Just to keep you posted on the Future Focus Chart of the Day, ST Wheat, CME is reporting that wheat is lagging movement in soybeans, and that conditions are creating delays in planting, but we are seeing more moisture in planting regions. Markets just opened with wheat moving higher. A weaker USD would have been nice, but going into the open of the US Trading session, the USD recouped all of its overnight losses, if however, the bulls can hang on to the day in the equity markets, we could see some additional price increase in commodities.
If you like market commentary, check out the cmegroup website and look for market commentary under the Education tab, Grains are reported premarket, mid day and wrap up on the day.
In the past week we have seen the Libor rate drop allowing the Eurodollar to advance from 98.85 to 99.04. I'm watching to see if it will fail at 99.04 or try to make it back to 99.21. The selling pressure in the equities markets from overnight trading has helped strengthen the Treasury Notes and the Eurodollar while bonds are trading at resistance as there has been recent selling pressure.
The Eurodollar is now over extended on the Short Term chart and converging, but any short side play will be counter to the more recent buying trend. It would take a few days of selling to roll the Mid Term back over for a more conservative play, so with equity markets running a little scared because of swine flu threats, be careful about any short side temptations.
UPDATE: The Eurodollar pulled back and held at 98.985, but advanced overnight to break 99.04 and advance to 99.065 before encountering resistance today.
UPDATE 05.04.2009 The Eurodollar remains locked between 99.02 and 99.06. The European Central Bank is expected to cut their overnight lending rate on Thursday morning from 1.25% TO 1.00%, This continues to lower bank lending rates which impact US Dollars held outside US regulation, and could allow additional narrowing of the already narrow Libor Rates. If this logic holds we could see the Eurodollar rate advance back towards the previous high of 99.21. We are running out of rates to cut, and we are seeing some early signs of inflation, that will also put future rate cuts in check.
Be sure to look at the LT chart to see that we have been stuck fast to a range, so this could struggle a little farther north, but a ceiling seems to be in place.
Hogs: Limit down action today against Swine Flu News. The movement sets the stage for further declines to 66?? The June market fell from Friday’s close of 71.65 to 68.65 and more downside is likely to follow this week. Be sure and wash your hands and disinfect everything.
Other markets fell sharply as well, but regained nicely (at 11:30a.m. Central): Crude Oil sold off to 48.02 and then recovered to 50.625. The Indices showed positive gains after being down premarket. The Soybean complex recovered nicely from overnight action. Meal fought back to 315.90 after a low of 300.60. Look for possible continued gains to 317.50. Bean Oil is at 36.65 from the overnight low of 34.87, and Beans looked to go limit down when they reached 975, but rose to 1028, a very nice recovery.
Then, collectively, markets began seeking their daily lows again almost in unison as they had risen.
I was a little surprised by the downward thrust of the markets because of all the pitching of recovery by the Treasury Dept and other White House economic advisors over the weekend. Geithner was at G7 selling banking stock and saying “everything may not look so good, but our economic recovery is showing signs of revival.” He should know.
The way the game is played is to convince others the recovery for global economies is coming soon if not already here while pumping as much cash into illiquid banks as possible before the truth is known. I hope all banks passed the stress test and are fully liquid now. It would mean a recovery of sorts and it’s better than the alternative.
Oil Inventories were up from a forecast 2.0 M last week to a 5.6 M actual. The forecast this week is for surpluses, but not as grand as last week. The question is will it impact energy prices enough to break recent ranges, watch the 180 min charts. Oil and Gas traded at support levels going into the open of the US markets today.
Because of the sideways action in physical commodity markets like Crude Oil, Corn, Natural Gas, Gold, the likelihood off the seasonal push up in all these markets is diminishing at a very rapid rate. This visualization is very apparent in the Mid Term and Short Term charts in these markets.
I started pointing this out to Future Focus viewers after returning from Easter vacation. Almost every market was in a sideways channel. Some, like Crude Oil and Corn were in a wedge formation that was pointing to the upside. However, the chart action was showing the collapse of the uptrend range and when they failed to reach their resistance trend lines, down they came.
Crude Oil is selling off toward $33 – $35/BBl as a retest of that downside support. One reason for this is the collapse of the economy. Household net worth has dropped $13 Trillion in the last year and a half. To make up for this deficit, Baby Boomers, reaching retirement age will budget tighter, travel less, purchase fewer large items and save more money. Send them more stimulus money; they will save it. Values, prices, and employment are going down more.
Corn is heading back to $2.00 - $2.50/Bushel. The demand factor for ethanol is diminishing. As the current Washington group attacks fossil fuels, Ethanol will be included in that fray for a time. It just is not a viable alternative to gasoline and as the price of gasoline falls, so too the value of ethanol as an additive. We are going electric cars, people. Drop the interest rate some more because Baby Boomers are saving, not buying.
Again, no buy, hold or sell intended in these comments, but I took a week’s vacation and stayed home; planted my garden. No trips anywhere, not even locally. Business is more important to me now than rest and relaxation as I ready myself for retirement. Maybe others are like me? Click this link to Population Growth to 2018.
Chart of the Day is the ST for Oats as we see selling pressure coming in. The USD was strong overnight, that is an understatement, and continues strong with selling in the equity markets. Oil has finally broken down from the wedge on the ST chart that was centered around $50 per barrel. Investors are concerned that earnings reports this week will continue to stoke concerns that the economy is in for some hard times, It doesn't seem that this should come as a surprise.
Ron,
I saw your blog on "OIL TRUTH" and found it to be full of hype(fiction) please look at the below link and I think you may want to add the below link to your blog to provide a more balanced view of potential domestic oil production versus alternative energy solutions.
http://www.snopes.com/politics/gasoline/bakken.asp
Bob,
Thanks for the recent Snopes article updating the information I was given on the Bakken Oil discovery. The link I placed in the text is to the USGS.gov website which released the article on April, 10, 2008. This is the same site referred to in the Snopes article and unless it is the USGS trying to sell news letters, I don’t know who they are derisively talking about. I will add the link you sent to our site as well as http://www.youtube.com/watch?v=NbakN7SLdbk from the Lindsey Williams broadcast The Energy Non-Crisis. However, I do not find the Rand Corporation Snopes refers to in the article to be a valid unbiased reference source.
The bottom line is: there is/was no Peak Oil which is the subject of Oil Truth and Peak Oil, a previous blog I wrote on the subject. There is oil everywhere and we are being lied to about its abundance. I am not promoting oil as the only energy source for the US, but where are the substitute sources? Are they ready to take over fully the place of Crude Oil today? If so, close all the refineries now. Until they are, I don’t want to be bent over backwards with $147.50/BBl oil on the false premise that we are running out of it.
Recently Lean Hogs have been locked in a range on the Mid Term Chart, but now we are watching to see if support will fail as we approach 70.52, the low from the Short Term Chart. A failure at these levels could open the way for significant selling. NOTE: Crude Oil is trading below $50 ahead of this mornings inventory. The expectation is that the surplus will continue to increase which would undermine Crude prices. Additionally, the US markets have started the day a little bearish, which generally will also undermine Crude prices. This Mornings Capacity Utilization and Industrial Production for the US were still weak.
Market Correlations, Weak Markets currently equal stronger USD which means lower commodity prices. Grains could move lower, which would improve profits for livestock.
Crude Oil Prices tumbled this morning from highs at $52 overnight to 48.875 after the open bell of the US Trading session. The Short Term Chart becomes of particular interest, because it reflects what is going on in the markets. Surpluses in Energies vs. diminished demand outlook through the end of the year have weighed heavy on Crude and even worse on Natural Gas with huge surpluses.
Signs that look like recovery in global economies continued to be over shadowed by concerns that more loan defaults could hold things down in the equity markets. Daily gyrations in the equity markets lead to speculators alternating from bull to bear in 24 hour cycles.
All that being said the Short Term Chart paints us a picture of Oil prices posting higher lows and lower highs as it wrestles with the $50 mark. The EIA report and OPEC's fundamental assessment of demand are both expected to project reduced demand for Oil in 2009. Earnings reports will weigh on the equity markets this week, and unless we see surprises to the upside it could be a tough week for market bulls. If this is the case Oil and Natural Gas could remain bearish.
Breakouts for our current narrow range are above 52.475 and below 47.25.
Hogs have been having a hard time keeping up with cattle in the commodities market as the bulls took a little run on wall street, but now that the bears are exerting themselves with concerns on rising unemployment, defaults on loans, and potentially devastating earnings reports, the Hogs are heading south faster than the Cows. Adding to the lower values for Lean Hogs, is a sharp drop in cutout values yesterday, substantially reducing profit margins. Now, with a downturn in the stock markets the Mid Term chart is diverging to the short side and critical support has broken on the 180 min light. the next level of support on the Mid Term chart appears to be at $57, currently trading at $59.
