Wheat: Level 3 cycle tops occurred Aug. 10 and Aug. 25. Next peak is due about two weeks from now. A related low is due now, which suggests a short-term oversold condition. The oversold five-day stochastic with narrowing spread concurs. A more important Level 1 cycle low is due, which suggests a degree of undervaluation. And prices are near annual support. The five-week stochastic is oversold. A Level 2 top is due mid- next month suggesting buyers are to bid wheat higher. A close above yesterday’s high at $5.00 1/4 would favor the bulls. Trade above $5.16 would be a bullish sign. Long-term research suggests range trade to higher prices to year-end. Posson’s Profit Watch (PPW): 8/6: long December SRW at $5.11 1/2, 1 unit of possible 2 unit trade. Same for other wheats that may not be as strong. Consumers should make incremental purchase of long-term usage. 8/7: calling Level 1 bottom or at least Level 2 for U.S., Europe (Euronext futures) and British markets. An alternate model script also allows for a U.S. low next two weeks. 8/20: buying second position December SRW. Other wheats are relatively weaker, but due for recovery. Manage your own risk for these buyback positions. 8/24: Manage risk relative to financial market interference.
____________________________________________________________________________
Corn: Futures are range bound with the five-day stochastic near midrange, which is a level to consider buy or sell signals. The indicator is sensitive to higher prices and so there is a bullish bias. Analysis suggests a Level 3 top was placed Tuesday and the next peak is due in about two weeks. A related low should be in place, which suggests buyers should bid for corn the next couple of weeks. Price wise, they may not complete purchase until as high as $4.03, but nearby resistance is around $3.90 for the December contract. Still larger trends offer a rise in demand/buyer interest to mid- to late next month. Long-term research suggests prices are likely to work higher into year-end. Harvest pressure is to be light. Trade above $3.78 3/4 would be a sign of rising buyer interest. A weekly close above $3.86 3/4 would be a sign the more important intermediate intra-year trends are up. PPW: 8/6/15: long December at $3.84, 1 unit of possible 2 unit trade. 8/7: consumers should scale in buy for long-term. 8/19: long December at $3.79 1/4. 8/24: Manage risk relative to financial market interference.
______________________________________________________________________________
Soybeans: Trade above $8.89 1/2 for the November contract would be a bullish sign. A breach of that level would likely be a sign a Level 3 cycle trend is up into a peak due two weeks from now. This provides insight as to how long buyers will need to secure supply. Price studies suggest they may pay as high as $9.20s to $9.40s. Larger trends offer buyer interest/demand into mid- to late September. Harvest pressure might be lighter than some may believe as the $8.00 area is likely a long-term value area. The business cycle model suggests rising prices from mid- October to year-end. It is feasible such a trend begins this week. Chinese soybean futures are still in an uptrend since early 2000s, albeit hefty imports have slowed momentum. Chinese corn is of relative strength to beans. With huge imports in July of 20 commodities, I discount negative Chinese economy talk. The Chinese stock market rout was mostly due to a market that rallied too fast. Over reaction in both directions and little for worthy insight into its economy. And the U.S. moves forward with a rise to 3.7% GDP for the second quarter. In the news: erratic weather hits India’s soybean output; to trim meal exports. PPW: 8/6: long November at $9.49. 8/18: Manage risk. Would like to see how the market handles a test of last week’s low. But one could exit and buy back on breach of resistance. Market is oversold enough to consider a rally. 8/19: long November at $9.06 3/4. 8/20: Manage your risk of these positions with stops. I will likely use an intra-day system approach and will not be able to update. Prefer to hold into next week and revaluate. 8/24: Manage risk relative to financial market interference.
___________________________________________________________________________
Soymeal: A close above this week’s high at $320.50 for the December futures would be a sign a Level 2 business cycle low is in place. Buyer interest/demand is to rise. The low would complete a correction since July and in relation to the more important Level 1 bottom forged in June. It will likely take buyers until mid- to late next month to increase inventory to satisfactory levels. And they may bid as high as $340.00s. A buy signal from the oversold five-week stochastic would be evidence. PPW: 8/6/15: long December at $331.40. 8/19: long December at $314.20.
____________________________________________________________________________
Cotton: Basis improved this week, which suggests the cash market rejected some of the large and fast paced decline in futures. This market is at a value level for buyers. More sustainable and intense uptrends will develop when prices breach 68.11 cents. The oversold five-day stochastic is rolling to long. Watch for an abrupt return to around 64.54 cents for the December contract. PPW: 5/31: Long December 66.00 calls at 2.59 as a buy back. 7/28: Consumer should make a major incremental purchase related to a Level 1 cycle low. Accumulate a long-term position. 8/13: Level 1 low in relation to USDA bullish report. Buy more calls/futures, manage risk. Consumer best take care of business.
____________________________________________________________________________
Cattle: A close above $143.45 October would be a sign the downtrend this month exhausted. The futures based cattle-crush spread shows feedlots have had losses attributed to high feeder cattle prices relative to soft fed cattle. Feeder auctions show reduced bidding, while a move above $246.78 Choice boxed beef would fed cattle prices should improve. Although futures may remain soft for a few weeks, higher prices are likely later this year. PPW: None
____________________________________________________________________________
Hogs: Pork cutout values may be signaling a short-term set back, but looking out to late next month into October expiration another cyclical upswing in futures is likely. 8/26: bulls are in force as they run out the bears from a perspective the discount of October futures to cash was too wide relative to strength in pork prices. The October contract may find resistance near $68.24, but I wonder if bulls target the 200-day moving average near $71.00. PPW: None
____________________________________________________________________________
Milk: December C3 futures peaked last week for a Level 3 intra-month cycle high. A related low is due today to mid-next week. The five-day stochastic is oversold. PPW: 8/3: If concerned of supplies distorting cyclical behavior, then use put options to insure production value. One could sell calls as well and in order to create a range of price. A strategy known as collar.
____________________________________________________________________________
Stock market: The Shanghai Composite was up nearly 5% for the second day in a row and breached important resistance at 3,000 and 3,200. 8/27: China’s Shanghai Composite was up 5% today. Asian markets were generally in recovery. European markets were positive in early session. The S&P 500 index rallied 4% yesterday and related futures extended gains overnight. Traders were stumped yesterday when they believed there was a pattern of higher prices early in the session then lower into the close. They sold late session, but were run out of short as the pattern failed and larger and likely longer-term thinking investors scooped up stocks. I think the drop seen in recent days dialed in this fall’s seasonal bearish tendency and mitigated overvaluation seen near the year’s high. Stocks are now likely somewhat undervalued. Consider a rally from now to year-end.
____________________________________________________________________________
Economy: Second quarter GDP rose to a strong 3.7%. Business investment returned. 8/27: Strong import of 21 commodities was seen in China in July. Some of those commodities were of strong importation throughout 2015. This is unlikely a sign of economic woes for China. The sentiment this summer was on the assumption a weak stock market is a sign of a weak economy. Not in China. The stock market rallied far too fast and corrected far too fast. Free markets swing for the fences, the extreme. U.S durable goods performed well and showed signs of business investment. Be cautious of betting against the U.S. economy. Housing and consumer sentiment performance does not support the bears in the stock market. 8/25: Although China has slowed its pace of growth still leaves other nations in envy. The trend since 2005 of GDP is up and in the past complications met something to markets, but caused little impact to final annual GDP. In the U.S. used auto prices are on the high side. Seems the nation is moving forward, while the stock market moves backward. I think the economy is likely to be at faster pace in 2016. And the nine-year cycle suggests the next recession can wait to near end of the decade.
______________________________________________________________________________
Interest Rates: 8/25: Ten-year note rates have eroded past six weeks. Although the three-year cycle is higher into next year, the weakness seen in recent weeks is a reminder upside potential may be limited.
______________________________________________________________________________
Dollar: 8/24: The euro shoots higher as the dollar falls. The euro breached a downtrend since a high made last year and some commodity indices peaked at the same time. This may be constructive action towards commodities during the next few years. The dollar peaked three weeks ago for a Level 1 top as anticipated. The forecast had been and still is for a weak dollar well into next month and it may remain so into October. Trade under 3.43 for the Brazil real will likely signal a long-term top for the dollar.
______________________________________________________________________________
Energy: Oil: 8/24: Financial markets interfere. 8/19: Farmers Almanac forecasting extreme cold winter? 8/17: The continuation chart shows prices violated a low made earlier this year that showed promising signs of a long-term bottom. The trend is down since June and a Level 1 cycle bottom that occurs two to three times per is due this month. This will provide another opportunity for a three-year business cycle low. A minimum variation downtrend has occurred since mid-July. If the continuation chart trades above $45.34 consider chance for a return to near $51.00. Natural Gas: 8/24: Financial markets interfere as a long-term uptrend develops for nat gas. 8/10: Weekly continuation chart of second contract since first quarter shows potential for gap filling around $3.44 to a challenge of the fall high in the $4.70s. The three-year business cycle is to be up into 2016. PPW: 6/10: Long August WTI at $62.01. Manage your own risk in the position. Intend to trade as a hedge for fall energy usage. 7/15: Rolled to October.
______________________________________________________________________________
Climate: 8/24: I find weather in the Corn Belt acts as though fall has already arrived. Seldom do I bother with fall frost assessment, but I think this year it is worth considering an early frost. An alternative is a wet harvest. I think a bit of yield erosion will occur in coming weeks for corn and beans. Long-term analysis had suggested a three-year cycle low in temps for earlier this year, while a related low in precip would wait until after summer. But precip bottomed early and temps have not yet bottomed. With talk of Farmers Almanac calling for an extreme cold winter the cyclical cool trend since 2013 may last into early next year. Odds are rising however, that summer 2016 can be warm and dry. Climate cycles and cycles of corn yield and production offer a problem some time 2016-2018, which suggests problems or volatility or strangeness seen this year is a clue of coming volatility.
