What Traders are Talking About:
* Hopes for European debt relief improve. European Union officials are reportedly considering providing seed money for a special purpose vehicle that would be able to issue bonds and buy euro-zone sovereign debt, thus keeping the risk away from the European Central Bank. News of this potential development sparked a late rally in U.S. markets Monday and carried over into overnight trade amid relief buying after recent sharp weakness. There is finally some hope European leaders and policymakers may be getting out in front of the financial issues. But there's still a lot of economic uncertainty ahead.
The long and short of it: It appears a worst-case scenario may be factored into markets for now. But buying interest is still corrective in nature.
* Physical demand coming back to markets. . While investors have been liquidating long positions, the recent sharp price breaks in many commodities is providing a buying opportunity for end-users. The result has been a noticeable increase in physical demand in many markets. The increase in physical demand should help shore up support under commodity markets as it provides fundamental support to help offset some of the macro-economic concerns.
The long and short of it: Increasing physical demand is a clear sign the recent price plunge in commodities was too hard and too fast.
* Focus shifts from crop condition ratings to harvest progress. With 15% of the U.S. corn crop and 5% of the country's bean crop harvested, that will now be the focal point instead of weekly crop condition ratings. Both corn and soybean harvest is running behind the respective five-year averages of 16% and 11%, but harvest activity will pick up across the Corn Belt once the cool, wet conditions pass.
The long and short of it: Even if yields are disappointing, seasonal pressure could hang over markets near-term. But long-term price prospects are bullish, especially if macro-economic concerns ease.
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