This Market Is Jumping
Grain markets gyrated wildly again on speculation over the weather and how climate might effect crop yields in a critical phase of development.
Corn made back all of yesterday’s precipitous losses, gapping higher and leaving a gap reversal of a reversal on the daily charts. The soy complex and wheat also rallied more than 2% each.
Grains are up sharply on renewed forecasts for hot, dry weather during the critical pollination period. Of note, corn pollination is severely retarded compared to prior years and to the five-year moving average. Only 6% — and as little as 1% — of corn has been pollinated: the average pollination rate at this stage of growth should be 20% or higher. Soy beans are also behind their normal development.
Corn gapped higher from the 50% retracement area (pointed out as potential support in yesterday’s commentary), leaving what should now act as firm support at the gap in the 219 1/2 to 222 area. Basis September
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PowerRating) sold off after the sharp jump higher, but still finished above the low from two days ago (reaffirming the gap support) for a close 8 1/2 higher at 224 3/4.
Another factor enhancing the bullish case in corn was an update from the USDA who downgraded the crop’s condition, reporting that only 65% of the crop was in “good to excellent†condition.
In addition, China, a major producer, said its crop was down nearly 5% from last year as their growing regions endure a drought.
Beans also rallied on the weather forecast. Bean oil
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PowerRating) led the way and got an extra boost from a rally in back-month Malaysian palm oil futures, which surged overnight, giving extra impetus to the bean complex’s weather-related bullish slant. Bean oil is the leading contract on the Momentum-5 List with basis August closing .69, or 3.89%, higher at 18.69. Soybeans occupy the number two position on the Momentum-5 List.
Stock index futures got going on persistent buying of blue chips after Caterpillar
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PowerRating), International Paper
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PowerRating) and Johnson & Johnson
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PowerRating) all handed in favorable earnings results. Dow futures remained in positive territory after the first pullback to close 125.0 higher at 10,645.0. The S&Ps
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PowerRating) added 10.00 to 1220.50, and Nasdaq 100 futures
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PowerRating) closed on their highs, up 38.50 at 1748.00.
Swiss francs
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PowerRating) lapped lower but came on strong to close in the gap left back on May 22 in a very constructive engulfing bar. The Swiss futures triggered a Pullback Off Highs setup on its trip .0044 higher to .5710. The intraday travel from low was just shy of 100 ticks.
The reason behind the rally in Swiss francs was heavy selling of the British pound in favor of euros on speculation the United Kingdom will join the current 12-nation currency bloc. Britain joining the euro would enhance the creditability of the currency that has steadily declined since its inception two years ago. Swiss franc futures are highly correlated with euro FX futures
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PowerRating), where any movement in the larger euro unit is reflected by a near equivalent movement in the Swiss unit. The historical linkage that binds the euro and Swiss franc continues: the Deutsche mark is the most heavily weighted monetary unit of the euro.
British pounds
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PowerRating) erased earlier gains and left a tail while closing at a 17-day low. The pound touched a multi-year low earlier this summer when the Labour Party was elected back into power, enhancing the chance that Britain will more quickly join the single-currency bloc.
10-year notes
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PowerRating) moved higher for a seventh gain in eight sessions, making good on their Momentum-5 List reading.
In the metals, copper
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PowerRating) closed higher for a second consecutive day out of its Turtle Soup Plus One Buy reversal pattern, gaining 1.05 to 72.00
Cotton followed through on its Turtle Soup Buy Reversal from yesterday with a Turtle Soup Plus One Buy signal from today, up .12 at 41.46 off the multi-year low struck yesterday.