"If it doesn't challenge you, it doesn't change you."
-Anonymous
Commentary
Last week Thursday I sad by "Wednesday of this week we will be looking back at Friday and saying yes, the US dollar made a high and now grains are rallying." Now investors with the US$ falling are focusing on longer-term supportive fundamentals, with forecasts for warm, dry weather keeping traders watching the threat of declining soil moisture for an early planted US crop. Dry soils in parts of the Midwest are keeping recently planted crops from germinating. Meanwhile, firm cash basis levels reflective of tightening soybean stockpiles added further support to underpin prices. An ongoing decline in soybean registrations for delivery against the July futures contract added to the supportive tone in the market.
Support came in overnight for all commodities amid expectations that the US Federal Reserve will launch another round of quantitative easing and other central banks will cut interest rates. Dennis Gartman was quoted on CNBC's Capital Connection last night as saying the odds for a US QE3 program are now essentially 100%. "The Fed has made it abundantly clear that it has kept QE3 up on the table and would be executed if economic circumstances deteriorated. And you have to admit that Friday's (U.S. jobs) number, no matter how you try to slice it, was deterioration."
Both corn and wheat have a negative seasonal into the last half of June, while soybeans typically trade sideways during this period though early July before moving sharply lower later in July if rainfall is adequate. Thus, it is the corn market that traders will be following closely over the next couple of weeks as if widespread rains fall in the Midwest next week, it could set the stage for a downside breakout below $5.00 area. On the other hand, if rainfall once again disappoints this close to corn's pollination window, especially since an estimated 45% of the US corn belt has received 50% or less of average rainfall over the last 30 days, current prices would likely encourage end users to buy as prices could quickly retest resistance near $5.50, but probably not until next Tuesday's S&D report passes.
US Dollar Daily Chart
Corn
The basis for spot corn jumped 15 cents in the last 24 hours reflecting the strong interest in buying the liquidation break of the month of May. Since futures do not seem to care about reality, you would have to deduct the technical resistance at 600-605 will hold for the computers and basis will have to do the rest if further rally is warranted. A close above 610 spot July changes the long term down trend on old crop corn charts.
July Corn Intraday Chart
Beans
I have shown this chart before and the purple line was severely tested Friday-Tuesday till finding legs. 1405-1410 should be a minimum upside target for this market.
July DailyBean Chart
Wheat
You can tell by wheat's unwillingness to join corn and beans on the recovery rally, it is the whipping child that gets spread against. 650 is required to be cleared to change trend. Wheat seasonal selling pressure typically ends when the southern wheat harvest moves North of Hutchinson, Kansas, typically past the 4th of July.
Chicago Wheat Daily Chart
Live Cattle and Feeder Cattle
It was a yawner of a day in cattle futures....expect more of the same for the remainder of the month. Choice beef cutouts are still flirting with the 197 area, and select is 13 some dollars below that. Packer margins are roughly $21 per head in the black. The feedlots are feeling the pinch for now, with asking prices at 123+ and no takers. After we get through June, the outlook is still bullish.
August Live Cattle Daily Chart
August Feeder Cattle Daily Chart
Monday I said gold needs to get through Friday's high of 1632 for the run to continue. Today's high of 1642 proves that wrong, and I can see why when I played with trend lines on the chart. If a correction starts here, look for 1585-1600 as a buy zone for what should be a push up to 1670-1680.
Gold Daily Chart
Crude
The bounce in oil started one dollar higher then my 79.00-80.00 projection while the US dollar stalls out. Potential upside recovery pricing could see a test of 88.00-89.00 before further downside erosion occurs. Keep in mind, if there is a QE 3, the low for oil is in. Mr. Gartman in the commentary, to his opinion, puts it at 100%. I agree, but the timing is everything, and the FED may like to see gas prices near $3.00 before they hit the throttle in an election year.
Crude Oil daily Chart
06-05-12
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Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable to Heartland Investor Capital Management , Inc. but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK of LOSS involved in trading futures and / or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL . NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. The information contained in this newsletter is privileged, confidential and protected from disclosure. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited.
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