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Jim Wyckoff's Morning Report: US Congress and President Making Progress on Agreeing a Budget

15 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - As the U.S. government partial closure is in day 15, it finally appears the U.S. Congress and President Obama are making substantial progress on agreeing on a budget measure that includes extending the government’s soon-to-be hit overall debt ceiling.

Many believe a U.S. budget/debt deal will be announced today, as the somewhat self-imposed
Thursday debt-ceiling deadline approaches. If the U.S. lawmakers do reach a deal before Thursday, it would be pretty much what the market place had expected all along—a last-minute compromise.

If no deal is reached by U.S. lawmakers before Thursday, serious strains in the markets will quickly surface. But that appears unlikely. The features of the market place Tuesday morning are a sharply higher U.S. dollar index and solidly lower gold prices. U.S. stock indexes and many other world stock markets have seen sharp rallies the past few days, not only on expectations that the U.S. lawmakers would reach a last-minute budget/debt agreement, but also on ideas the U.S. Federal Reserve will keep its very easy monetary policy (quantitative easing) in place for longer than what many had been expecting up until the U.S. government shutdown. With the government closure likely crimping the U.S. gross domestic product growth to a slight degree and also rattling investor confidence, it seems the Federal Reserve was prescient in leaving its monetary policies unchanged at its last FOMC meeting a few weeks ago. Add on top of that the nomination last week of perceived monetary policy dove Janet Yellen to head up the U.S. Federal Reserve next year, and most of the market place got a good dose of bullish tonic.

The dearth of U.S. economic data the past two weeks has put a damper on many markets, which could account for the generally low volatility seen during the government shutdown. The next big unknown for the market place when the U.S. government does reopen its doors is when and how will all the backed-up U.S. economic data be released, or will some of the reports just be permanently cancelled. At present there is no consensus on how this matter will play out, mainly because the government stats officials have been on furlough and probably have not yet even discussed how and when to disseminate the backed-up U.S. economic data. If much of the backed-up economic data is released in a short timeframe it could make for higher volatility in the market place, at least for a short period of time. In other overnight news, the closely watched German ZEW economic expectations index rose to a higher-than-expected 52.8 in October versus a reading of 49.6 in September. The German DAX stock index hit a record intra-day high following the
upbeat economic report. U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and the Empire State manufacturing survey.

US Dollar Index

The December U.S. dollar index is solidly higher early today, on short covering. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at October high of 80.865 and then at 81.000. Shorter-term support is seen at 80.500 and then at the overnight low of 80.340. Wyckoff's Intra Day Market Rating: 6.0

NYMEX Crude Oil

November Nymex crude oil prices are lower early today. Bears have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. In November Nymex crude, look for buy stops to reside just above resistance at $102.00 and then at Monday’s high of
$102.52. Look for sell stops just below technical support at last week’s low of $100.60 and then at $100.00. Wyckoff's Intra-Day Market Rating: 4.0

Grains

Markets were mixed but mostly weaker overnight. The key “outside markets” are in a bearish posture for the grains early this morning, as the U.S. dollar index is solidly higher and crude oil prices are lower. Harvest is presently at full speed in most areas of the Corn Belt. However,
rains will be falling in some areas starting today. With much of USDA still closed, there was no weekly crop progress data issued Monday and there remains a lack of fresh fundamental news for grain traders to digest. 

Technically, the corn bears are in full command, soybean bears have the slight chart advantage, and wheat bulls possess the slight near-term technical advantage.

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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