Grain Markets Up On Oversold Conditions!
Feb 08, 2010
Well the Super Bowl indicators suggest if a team is part of the old NFL it’s bullish for the markets. While I’m a Colt’s fan and I have to say hats off to the Saints for their aggressive play and winning of Super Bowl XLIV.
The other change in tone was on Friday, there was a very negative cloud spreading over the market in regards to the European default situation. The Euro was breaking and the dollar was rallying, along with a very bearish U.S. stock market. While the U.S. stocks were down again today, the dollar was weaker and overall the energy markets were firmer. Bottomline: Fears of a global melt down have tapered a little. There is still concern but not the panic attitude that was sweeping into the market last week. This allowed the grain markets to even up an oversold condition prior to this week’s USDA Supply and Demand Report.
So the grains have enjoyed a bounce today. I would suggest its a technical bounce to a very oversold condition. My expectation for the supply and demand reports this week, is neutral on corn and wheat and slightly bearish on bigger global supplies as directly related to good crops coming out of South America. Since cash prices have dropped significantly, farmers have effectively stopped selling. The market knows we are coming into a time period when producers have to move cash inventory to raise cash flow to pay off debts.
Our working assumption is we are looking for a price low to be put in very soon in the grains and oilseeds and then the market will start looking forward for reason why we have to bounce up. Essentially, I believe the there are only two reasons for a rally. One is technical because of an oversold condition. This is not by itself enough of a reason. The other has to be a major revision of supply numbers in the March report. While we can hope I still believe this is a thin reason to hope for an extensive rally. There is only two reason why prices are going to exceed much more than a 1/3 retracement of the last months correction. First, the domestic and global economy starts to show a faster growth rate than expected (i.e. President Obama's economic policies are working) and second there is a significant weather event to reduce planted acres. I would suggest the odds are less than 1 in 5 that prices will now exceed the 50% retracement levels. However, even with these low odds prices and time are at levels where there is little options left other than to hold on and hope.
My only suggestion is to remind yourself how frustrating this feels—and when the market at some time in the future allows you to lock up 30% high profits you act so you don’t have to go through this problem again.
Special note: I will be speaking at the National Farm Machinery Show in Louisville, Ken., this week. My speaking times are Wednesday at 2:30 p.m., and Thursday at 10 a.m.. Finally, I will be part of a taping of U.S. Farm Report at 2:30 p.m. All of these events will be in South Wing B, Room 105. If you are coming to the show, please come on by and say hello.
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
February 2010: Louisville, KY … Anaheim, CA.
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