I am really starting to believe that in short order, will be looking at a skewed version of reality. Like walking through the carnival hall of mirrors, fat can look thin in the right light and with the right curve of the glass.
With Unemployment technically at 9.7 percent after Friday’s unemployment number. The disconcerting part of the number was that 400+ of the jobs were public sector. Plus, if you read about the way they are counting census workers, it makes the whole number suspect. Remember in a month they can be re adjusted and we could swing + or – 100K or more.
If you look at an economy that, in the private sector, generated 40K plus jobs, it makes you wonder.
I harking back to the Newsweek cover “America’s Back” along with Vice President Joe Biden’s assertion that the US was back on track and would soon be generating 400K new jobs every month. That is a sound bite which could come back to haunt the DNC in the next election cycle.
As for the stock market in general and the S&P500 and Dow in specific, I have not changed my feelings. On the downside, those 50% retracements are weighing on people’s minds. Another 1000 points could be melted away in about 2 days trading, given our current volatility. With the increased volatility we have seen, I believe we will begin to have regular movements of 300 to 500 points, at least on a monthly basis. I believe it will get to the point where Congress will have meetings examining ways to squelch volatility in the markets.
After all, if Health care is best run by the Government, Banking is best run by the Government, the Auto Industry is best run by the Government, sooner or later they will figure out a way to sell voters on guaranteed investment returns with markets monitored by a “Stock CZAR”. If BP is not careful, it too, will be on the chopping block, no doubt to be better run by a group of Washington’s Best and Brightest.
There are plenty of intelligent lawyers in Washington standing around looking for something to manage in return for political power.
But I digress.
Back to skewed reality. I can envision a conclave of economists coming together, arguing that the goal of full unemployment is unobtainable as it is currently defined. In the 70’s and 80’s the accepted goal of full employment was unemployment at 6%. I could see this benchmark target being raised, for political reasons, up to 7% or 8%. If the bar is too high, simply lower the bar.
In the grains, look for corn to move another 25 cents lower from 350 CN to 325. I could see a flush down to 311 or 303 if exports don’t increase. Its shaping up to be a game of musical chairs, with US farmers with a lot of corn in the bin, done planting, and now they get to stare at the DTN all day. Farmers by nature of their business are speculators. I know that’s a bad word, but if you invest in inputs, and then hope for higher prices at the elevator for your product, you are speculating. By nature farmers are the ultimate bulls.
However, since farmers are people, their emotions impact when they finally pull the trigger on cash sales. Human nature results in similar emotional factors driving what should be a totally un emotional economic decision. Which gives us our present backdrop.
While farmers have been planting, they saw a blip higher in corn prices with the China news. However, 15 or 20 cargo’s of corn imports is not enough to firmly get us above 4.00 a bushel corn at the elevator.
In the next several weeks, even the farmers in MO, some on their 3rd re-plant, will get the crop in. They will get the beans in.
Then they will have time to sit and think. And hope.
If the prices dip to the point where they are protecting input costs, you will see a flush. A sell off capitulation. We are close right now, with CN breaking below 350. 325 will cause farmers to sell 1/2 of what they have stored. 300 will make them sell the rest in the bin. At that point, they will also want to buy puts on corn and/or sell futures at the board. That could take us down to 284. At that point, then, I think you see China drop the gloves and announce they want every kernel of corn the US can spare. Then we rally. First, though, we have to squeeze every drop of blood from weak longs.
Now to the Beans.
There are already some issues with old crop beans. All we need is one or two weather scares to give us technical support for a fundamental problem. As with anything else, we may have to shake out weak longs first. Does that shake out occur after 50 cents or 75 cents. Again, before we can rally, we have to have farmers and specs throw in the bullish towel. I personally think we will be led up this year by the beans. The meal is already trying. Don’t fade the meal.
The wheat will suffer the slings and arrows of a world awash in supply. That does not mean we won’t have 30 or 40 cent rallies to punish the shorts. For the wheat, I would want to sell rallies. But that is a strategy that requires a lot of patience and a lot of discipline. Too things generally in short supply with most speculators.
As always, use your stops when you place your positions. Money management, money management money management. That is the most important aspect of taking advantage of these moves.
Good Trading
