In Tuesday's Update I suggested that because of the difference technically with the grains today versus 2008, the likelihood of them selling off as they did in 2008 (if the dollar is bottoming) is small. Grains sold off yesterday but did nothing negative technically. They were right back up today. Both corn and wheat did some very positive things technically on their daily charts. Check out the individual comments belong.
Also, in watching the bean complex, the way they are trading is very typical of a grain bull move. They back off a little but never enough to justify buying at these levels and then they rally to new highs.
Some Developing Grain Fundamentals:
Some issues we are hearing that could be supporting the grains near term:
1. A lot of the corn that China has in the bins is moldy and not useable.
2. The potential for an El Nino right after two years of La Nina is increasing according to a leading weather expert. It has occurred six times out of the ten that we had two years of La Nina back to back. This would mean a dry spring and summer in the U.S. corn belt and for the western Canadian farmers. With 57% of the country in some phase of drought, this is not a good way to head into what could be a dry spring and summer. The Pacific Ocean has already increased in warmth by 1.1 C in February. That increase is huge and is the first indication of an El Nino developing historically.
TRADE ALERTS:
Buy April hogs.Buy 88.02 stop. Protective stop 86.80. Potential projection 92.00. (Potential risk $488. Potential reward $1592). Margin $1688.
Reasons for the Trade:
1. The monthly chart has a buy signal.
2. Hogs have been in an uptrend on the monthly chart since the August 2009 low. They now appear to be setting up for another wave up.
3. The weekly chart has a buy signal.
4. Hogs have been in an uptrend on the daily chart since Dec. 16.
5. On the daily chart the recent sell-off formed a double bottom on March 7. Technically that indicates a trend change from down to up.
6. Today was an outside day that can trigger a signal and market direction.
GRAIN COMMENTS:
MAY CORN: Since it failed the 150 day ma on Sept. 22 on the daily chart, today was the first time it actually traded above and closed above it. That is very positive. It also took out the high of the January 3 rally. Another technical positive. Of course, it needs to follow through. Considering that it now has a consolidation under it extending from late January through mid March, it has the support necessary to do just that. Long term the monthly is triggering a buy this month and the weekly did this week. Keep stops 641. Closed 669, up 10 1/4.
Position: Long 662 (3.13).
Projection: 700.
MAY MINI WHEAT: Today it cleared both the 20 and 100 day ma on the daily chart. That is significant as they both intersected at the same level making that area a double resistance. It was also the psychological 650 barrier too. It has succeeded in getting over this barrier in late Feb. but could not hold it. If wheat takes out 677 3/4 that would be further confirmation. That would be significant on the weekly chart too as that is where the 100 day ma intersects. That has held wheat back in the past. Keep stops at 633. Closed 664 3/4, up 21.
Position: Long 656 (3.13).
Projection: 700.
MAY MINI BEANS: They sure are trading like previous bull moves: a small sell-off inter day or over night and then new highs. Currently they are deep into resistance but do not seem phased by it. The near term target in 1400. Closed 1369, up 18 3/4.
MAY MEAL: After a key reversal top on the daily chart last week and a sell signal, the market turned right around and negated the formation. Long term it will reach resistance at 380.00. Possibly that will trigger a correction. You just don't know. Based on the monthly chart, it suggests the potential to 400.00. Closed 371.40, up 4.20.
MAY BEAN OIL: An outside day on Tuesday triggered a buy with follow through today. The high of the last rally (55.25) was taken out. That is positive. Long term it had resistance at 55.00 on the weekly chart and it is over that this week. Closed 55.48, up .68.
MEAT COMMENTS:
APR HOGS: I tried to buy them today. They did not reach my price and formed an outside day. I'll try again tomorrow. See Trade Alert for details. Closed 86.90, down .50.
APR CATTLE: They are struggling and suggest more sell-off. They formed a huge outside day today making the risk reward ratio not that good to recommend a trade. Watching closely. Closed 125.57, down 1.45.
SOFTS:
MAY COTTON: It triggered another sell yesterday but it is not following through. It appears to be attempting the start of a consolidation. It is pushing into support formed last December. Just watching. Closed 87.34, up .20.
MAY ORANGE JUICE: It has a sell signal but the follow through is not there. It is trying to hold 185.00 support. The daily chart is not giving much direction. I see nothing to do. Closed 187.60, down .20.
MAY COFFEE: It triggered another sell on Monday but there has not been follow through. It has consolidated since and it may rally. If it can get over 190.00 it has the potential to try for 200.00. If it could rally near that area (that is resistance now) it could be an opportunity to short. Why? Long term there isn't much to be encouraged about. On the weekly chart, coffee violated the 150 day ma last week. That is negative as it is the first time since the major rally began in June 2010 that it had done that. It needs to get over 191.00 to rectify that negative development. Either way it is a warning sign of more weakness. Many months ago I pointed out that the charts suggested a projection to 200.00. Coffee did reach that projection. That was good support and it couldn't even develop a rally off of that. If a market can't do so from a key level, it will go lower and try from a lower level. That is what it is trying to do now. There is some minor support around 170.00 but the major support is down at 150.00. That still looks like the long term projection. Closed 185.30, up 1.70.
MAY COCOA: The sell signal mentioned last time continues to follow through. Today's low 21.77. It failed to hold both the 100 and 20 day ma on the daily chart. It is now trying to hold 22.00 but has done damage long term. On the weekly it is now under the 20 day ma. It had held that for several weeks but has now failed. Not a good sign. It is, again, teetering on the edge of the 100 day ma on the monthly. Just watching. Closed 22.21., down .93.
MAY SUGAR: In my last report I mentioned that sugar needed to clear 25.00 to get over the cluster of resistance on the weekly chart. It did so today. Since the key reversal bottom on Monday sugar has rallied from 23.26 up to 25.58 today. It plowed through every resistance level as though it did not exist. Waiting for a setback to buy. Closed 25.50, up 1.06.
METALS & ENERGY COMMENTS:
MAY COPPER: It is still stuck in the range I referred to last time and is working towards the high end. Nothing new going on here. Closed 389.75, up .495.
APRIL MINI GOLD: The sell-off over the last few days has done its share of technical damage. On the daily chart it has violated every average. It exceeded the 1650.00 support but is back over it today. The monthly chart continues to not show any technical change but the weekly does. It has a sell signal and violated the 20 day ma during this sell-off. If it follows through as it did the last time when it failed that average on the weekly, gold has the potential to sell off to 1500.00 as suggested on the weekly chart. On the daily chart the 200 day ma intersects at 1680.00 approximately. When it failed it last December, the subsequent rally attempted to get back over it but failed and gold made a new low. The projection for this wave down on the daily is 1600.00. With that in mind, a rally on the daily chart could be an opportunity to short. The key is that 200 day ma and the 1700.00 resistance area. Closed 1659.50, up 16.60.
MAY MINI SILVER: I covered the position this morning as it had reached the projection and started to consolidate. Today was an inside day. It may try to rally. Just watching for now. Closed 32.726, up .545.
Position: Short 33.335 (4.13). Exit 31.150 (4.15). Profit $2130 (-comm/fees).
Projection: 31.000.
APRIL MINI CRUDE OIL: The inside day referred to in Tuesday's Update triggered a sell. It closed under the 20 day ma the same day with follow through today down to 103.78. There should be more to this sell-off but as I mentioned last time, I would not be surprised if it is volatile in the process. If there is follow through, it should reach 102.50 approximately. The monthly chart is still positive as is the weekly. Closed 105.11, down .32.
CURRENCIES & FINANCIALS:
JUN MINI JAPANESE YEN: Another attempt at a key reversal bottom. The last attempt was on Feb. 27. It failed to follow through that time. Now that it is at a much lower price, the odds of a turn around increases. What does the long term charts suggest? It doesn't look good. As mentioned before on the monthly the yen violated the 20 day ma last month with further follow through this month. That is the first time it has violated it since the major bull move started in August 2007. Needless to say, that is very negative. Last week it violated the 100 day ma on the weekly chart for the first time since the move began. Another negative development. The yen does have some support down at 117.00. Waiting for a rally to short. Closed 120.02, up .45.
JUN SWISS FRANC: Yesterday it failed the 107.81 low made on Feb. 16 on the daily chart. Technically that is negative. Today if formed an outside day and key reversal bottom. The chart does suggest the potential for a rally but there is a cluster of resistance from 109.30 up to 109.70. It still needs to get over 110.00 for an extended rally. Closed 108.52, up 1.03.
JUN DOLLAR INDEX: It triggered a buy on Tuesday and rallied to 81.160 today and sold off. Long term nothing has changed and the market is positive. It formed an outside day today. Move stops from 80.095 up to 80.350. Closed
Position: Long 80.860 (3.14).
Projection: 84.000.
JUN MINI EUROCURRENCY: It triggered a sell yesterday and made a low today at 130.09. It formed an outside day. Move stops from 132.02 down to 131.27. Closed 130.97, up .74.
Position: Short 130.47 (3.14).
Projection: 127.00.
JUN CANADIAN DOLLAR: It triggered a sell today but held at the 20 day ma and rallied. For over a week it has been consolidating between 101.00 down to 100.40 approximately. It is still in an uptrend but may be forming a 1,2,3 top formation. If it sells off below 100.30, that will confirm further the potential top formation. Closed 100.86, up .20.
JUN AUSTRALIAN DOLLAR: It formed a double bottom today on the daily chart. That normally means a trend change from down to up. Long term the aussie needs to get over 108.00 with follow through. It has not been able to achieve that. On the daily chart it needs to get over 105.25 near term to become more positive. That could stop any rally attempt. Just watching. Closed 105.42, up 1.05.
JUN E-MINI S&P: Another new high today at 1397.50. The world wide wave of money printing (ECB, England, Japan & our Fed) continues to be the only thing that matters to the stock market. This organized effort on the part of these countries to print like it's going out of style to boost asset prices, is behind the strength of the market. Closed 1396.00, up 7.25.
JUNE 10 YR. NOTES: Long term the monthly chart suggests more sell-off. Near term, however, they did reach some support around 128.000. The important point now is 129.020. That is where the rally today stopped. That is where the 150 day ma intersects. Notes need to get over that. That could produce a rally to 129.250 area. That could be an area to short again. Watching closely. Closed 128.270, up .025.