Overnight, we saw grains sharply higher as Chicago land gets pounded by over an inch of rain… We saw corn up 7 1-2 cents, Beans up 15 1/4, and Wheat up 12 cents…The grains still are sensitive to crude prices, but 80 dollars a barrel seems to be holding in the crude, which continues to be supportive…
On the opening in the pits, we opened higher, spiked sharply higher, then had profit taking as SX traded up to 1025, CZ traded up to 413, and WZ went to a high at 573…In the face of those new highs, we saw some sharp selling pressure, with beans then retracing 18 cents in about ten minutes, corn dropping 7 cents and corn dropping a quick 5 cents…For this time of year, this volatility is a little unusual, and gives a nimble day trader opportunity, but one must remain extremely disciplined… ten cent down drafts are not too much fun if you are stuck the wrong way, however if you catch it the right way, especially on a Friday, take your quick dime profit, and consider yourself lucky and consider retiring for the rest of the day with your profits in tact…
In the Stock indexes, we have some selling pressure coming out at the end of the week after a pretty strong performance this week overall,,,We had encouraging numbers come out with sales of existing homes rising to their highest level in 2 years, as people rush to take advantage of the 8K dollar tax credit for first time buyers, and the inventory of unsold homes dropped 7 percent to 3.63 million, which translates to about an 8 month supply which still needs to be worked off.. In the face of this “good news” why are the indexes down?
Most likely, its Friday and there is profit taking going on… pros like to sell into good news if they have been long prior to the number coming out… Once the number comes out, as it did this morning, they use buying demand to sell into.. That’s why they are professionals, they repeatedly take profits on good news and take profits on shorts if bad news comes out.. Someone is always positioned properly to take profits no matter what the market action…
For the rest of the day, I would watch the gyrations of the dollar, the crude, the metals and the grains… These are all intertwined, and I believe the longer term picture is still bearish for the dollar, bullish for commodities, up until the time when the fed decides to take a stand and raise rates to defend the dollar…. A couple more quarters of a mini boom in real estate is all I think it would take for the fed to step in… If the housing glut gets cut from an 8 month supply to about a 3 month supply, then the fed will most likely have to step in to cool things off…
At that point you would see a fundamental shift in currency valuations and therefore commodity prices…
Looking at 1025 cent beans in the end of October, builds a base for a move in spring of 2010 for a jump up to talk about beans in the teens and five dollar corn…Bullish talk which will be supported by any weather issues…
I will have an afternoon summary in a few hours…
again, feel free to ask any questions, I will answer them each individually…I have already gotten quite a few interesting comments and questions..
Good Trading