I missed writing for a while. Was on vacation and just didn’t feel like adding anything. If you look at my last call on the Dow, I liked 12,100 as an area to cover our shorts at 12,500. As usual, you never have enough on when you nail it correctly but in general a good move. Profitable trade.
I am writing today to advise, if you are long from 12,100, put a sell target in Dow futures at 12,576-584. If we get the 12,600 print and continue higher, then fine but take profits on your longs there. Today’s trade at 12,500 was a 38% pull back from the recent sell off…. REMEMBER, WHEN WE WERE AT 13,200 on may 1st? 13,285 down to 11,992. A nice 1,300 point correction. My 5th grader can tell you that was just a 10% correction. A lot of bears were /are looking for a final correction down to about 10,800. That level, in my opinion, would be a place to cover shorts and get long. We could see that over the next 6 months as we descend into the mayhem of election year garbage from both the right and the left. They are equally responsible for bovine bloviation, in my opinion.
The big news, honestly today, was China cutting rates. For the first time since 2008, they cut rates. Generally they don’t just cut rates once and stop. This signals a potential round of further rate cuts.
The fact that they did this in advance of next week’s economic data has a lot of people wondering how bad the data might be coming down the pipeline. Bad enough for theme to do a pre-emptive rate cut?
They will ease to keep their economy growing. Which is important b/c Europe’s debt issue is not going away.
Spain’s bank’s need billions. That will have to come from Germany or France. Or a combination of that. In the end, China might have to get involved. China depends on Europe for a large part of their demand for the products they produce.
On the flip side, Chairman Bernanke said today, “no more easing here” “yet”. Market broke hard initially, then rallied back. We could see some good volatility in this 1200 point trading range for the next six months.
I think it will continue to give opportunities at the extremes. The noise in middle could be dangerous. This has been a sideways market in a 1200 to 1500 point range for quite some time.
In the grains, we have had a nice rally back from 1-1/2 year lows in CN, 4 month lows in Soy and contract lows in the wheat.
Old crop basis remains way way ahead of the futures market. The basis in Nebraska for corn is 70 cents over futures… Seriously? 70 over… That either tells you there is no corn, or producers are sitting tight looking for the moon.
The next 6-10 days could give us some fireworks. If we don’t get rain over the next 5 days, we could have beans up one dollar and corn up another 40 or 50.
However, one rain. ONE soaking rain. And we are on greased skids down to the recent lows.
I have 10 cent 580 calls and 20 cent 540 august calls which i bot yesterday. Today the 580’s are worth 15 and the 540’s are worth 30. If they get after corn, we could see those be a nice double or hopefully a triple.
That is all.
CER