So far grain traders have been waiting in vain for the funds to strap on their buying shoes and get busy in 2010. Perhaps its true that a lot of the fund managers are still enjoying skiing vacations in Switzerland, Aspen or where ever it is those types vacation.
All in all its been a surprisingly low volume beginning to the year. The lone exception has been in the wheat and today in the crude oil.
March wheat is looking to be the strong horse so far in the grains, which is ironic, because it has the weakest fundamental picture, with steady demand and a very large worldwide supply. Despite that, WH posted a new one month high today at 567 3/4, and settling +14 1/4 cents at 567 1/4.
Jan Beans actually posted an inside day down after Monday’s action, which is starting to look like a head fake potentially. Today’s high at 1058 1/2 was met with resistance and a settle at 10501/2. Early in the session it looked like 1042 3/4 would not hold. All in all if we don’t see the funds come soon, we could have a situation where weak longs who entered their positions looking for support from the funds, could puke their positions all over themselves in short order. Certainly if the 1034 level were to be tested, you might have some new year’s bulls take another look at their level of commitment to their positions. No one likes starting the first of the year with a debit in their account.
The action in the Dollar Index cash is looking like another case of buy the rumor, sell the fact. The whole world was talking about 81 as a target as recently as 2 weeks ago. Myself included. However, if 78 becomes the new ceiling and the anticipated rally at least through 80 does not materialize, we could have a correction in short order. This is why as traders, you have to use stops to protect your positions. The best laid plans of mice and men, always, always call for stop loss orders. The winners will take care of themselves. We as traders have to love our losses, expect them and take them as a matter of course.
Surprisingly so far this year has been the continued rally in crude oil. Just 2 weeks ago we were below 71 dollar and people were looking for a move lower to the 60 dollar level potentially once again. Low and behold we had a high today in Feb crude at 8336 is the highest print in 2 months. A breach above these levels would be a new 6 month high. Take a look at the monthly chart. Crude has been quietly making higher major highs and higher major lows since the lows in March 09. This looks suspiciously like what we like to call a sustainable rally.
March Corn still looks healthy, after Monday’s 6 month high at 425. That market looks like if it can get any fresh support from the funds with a settlement above the 425 area and we could be in for a re-test of the 480 level. A potential 50 cent pop if we can just get some follow through buying. However, if that fund buying does not show up, it would make sense to see a quick sell of as the market would be moved to re-price the evident lack of interest from the funds.
In the metals, we were mixed, with gold lower and silver slightly higher on the day. March silver settled lower at -5 ticks at 18170 after posting a new one month high at 18420. Technically a bearish hook reversal on the daily charts, it does not look like a major chart formation in any event. Gold took a breather after yesterday’s test of the 1140 level. Gold doesn’t really shift to firmly bullish without a settlement above the 1170 level. Although continued weakness in the dollar could be just what the gold bugs have ordered for 2010.
In the stock indexes, there is only one word to describe this trade. That is uninspiring. Lack of volume continues to be a plague to these markets. Perhaps there is massive amounts of cash on the sidelines waiting to come and play, but honestly, we have been listening to that garbage for over a year. Eventually the players are going to have to come back. Its just a matter of time. I think a lot of investors are wary of chasing the market, especially if like most traders, they missed a lot of the large rally back, endlessly waiting for the other shoe to drop in this market. I don’t think that shoe will come unless and until the retail investor gets fed up with not being long, and plunges back into the market.
With interest rates low, long term stocks are still the only game in town for longer term yields to beat inflation. A historical rate of return from common stocks at 7 or 8 percent is hard to sell to a client, after he just lived through a 2 year drop in the Dow from Oct 07 high at 14,200 down to its panic March low at 6,440. However, it remains, unfortunately, the only game in town. The US investor got smoked with the equity melt down in their real estate, ditto for the stock index drop last year. So much so, that the rally from 6,400 to 10,500 has left the average investor still wary. For these markets to get back on track, at some point, folks will have to take the leap of faith and re-own their stocks. At that point, in my opinion, the market will be most ripe for one more serious correction. Once we get to the point where there is absolutely no faith in the ability of this market to sustain a long term rally, that will be the day the new bull market begins. A reverse indicator of epic proportions is looming out there.
So, have your opinions, do your homework, take your positions, but protect yourself with stops… Hang on, it looks like it could be a bumpy ride. Right now, we are still hanging fire, waiting on 2010 to unfold what ever it has in store for us as traders.
