading.
The Gold Volatility Index actually fell lower making yet another multi-month low. It sure does appear as if gold has entered its "summer doldrums".
That general "safe haven" theme could be seen in the stronger Yen once again ( the idea that the Yen is a safe haven is laughable but the markets have transformed the currency into a safe haven for some reason). Also, bonds ticked higher on the news with the result that interest rates dropped lower. US stock markets moved lower on that news and have also remained lower as I type these comments. "Caution" is the theme of today.
It is interesting to note that copper was weak on the news but that silver decided to move with gold instead of the red metal.
Once again Crude oil is back to throwing off mixed messages about the state of the US economy when compared to copper. US EIA data showed a 2.6 million barrel drop in oil inventories. Someone is using the stuff and keeping this market supported. If the economy was completely in the tank as some are suggesting, we would not be seeing crude oil prices staying this well supported. I am keeping a close eye on that $105 level. It has thus far been acting as an overhead cap but if it goes, $108 comes into play.
The miners ticked higher today with the HUI inching towards overhead chart resistance beginning near 215.50 and extending to 220. It looks like it is setting up a range trade for now.
I am, however noting that as the session is wearing on, gold and the miners are surrendering some of their gains. Both remain in the black at the moment but they have certainly faded from their session-best levels.
The US Dollar, as viewed through the prism of the USDX, once again made a try at the 81 level but could not clear it. It has been in a slow, grinding-like trend higher but really needs to push past that 81 level to make a run at heavier resistance near 81.45 - 81.50. It has managed to best its initial resistance level near 80.70-80.80 and so far is holding above there. I do believe that if the greenback can clear 81.50, gold will not hold at $1240. We'll see. Just an opinion and we all know here what opinions about markets are worth. Price action is the ultimate arbiter.
Further along the currency front, the Euro is continually its descent towards chart support near the 1.350 region. That support extends down to 1.348 or so. I should note here that there is some chatter about the Euro being used a "funding currency" ( aka - carry trade) in regards to other European currencies.
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