Double Bottom?

There is an old trading adage that says that one should be buying when the public is cryin'. We are testing the lows made in Nov in the stock market and so far they have held. Another axiom of trading and of life is that we everyone is thinking the same thing, someone is not thinking. We may be setting up for another leg down in all of these markets, but my money is on a bounce, maybe a big bounce. The fear and angst is so thick you can cut it with a knife. Market sentiment is overwhelmingly pessimistic with no one predicting anything other than pain, agony, and despair. The TV stations are selling gloom and doom, but we are at a time that I encourage you to hit the mute button and take a moment. I have learned one thing in markets and trading that comes to mind when thinking of the banks and the problems attendant to the equity markets, things that can't go on forever won't! Citi and BAC can only trade to zero.

On a positive note, the grain markets held up pretty well on a very grim day. Beans closed up a dime, while corn 1 and wheat down 9. The question remains in all of our minds, will the weakness in the equities chase the grains into another leg lower testing the lows made in early Dec. I am starting to see some give up selling from farmers who need to move corn, and just don't want to wait any longer on Mr. Market. There are mammoth bushels at the farm trapped above the market and any 20-30 cent bounce would instigate some aggressive selling from the producers. I have been rec. to farmers to sell basis and wait for the bounce, as any rally will immediately soften the basis in central pa as much as a dime, maybe more. Bean basis is very steady, no supply disruptions in what I believe to be a soft market. Wheat demand is also very tepid in PA as the mills have ample supply already booked and there are virtually no spot bids for wheat. This is not a normal phenomena this time of year in the soft red market, but this is not a normal year!

A couple random thoughts as I near bedtime in Mifflintown.

• If you are considering a sale of corn on a basis, you may also consider a stop underneath us @ 3.43 ish May. This will protect you if we decide that we have to go check out the Dec lows. If we do and hold, buy some calls with the money saved.
• The trade of the day was shorting March corn @ 3.60. This market is trading in a 3.60-3.40 range looking for direction. Look for a breakout of that range.
• Corn has held up better in the sell off than beans and wheat. Another leg down may be led by corn?
• The crush closed into new highs this afternoon which should help processors clear inventory and boost bean demand.
• Believe that we still have a chance to sell into a better market, but make your plans now. Answer yourself this question, if they hit the ball to me, what am I going to do with it?
• Congress telling us that we cannot live without Citigroup is utterly asinine.
• What would be wrong with raising the fdic insurance to "infinite" that eliminates any run on the banks while reducing public anxiety and the need to debate "toxic"assets. I am so sick of hearing about that!
• I fully support President Obama and we all must hope that he can find his footing; however, I find it bizarre that prior to the ink drying on the 800 billion stimulus bill our President is in front of the camera talking about cutting our national debt in half prior to the end of his first term? This is right after our Sec of State Hillary Clinton was in China encouraging them to keep their hand up in the bond pit. It all strikes me as a little odd?
• Smithfield Foods announced a complete restructuring, cutting 1800 jobs and closing 6 plants. Also hearing rumors of them pulling production out of PA completely. Not sure of the details or the validity of the latter, but at face value it does not bode well for demand for feed in PA. The barns will be repopulated over time filling in the gaps, but only after the pork margins improve.
• Last year was a very difficult year to manage through, especially if you were on the business end of the rally now evidenced by Pilgrim's Pride, Verasun Energy and countless others. Now Smithfield, the largest pork producer is reshuffling the cards. This reminds me that this is a zero sum game. Cheaper grain prices while ugly to the producer should help restore health to the balance sheets of the companies that we depend on to buy and pay for the crops that we produce.

Good day and good luck,

Jon Hart