After watching and waiting for inflation since the FED began its steroid-induced QE and balance sheet swelling, there is some evidence that the big I may be near at hand. Whether this is for real, or whether it is just another sighting of Bigfoot is unknown at the moment. The main catalyst for inflation is wage pressure, and with unemployment full, and those with no desire to work also full, companies are having to pay up for new hires. Under current conditions, wages are expected to rise 3%, which means upward pressure on prices. Is it time to finally look around for some markets to buy as an inflation hedge? Best to find those that are trading at or below cost of production, and scanning across the CRB, there are many.
The Chinese economy is also a heavy contributor to inflation, and freight volume there is showing a 20% gain in a year, following a bottom 15 months ago. Electricity consumption bottomed at the same time, and is now +9% in a year. The IMF, has upped their world GDP estimate, but their record has been abysmal. The big bank/trade corps are nearly universal in their forecasts for crude and other commodities bullish.
May cotton is the man not only for cotton, but stands out as a true bull among others. We advise traders to exit this thing now, as notice could be brutal. The cert stocks appear to have been taken and digested on the swing in K/N to -200, and more than one strong taker is likely.
Understand we are not saying inflation is here and therefore one needs to buy hard assets. We are only writing of what we see, and rising wages are maxime amet to get asset prices bubbling. Recall it was this time last year when the softs bottomed, along with cotton, and began a group rally that lasted about 9 months. Same for the industrial metals in China. Now both of these sets of markets have come under pressure, giving back up to and above half the gains. Cotton is the only market of either grouping to hold onto its bull. However, our market is entering a phase when new crop is gaining power every passing day, and we expect quite a battle to be played out between booming demand for old crop, and booming supply for new crop. Dec has achieved a 67% retrace on this bounce, enough to try a short. Farmers too.
Timing is interesting near term, as today falls on a 21 Fib count from the minor high of Mar; and tomorrow falls on a 144 count from the intermediate high of Sep. Monday (4/23 actual) begins another negative seasonal for July. Looking back 10 years, there have been intermediate highs on 4/25/2016, 4/26/2010, and 4/16/2008. There were intermediate lows on 4/22/2015 and 4/24/2013. Be alert for an intermediate top in the next few days.
325 Cotton Row Cleveland MS 38732
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