Greetings from Mifflintown, Thursday afternoon. I have been trying to stay quiet as the markets make those that talk everyday out to be a fool. Yesterday's USDA reports as I am sure you have reviewed by now were a little friendly to corn and beans, bearish wheat. The markets traded pretty aweful yesterday, starting higher and then falling to the lows by the end of the session, bearish right? Not so fast, Today we come out and start a little higher, and finish up on the highs of the day and new high closes in corn since the beginning of Feb. The above chart of May corn popping up today looking like we SHOULD have some follow thru. On http://www.keystonecommodities.com/ I have been showing for the last week the corn bean chart. We are battling back and forth and I feel like today's trade is validation that Mr. Market wants some more corn acres.
To keep things in perspective, corn is still in this 3.45-4.10 ish trading range. A couple of weeks ago we were talking the markets up as they were trying to extend. That was followed by the market being brought to its knees by the bearishness of Wall Street leaking over into the grain pits. When the stock market was kissing the 10 and 12 year lows, I commented on this line about how I thought it was constructive that the grain markets were holding up pretty well. All of this fits my trading bias right now, stock market up as everyone is still calling this a bear market rally. The higher we go, the better chance we have of pulling some sideline money back into the market. If this happens, we will have a little more than a short covering, we will have real buying and that will have an effect on our grain market.
Just so I am clear, tomorrow we could go right back down, it is Friday the 13th! But if we can hold this rally together, we will have something more to build a lasting rally on. I am bullish of energy from here, a close above 55 ish in crude will spark more short covering, perhaps we even get a .618 retracement out of it. Unleaded gas stocks are lower than we like as the refinery utilization rates are low. Refiners are seasonally gearing up for heavier gas runs while the gas crack improves in front of them. I would fill up farm tanks for planting and lock in summer needs. With ng below 4 you may even take a shot at fall propane?
If you have been hanging on by your finger nails to sell corn, you may get your chance. The basis for corn will be under pressure next week as the PA mills are stuffed. Feed demand is not all that stellar and the grain lines will be increasingly long as the market moves higher. Too many farmers wanting to cash in and get some working capital all at the same time. Bean basis is steady as the movement is not that active and demand from the SE is picking up. Basis could be very strong this summer if more beans don't show up. The PA wheat market is all but nonexistent. Dreadful!
So I look for the rally in stocks to continue as the market anticipates congress' move to relax accounting rules which should carry the rally farther that most think, bonds should keep getting hit hard as Uncle issues mountains of debt. I look for dollar to get hit to the downside which will help buttress and support all commodity prices in general. Grains should participate, look for a challenge of the upper end of the trading range to make another sale. This sounds great, let's see if we can pull it off. Right now I feel like we are playing a game of "Press Your Luck" as in we are all tired of whammies!!
This is a very spastic market full of head fakes and mixed signals. I like what we are seeing in the markets, but we have had our parade rained on in the past. Be careful of getting too bulled up on another 25 cent day. We are correcting and it is fun, just don't let the market convince you that the storm is all over.
Thanks for reading and good luck.
Jon Hart
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