It would appear that we are set to finish out the week, and almost the month with quite a bit if green around. Were we to close right now, nearby corn would be up almost 14 cents, beans around 6 and even wheat up 11 cents. It does not end there as we find strength in a number of other markets as well. As I noted yesterday crude oil has poked up to the $50 mark before slipping backwards just a bit but the WTI market remains around 40-cents higher for the week. The positive sentiment even extends over to the financial world as the S&P 500 is currently up over 41 points and back to within striking distance of the April highs and even 10-year notes are now a smidge higher. For all intents and purposes, it would appear that the bulls should have an enjoyable Memorial Day weekend. Of course there is always the but and in this case it is, but what has happened to gold? Why is it no longer glittering and is there a message that we should be listening to here? The first thing that comes to mind is that the investment world is feeling better about the economic outlook and is returning to equity markets and the like but that is not backed up by the data, in fact just the opposite has been occurring. Is it because everyone is looking forward to the potential outcome of the upcoming election? (I had to stop myself from laughing as I wrote that last line). As is always the case, there are a number of real underlying factors that have allowed this market to slip backwards now for the past three weeks, one of which is the fact that we have reached quite overbought levels and were due for a correction. Sometimes we lose sight of the fact that the the job of the market is to try and constantly adjust to changes in the underlying factors and that is not precise. We always overshoot the mark then have to try and bring things back into balance once again. That would appear to be the case of what has been occurring in gold, and as I have suggested recently, could also be near the case for a number of other commodities. Note that gold actually posted its lows back in late November/December while the general commodity complex did not post a low until after the New Year so could possibly have been a lead indicator for the commodity complex even then. While there nothing to say this will be the case again this time around but the point is, we should never become lulled into complacency and believe that markets will not post corrections and often when they do, it takes longer and goes farther than most would think reasonable. That is exactly why we need to have plans in effect to take advantage of the opportunities that are presented.
I have not seen any information yet on the results of the Chinese corn auction that is slated for today but it is interesting to note that on the daily reporting system, the FSA has posted a sale of 130,000 MT of corn to China for this marketing year. That is something that has been a rare occurrence over the past few years.
Summer temperatures appear to finally be here to stay but that will include some unwanted moisture in the east and south. The trade will be anticipating a sizable switch in acreage from corn to beans on the next acreage report but of course we will not have that number for another month yet.
Currently we have grain and soy markets basically mixed and realistically at the same levels that we have been trading at for the better part of the past month, particularly for beans. As I commented yesterday, long weekends can often do funny things to the psychology of markets and if we are not greeted with a little fresh positive new next Tuesday morning, these recent bulls may begin to become a bit impatient.