China raised its interest rate .25% overnight. Grains should be under pressure early, however, I am cynical enough to think this is a strategy on the part of Chinese to once again buy our food on sale.
First: The Grains…
There is support in CZ down at 521. That would completely fill the recent gap, and mark the half-way point pull back of the recent 1.34 jump from the October 4th 6 week low at 454 1/4 to the recent 2 year high last Wednesday, Oct 13 at 588.
The gap is down to 528. First support is 537, then 521… If the wheels really fall off, 505 1/2 is a target, however, at that price, I believe every cattleman and ethanol plant manager will be borrowing his neighbor’s trucks to buy corn at those levels.
In SX, we had a 1.62 rally over the same time frame. 1/2 way back is 1123. However, the first support is at 1150, then 1144 then 1135.
Second: The US dollar:
For the US dollar, it seems that the recent 9 month low at 76.33 was enough of a tempting sell target to have a near term low. Certainly a bounce back to 79.124 and then 79.98 seems to be a good upside target. Six weeks ago, we were at 83.62. 4-months ago in June, , the dollar was at a lofty 19-month high at 89.10. Interestingly, on a longer term chart, there is a great trend line support. Pull up a weekly chart. In fact, there are two long term trend lines worth looking at on the US dollar. If for some reason the dollar would rally above resistance at the 89.00 level with a powerful settlement above that level, that would open the door up for a major up move in the US dollar. Technically, those two trend lines look impressive, and I will be talking about them more in the coming days and months.
Third: The Dow:
Finally: Gold… I noticed that every other store in a 20 mile drive down route 14 here in northwest Chicago had “CASH FOR GOLD” stores. Seems like the rest of the world was looking for 1500 dollar gold as well… I was waiting with a sell order… Unfortunately, I never got a chance to sell it there. The high print was 1388. 112 bucks short….
Right now, I don’t see any support until 1300, and then 1272, I like re-owning gold at 1266, which was our June 10th high. Old high resistance translate to good support longer term.
As for the Stock indexes, this week should be a good test for any strength in the market. Chinese interest rates going higher has to be a negative for US stocks. Chinese interest rates going higher is the way of China admitting that they have an issue with inflation. A shot across the bow.
The Chinese have inflation. The US has deflation.
Food for thought. Big fundamental facts like that have long term impacts on how markets move. I thought it was interesting that the Dow cash could not get above 1100 level. For Dow cash, I like 10650 as first support and then 10500 for second report.
It should be an interesting trade over the next few months.
I think, if the grains break hard and then rally back, that will be an indication that grains will have a story for the next year.
Good Trading
