Indecision day

No better way to describe Tuesday, other than a day of indecision. Equity prices came off the boil from Monday’s sharp rally only to close marginally higher in the case of the Dow industrials. As investors reassessed the weekend developments there appeared to be a struggle to hear the same context from the same words. Some doubts to the rally crept in and that impacted both gold and the currency markets.

The dollar mirrored the behavior of the equity markets – rising as index values ticked lower and reversing direction at any hint of a rally. After all the pushing a shoving was done and the dollar had attempted to breach $1.4950 against the euro, it couldn’t build sufficient momentum and closed in New York at $1.4979.

Other commodity prices felt influences specific to their own markets. Corn prices in Chicago rose on prospects for a diminished crop after October’s cold and wet weather over the Midwest. On Tuesday the Department of Agriculture shrank its U.S. harvest prediction by 0.7% to 12.9 billion bushels. Despite the collective farming psychology of planting more in response to higher prices this year, the weather has undermined what could easily have been a glut of corn. Tuesday’s trading saw a further 2.2% gain to $3.945 per bushel for December delivery corn.

The weather has truly played havoc with this year’s crop. Despite everyone showing up to plant kernels this year, only 37% of the crop was harvested through last weekend and that compares to 69% at the same time a year ago and a five-year average of 82%. Analysts only expect about 63% of what’s left in the fields to be recovered. 

Soybean prices were yet another story, however. The big difference here is that 75% of the bumper crop is already harvested leading to a rather different dynamic. Last week farmers pulled out the stops and really reaped the best of the harvest – before then around half the crop was still in the ground. The expected harvest of 3.3 billion bushels will almost double global reserve stockpiles ahead of the 2010 harvest. On Tuesday the DoA said that global output would possibly rise 19% while reserves would increase to around one quarter of projected use. As a result the price of beans spent its fourth day in five in decline falling 1.4% to $9.5825 per bushel. 

Barclays Capital told investors that the price of gold will likely hover around its present $1,102 per ounce for a week before building up the conviction to assault $1,150. While gold was just a little firmer on Tuesday, the rethink on the gravity of Monday’s rally helped drag silver prices lower. Investors sold silver over fears that any hint of a stall in global aggregate demand would undermine silver thanks to its use as an industrial metal. On Tuesday morning we told readers of our flagship publication, Jurojin Weekly to target options on silver for precisely the opposite reason. As look would have it we were able to get aboard that trade because the world was doing the opposite of what we were doing.

Everywhere you look there are opportunities. We just have to be diligent in identifying them and then making a timely entry to those trades.

The Supreme Council of the Secret Order of Jurojin

Tyche Research

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