Commodities all higher across the board, as the dollar sinks again, while US equities are supported with better than expected earnings. In response, Crude is up 1.50, flirting with the $75 dollar level, Silver is up 9 bucks, flirting with the 1060 level, and silver is up over fourteen cents, trading to a high at 1799, approaching the 18 dollar level.. Over two dollar rally in silver over the past ten trading days. We have seen a dollar rally in Soybeans, and a 40 cent rally in both corn and wheat over the past 7 trading days alone…
Along the way we have seen the dollar index drop from the 77.75 level down to the 75.75 level, although currently it is above those recent lows..
We had some crop damage to yields after this weekend’s multiple frosts across the US..Today alone, SX is up over 24 cents, CZ is up 11 cents and WZ is up 15 cents.
On the charts this looks very bullish, but I think there is a possibility for a correction later this week in response to the rapid rise…
Longer term, however, the charts may be building a base from which we will build the next leg up as we anticipate next years business.. Any increase in demand from China would certainly be bullish fundamental news which could support current longs, as well as lure in more speculative long positions necessary to fuel any significant rally.
By significant, I am talking about a 3 to 6 month uptrend, with corrective dips serving as opportunities to get long and take advantage of a longer up move..
Certainly 10 bucks in the Beans is a hurdle which must be taken first, but I have noticed that the best long term rallies are ones that are driven by forces which are not readily apparent. We have a huge crop, regardless of the freeze, the huge supply does not warrant higher prices. The only other explanation is that there is large increased demand on the horizon, fueled by the cheaper dollar…
Gold and Silver and Crude will benefit with higher prices as the dollar declines in value. As long as earnings continue to be sustainable in the US, that suggests that the US economy may be on the slow road back to recovery… If US consumer demand ever catches fire again, we will definitely have inflation pressures on commodities, fueled mostly by the huge supply of US dollars which have been created over the past months in an effort to stave off economic catastrophe..
For the rest of the day I would look for sideways to higher trade, again, due to thinner than usual volume due to the holiday..
Tonight and Tuesday should be better indicators of exactly how high these grains will go.. We may see a correction on profit taking over the next several days as people get back to work.
China alone was on a week long holiday last week. I think Tuesday through Friday will provide some indication as to whether these rallies are over done in the short term, or the beginning of a larger move upward.