Harvest This
Grains wilted on the prospect of a
better-than-expected harvest both at home and abroad. The monthly US Department of Agriculture report on
the supply and demand situation in grains showed higher output in US
corn and soybeans and higher estimates for South American soybeans. The
report painted a bearish picture for grains — especially soybeans, since estimates predict Brazil,
the world’s second largest producer of beans, will harvest a record
crop.
Beans sank over 14 cents before settling down 11 1/2 at
436 1/4. As we often mention at TradingMarkets, price usually precedes news and
this was has been apparent recently in November soybeans
(
SX1 |
Quote |
Chart |
News |
PowerRating),
which registered for the second day on the
Implosion-5 List and have made new 10-day lows in several sessions over the
past few weeks. (The soybean crop yield is also expected to be about one
bushel of beans greater than expected, or about 39 bushels per acre).
In fact, every major grain component gave an
indication of potential downside. December soybean oil
(
BOZ1 |
Quote |
Chart |
News |
PowerRating)
signaled weakness in the bean complex by registering on the Implosion-5 List.
Corn
(
CZ1 |
Quote |
Chart |
News |
PowerRating) was in a Pullback
From Lows setup. And wheat
(
WZ1 |
Quote |
Chart |
News |
PowerRating) hinted it would reverse
by registering a
Turtle Soup Plus One
Sell setup.
Besides giving a strong collective indication of
direction, grains indicated they could make a larger-than-normal move:
November beans registered on the Multiple Days Low
Volatility List and December bean oil scored on the 6/100 Low Volatility
List. Contracts that show a combination of direction and potentially
large moves occur rarely, but provide for nice moves like those seen in the
grains today.
Three signals from the Market
Bias Indicators Page suggested stock index futures were overbought and could trade lower.
December Nasdaq 100 futures
(
NDZ1 |
Quote |
Chart |
News |
PowerRating) and
S&P futures
(
SPZ1 |
Quote |
Chart |
News |
PowerRating) lapped lower, tested yesterday’s open and broke down
out of intraday triangles. After breaking down (due to the announcement of an
anthrax case in New York), the
contracts held at the 38.2% and 61.8% retracement levels,
respectively, of their most recent swings. The recovery action in the
face of uncertainty and going into the weekend is a constructive sign.
The International Energy Agency said oil demand would
ebb to its slowest in nearly 15 years. And although OPEC may cut oil output
by another million barrels a day, rising production from non-OPEC countries
such as Russia, will increase supply.
Energy contracts were also negatively affected by the
anthrax story, falling on speculation that travel will decline as people opt
to stay close to home. The fundamental situation was already on traders’
minds, following word from the International Energy Agency that oil demand
in the 26 largest consuming countries would ebb to its slowest level in
nearly 15 years. And although OPEC may cut oil output by another million
barrels a day in a bid to support prices, rising production from non-OPEC
countries such as Russia, have been steadily increasing global output.
Crude oil and refined products registered outside
days out of pullback from lows formations, indicating an
increased likelihood they will continue lower.
November crude oil
(
CLX1 |
Quote |
Chart |
News |
PowerRating)
fell .84 to22.50,
heating oil
(
HOX1 |
Quote |
Chart |
News |
PowerRating) fell .0292 to .6384, and
unleaded gasoline
(
HUX1 |
Quote |
Chart |
News |
PowerRating) dropped .0263 to .6010.
Currency traders bought an early V-dip, and there
found a
place to fade the recent 20-day low. The action helped a Turtle Soup Plus One Buy signal to
work out in
euro FX futures
(
ECZ1 |
Quote |
Chart |
News |
PowerRating): basis December gained .00580 to .90700. Still,
New 10-Day Lows in four currency contracts is a definite
signal of a shift to the downside in momentum.