agriculture

Charts

The European Central Bank seemed to have disappointed investors yesterday after a lack of action sent markets reeling. The July US Nonfarm payrolls were reported better than expected today, which has so far sent markets soaring. With no clear advantage to the bulls or bears right now, I think it makes sense to sit tight. Here is what I'm looking at for commodities: 

Commodities Essential. 3 August 2012

Trade Essentials.

No new recommendations or adjustments at this time.

Alert: adding two new positions.

Let's short SLX and go long AGA.

We've taken some lumps lately as the correction in commodities extended. But I suspect much of that backing and filling is out of the way and fundamentals will dominate price action again. I recommend adding two new positions.

Trade Essentials.

Here is what I suggest you consider doing now:

 

SLX (Last price: $40.54)

SELL SHORT shares of Market Vectors Steel ETF, symbol SLX, at the market. Then place an order to BUY-TO-COVER ALL your shares of Market Vectors Steel ETF, symbol SLX, at $44.53, STOP; this order is good till cancelled.

 

AGA (Last price: $14.80)

Buy shares of PowerShares DB Agriculture Double Short ETN, symbol AGA, at the market. Then place an order to SELL ALL your shares of PowerShares DB Agriculture Double Short ETN, symbol AGA, at $13.77, STOP; this order is good till cancelled.

[For those seeking a non-leveraged way to play AGA, I recommend selling short PowerShares DB Agriculture ETN, symbol DBA, with a stop loss above $30.40. Note: this alternative to AGA will not be tracked.]

"It's like farming [corn] in hell!" ... sell the new news here?

Ok, we get it - it's bad out there. But might we see an end to this monster rally, i.e. is this hellish news priced in? I would say 'yes', but I'd add this caveat: unless the heat wave continues!

While not anticipating much-needed rain, temperatures have cooled off since the weekend when 100 degrees+ gave way to temps in the 80s. Now consider:

  • Appetite for planting corn this year was unmatched: US farmers planted the most acreage ever.
  • The USDA has reported a steady decline in corn export sales.
  • Sluggish gasoline demand is reducing demand for, and production of, corn-based ethanol.

It may not make sense to get super anxious here and start selling, but there is potential we see the monthly USDA report mark a ceiling, more or less, in the price of corn. That's not to say a sharp downturn is imminent, since prices will probably try to push even higher first. 

Commodities Essential. 9 July 2012

Trade Essentials.

No new recommendations or adjustments at this time.