The Day After
Not much to chew on, a day after a neutral, dull report. There is more space in grain balance sheets, Chicago is where the Big Money is for now.
There was an article in the WSJ on Monday, titled “Five Myths About Commodities Investing.” Readers of these pages are likely well versed in these so-called myths, but it is worth a quick read just to see how the public views our markets. The term “asset class” has amused us when we hear it applied to commodities, as if buying corn or cattle can in any way be seen as a long term “safe” investment. Row crop markets can make up for a short supply in only a year, rendering projections more than that nothing more than statistical dreaming. Then there is that little issue of carry, which equity traders and non-commodity analysts seem oblivious to. Commodity indexes, especially the ones dealing with ag markets, are in the dirt today. Are we at the beginning of one of those sector rotation periods, when commodities are popular again? Don’t think so, but the WSJ gets a little more coverage than the Cotton Row Journal.
A rally in a bear market? Or the beginning of a new bull? We go with the former, but at this time of year weather issues take the helm. Who knows what weather will look like prior to the acreage report, but maybe the market is on the edge to knock out a few shorts. Looks like a modest rally may be beginning, so lets see how high it can go with a 6.4 Mb carryout.
One technician we read sees spot correcting to 7188, and maybe 7365. Another just shifted down his retrace level from 8550 to 7750. Only a dime up. Dave Toth (RJO tech analyst) is hunkered down in the bear camp, but is using 6872 July as a bailout. We remain flat, and see the COT positions as stretched on the short side, but this is a condition that can last for weeks, or months. Momentum has turned up from a low level, and there is divergence between the low of 6/10 and the low of 5/14. A seasonal high was due this week, but this seasonal was upside down this year.
As always, please use protective buy and sell stops when trading futures and options.
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