Overnight we again saw how thin volume can lead to extreme volatility in the grain future market… Traders were able to run the SX up to the 996 1/2 level after a low down at 77..
It’s interesting that the overnight trade almost seems to have better directional stability than the day trade..Jumping on the direction in a momentum trade seems to be the way to go..Especially around 2 or 3 AM CST…Asian and European funds are in a position to run the grains anyway they want…
Wed night we saw a push down to the lows around 970, and last night we see a run up almost to the ten dollar level…This is volatility which gives opportunity if you catch it the right way…
This morning, the grains opened higher, spiked to an early low, and have been grinding higher.. I would look for the grains to go after their overnight high prints, just to explore the trading range as we head into the weekend… No longer are we worried about frost warnings, but the focus is on harvest delays with the wet weather…
Look for some pre-hedging on the close in anticipation of Monday’s fund selling of the Corn and Wheat, however.. At which point we will most likely see buying of the soybeans in that inter market spread trade… We may see an early jump on that this afternoon as traders try to get positioned before Monday…
The dollar has seen a bounce off its lows, attributed mostly to Paul Volker’s comments that it may be time for the fed to start tightening money to head off hyper inflation caused by the liquidity flood of the past year..
Mr. Volker’s claim to fame was wringing out inflation with a fed funds rate of 21 percent in 1981 back in the 80’s…Wouldn’t that be a nice package? 10 percent unemployment, 20 percent mortgages? Stagflation? Maybe they’ll bring back Disco Music and Polyester Leisure Suits as well…
Gold looks to be taking a breather from its rocket ship ride higher as well, for the time being..ON the chart, it looks like there is good support at the 1033-1028 level, which would be possible if weak longs who bought the new contract highs get antsy or decide to bail on potential 40 dollar losses if the trade starts a correction.
Crude remains supported on the 75 dollar level, and is linked to the currency issue.
On an interesting note, the dollar has lost 7 percent of its value against a basket of currencies over the past year…And there have been increased calls for protectionist trade policies in the US in response to the balance of trade deficit w/ Asia..
All in all, however, with GE missing its target, and reporting a drop in orders, giving bearish guidance, with BOA losing money in the Credit Markets, and with consumer sentiment falling unexpectedly from 73.5 to 69.4 , ironically, these may be the bearish factors which will allow the indexes to continue to climb the wall of worry..
This morning I bumped into a financial planner/stock broker, he was so, so bearish, telling me that all his clients want to get out now that we rode back up to 10000. To a tee, all his customers are expecting a second leg down…That to me, honestly, is kind of comforting.. As long as the public is still pessimistic, then I think the indexes have room to 1) stabilize around the 9,800 level, and perhaps build a base for another leg up…
Finally, I would look for the beans to possibly go up and take a look at that 912 level this afternoon, if we get a thinly traded, quiet rally on a Friday.
Good Trading.