Monday, August 2, 2010

Morning Update/ Market Thread 8/2

Good Morning,

It’s a Monday, so of course equities are up once again in an algorithm that has better than 90% odds of making your HFT platform millions – Old Faithful. The dollar is down, bonds are lower, oil is back above the dangerous $80 a barrel mark, and gold is higher.

There was a small move in the McClelland Oscillator on Friday, so expect today’s move to be large.

The dollar is breaking down below the 50% retrace mark of its last wave up. Meanwhile the Euro is right up against the 38.2%. Next support for the dollar isn’t until roughly 80:

Oil, below left, is making a run up and out of its latest trading range. Remember, there is a high correlation between oil breaking that $80 mark and equities breaking down. Gold, lower right, is poking up through what may be a descending wedge. If that breakout decisively clears that upper boundary, it is bullish:

Wheat has continued on its parabolic tear. Up another 10% since I last reported it, and now up 75% from its June low:

When that move reverses, boy oh boy… The rise has been parabolic for well over a month now, but finally the mainstream picks up on the move and pins the reason on…
Aug. 2 (Bloomberg) -- Wheat futures surged to a 22-month high in Chicago, leading grains higher, on speculation that dry, hot weather in Russia may force the country to curb exports, squeezing global supplies.

Temperatures in Russia may climb to 42 degrees Celsius (107.6 degrees Fahrenheit) through Aug. 7, the country’s weather center said on its website today. Although there’s no official statement about export restrictions, the market doesn’t rule out such a scenario, Phillip Futures Pte. said in note today.

“It’s very, very bullish and there’s no sign of it really stopping,” Peter McGuire, managing director at CWA Global Markets Pty, said by phone from Sydney. “I wouldn’t be surprised if it reaches $7 within the next two trading sessions.”

The September-delivery contract jumped as much as 3.4 percent to $6.84 a bushel on the Chicago Board of Trade, the highest level since Oct. 1, 2008, and was at $6.8275 at 11:06 a.m. London time. Prices jumped 38 percent in July, the biggest gainer of 24 raw materials in the Standard & Poor’s GSCI Index.

Milling wheat for November delivery surged 5.4 percent to 205.75 euros ($269) a metric ton on NYSE Liffe in Paris. The November contract climbed 34 percent last month and today climbed to the highest price since trading started in March 2009.

Draught in Russia! Yeah, that’s the reason wheat’s been parabolic, always have to have a reason unrelated to rampant speculation and a money/ political system controlled by those doing the speculation. Wonder how many people around the world will go hungry as a result? Not to worry, it’s Monday, and the equity markets are higher.

Credit to Mick for being the first to see the move off the July first low as being a rising wedge – it seems that everyone now sees it that way, with 4 waves complete, this would be the 5th wave (e) off the bottom. It would be expected to rise into the upper boundary of the wedge and then fall hard – below is a 60 minute chart of the DOW and S&P futures:

Being a 5th wave, it can truncate prior to the upper trendline, touch it, or exceed it. Looking at the waves, waves 1 took two weeks to complete, wave 2 required 1 week, and thus I would expect wave 5 to take one week or less. This coincides with an early August cycle turn date, which it seems, everyone who is a cycle watcher is predicting a hard turn - Armstrong, Crawford, and others. The first week of August is traditionally bullish, but the summer seasonality quickly wanes thereafter.

We have quite a bit of data this week, the highlight being the Employment Situation update this Friday. Today at 10 Eastern we’ll receive the Manufacturing ISM number as well as Construction Spending. Bernanke flaps his criminal lips at 10:15, displaying once again how powerless he is to affect anything positive in the economy besides shoveling money into the central banks hands. His predecessor, Greenspan, waxed ineloquently this weekend about how broken our money system is – no kidding, Alan, thanks for your “service” to our country. Now shut the hell up, will ya?

The move lower in bonds this morning is tepid and they are still sitting near their recent highs. Once again we are seeing distribution in stocks, this final wave higher should draw in more money for eventual destruction, especially if we exceed the June high.