The US Dollar is crushed overnight, along with fresh talk of a Sunday Night freeze on the way which could damage the Corn crop, (although with a crop coming in at 13.1BB of Corn, the freeze would have to be massive to have long term affect on corn prices)
Over night, we saw new developments as Australia broke ranks with G20 and began tightening of their rates…Perhaps this is all that was needed to start a fresh round of selling of the US Dollar…. Cheaper dollar, creates demand for our grains..
Strong gains overnight in all the grains, with November bouncing of that 884 level I have talked about for a week….
We are now above the 900 level, as the markets are now digesting a possibility of fresh demand given the cheap dollar.. As well as talk of a freeze coming in Sunday night, which could damage, as much as 100MM bushels in IL alone could be lost in the Corn as harvest is ongoing. Still hanging over the grains is the overall gigantic crop coming in from the fields, along with the Index funds still under pressure to scale back their maximum position size as per new CFTC regs.
In time, this will have to have an affect on pricing…There is simply too much supply coming, and I believe that this bounce is just a reaction to currency issues.
There is huge Resistance at 350 and then all the way up to 400 in CZ… Those levels would have to be settled above, certainly 350 would have to be breached first to suggest anything other than a short term correction in an over-all down trend driven by the fact that supply will be huge with this crop, barring unforeseen, massive damage due to weather issues.
Gold and Silver have really popped with Gold now just 20 bucks away from contract highs from last year, which were at 1060… Currently we are at 1038, so in the next few days, if there is fresh selling in the US Dollar, we could definitely challenge these contract highs .The long awaited leg up in the metals may have begun.. Its not a market to be selling new highs.. I would rather be buying dips.
Crude Oil is back above 70 dollars a barrel, with interesting developments afoot.. This is directly due to a new report that Saudis, Kuwait, Qatar, and the UAE have been in apparently not so secret talks with China Russia, Japan and France moving towards having oil trades settle in a currency OTHER THAN THE US DOLLAR’ calling for a ‘basket of currencies’ by 2018… That would radically change the purchasing power of the US Dollar.
I would be leaning towards Jim Roger’s opinion that eventually the Chines Yuan will eventually replace the US Dollar over the next 20 years… We may look back at 2009 as being the beginning of the end of the power of the US dollar as it shifts towards China and Asia in general.
The USA, to me is looking more and more like The United Kingdom after WWII…A great empire, over extended and over committed, gradually losing its pre-eminent position in the world, as the real power shifts to Asia and specifically China..
The saving grace for the USA, will be its agricultural prowess…The rest of the world will always need our food. Unfortunately, food production, requires petroleum, and that could be our Achilles heel…
Back to the Markets,
So all in all, I would look for a day when its best to try to be long and sit tight.
This strong updraft has a way to go…
In the grains, I wouldn’t be a seller in Nov until around 930 to 935 level… In the stock indexes, I would look for the Dow to pop up and look at 10000. This is a classic case where just 3 days ago, Friday saw a bad unemployment number, people sold that number in the hole and now are chasing it higher. The market climbs a wall of worry..
We could get to the point where, due to the weakness in the US dollar, the rest of the world steps up to buy our beaten down stocks.. For the rest of the world, a weak US dollar means that our business are on sale… Time will tell if our debt remains such an attractive option… If that becomes an issue, the Fed will have no choice but to start raising rates, to justify China and the rest of the world to keep financing our debt… Its a fine line to dance, and if you can be correct on how it will turn out, you could profit from it handsomely… Time will tell.
Good Trading.
Don’t fight the uptrend today…