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Wyckoff's Morning Report: “Risk-off” Mentality Causes Bearish Grains

30 September 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - It’s a “risk-off” trader and investor mentality in the world market place Monday. The main focus of the market place is on the U.S. budget impasses that threatens to shut down part of the U.S. government Tuesday—which would be the first government shutdown in 17 years.

The weekend saw no apparent progress made by legislators on the matter. Also, in mid-October the U.S. government will hit its borrowing limit. 

These issues are presently an underlying bearish factor for many markets and could become a major bearish factor in the next couple weeks, if no progress is made among U.S. lawmakers and the Obama administration.

Gold may be seeing some buying interest due to safe-haven demand amid the U.S. budget and spending debacle. However, it can be argued recent selling pressure in gold was because it acted more like a raw commodity ahead of the U.S. budget deadlines.

It’s likely one of these scenarios will more clearly come to the forefront for gold early this week. The other factor causing a “risk-off” day in the market place Monday is turmoil in the Italian government that threatens to collapse it.

Italian stocks and bonds were under pressure Monday. Monday is also the last day of the month and of the quarter, which could make for more active market activity as traders square their books.

China markets are closed the rest of this week for the annual Golden holiday. In economic news overnight, European Union inflation fell to its lowest level in over three years in September.

Consumer inflation rose by 1.1%, year-on-year, in the Euro zone. This news bolsters the European Central Bank’s case that it could pump more money into the EU financial system and still not spark
inflationary problems. In an important development for many markets, Friday afternoon President Obama said he talked on the telephone with the Iranian president, regarding Iran’s pledge not to make nuclear weapons and both countries working to establish more normal relations—after more than 30 years of animosity.

A thawing in U.S.-Iran relations, a de-escalation of the Syria-U.S. confrontation over its chemical weapons and the surprising progress the U.S. had made the past few years on dramatically increasing its own crude oil production all suggest the Middle East may become less of a powder keg for world markets in the coming months, or longer.

Others would argue the notion of a stable Middle East is still just a pipe dream. Reports Monday said the Chinese government will relax its restrictions on public trading of gold, allowing more public and business participation in gold trading. U.S. economic data due for release Monday includes the Chicago Fed midwest manufacturing index, the ISM Chicago business survey, and the Texas manufacturing survey.--Jim

U.S. Dollar Index

The December U.S. dollar index is near steady early today. Bears remain in overall near-term technical command.

Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.490 and then at last week’s high of 80.760.

Shorter-term support is seen at last week’s low of 80.205 and then at the September low of 80.155. Wyckoff's Intra Day Market Rating: 5.0

NYMEX Crude Oil

November Nymex crude oil prices are lower early today and hit a fresh six-week low overnight. Bears have downside near-term technical momentum.

In November Nymex crude, look for buy stops to reside just above resistance at $102.00 and then at the overnight high of $102.54. Look for sell stops just below technical support at $101.00 and then at the August low of $100.80. Wyckoff's Intra-Day Market Rating: 4.0

Grains

Markets were mixed overnight. The “risk-off” mentality in the market place is a bearish underlying factor for the grains. U.S. harvest progress in soybeans are corn will likely progress rapidly this week, and that’s also bearish.

Wheat bulls are making a good upside progress. There are technical clues the wheat markets have put in major lows.

Traders are looking ahead to Monday’s USDA quarterly grain stocks report. That report is expected to be bearish for corn and soybeans.

TheCropSite News Desk

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%): 1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.



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