Grains Sell Off As Stocks Try To Stabilize
Global markets this morning:
Overall, it’s a pretty quiet start to the week, trading is expected to be light today with banks and government offices in the US and Canada closed today in lieu of yesterday’s Veterans Day / Remembrance Day holiday. Treasury markets are closed all day.
Asia Pacific and European stocks have been missed this morning while US markets appear set to start clawing back some of last week’s losses. Comments from US politicians and commentators over the weekend suggest that they have received the message from the election, post-election selloff and Fitch warning on the fiscal cliff.
Politicians now appear to be more interested in reaching a compromise to avoid going off the fiscal cliff likely through a framework agreement and down payment to start with more of the details to be nailed down next year. While overtures toward compromise may help stocks to stabilize, the risk that this could go to the wire again and the small chance that a miscalculation or mistake could send the country off the cliff could limit upside in the near term.
Similarly in Europe, the passage of Greece’s 2013 budget by a wide margin yesterday has provided some encouragement but it remains uncertain when the next round of bailout funds may be released. The resolution (for now) of the Greek situation may then turn focus back toward Spain and Cyprus, so markets may remain choppy for some time yet.
Economic news out of China over the weekend was mixed with positive trade numbers offset by slow loan growth. News out of India was disappointing, putting pressure on INR, while Japan’s economy appears to be falling back into recession. The biggest impact of the Chinese news has been to help resource currencies, particularly AUD, NZD and CAD to rebound today. Precious metals and European currencies have been steady against the greenback today.
The bottom has fallen out from under soybeans and wheat again today, carrying on from Friday’s declines. Increased stockpiles in the monthly crop report continues to continues to drag markets down on indications that the effects of this summer’s drought on some grains may not have been as bad as feared. Corn, the grain most impacted by the drought, remains steady today.
Another batch of major economic announcements came out of China over the weekend, including:
Trade Balance $31.9B vs street $27.3B
Exports 11.6% vs street 10.0%
Imports 2.4% vs street 3.4%
New Yuan loans 505B vs street 590B
M2 money supply 14.1% vs street 14.5%
Other major economic announcements include:
Japan Q3 GDP (3.5%) over year vs street (3.4%) and prevous 0.7%
India exports (1.6%)
India imports 7.4%
India industrial production (0.4%) vs street 2.8%
India consumer prices 9.7% same as previous month
There are no releases scheduled in the US or Canada today.
Research In Motion (RIM CA, RIMM) announced that it will be holding an event to launch its new Blackberry 10 operating system and new smartphones on January 31st, 2013.
Homebuilder DR Horton (DHI) reported EPS of $0.30, beating the $0.27 street estimate.
North American indices
The Dow Industrials (US30 CFD) bounced off of 12,700 and has rallied back toward 12,850 with initial key resistance near 12,975.
The S&P 500 (SPX500 CFD) is starting to stabilize in the 1,370-1,390 range but remains in a downtrend below 1,400.
The S&P/TSX 60 (Toronto60 CFD) is holding near the low end of its 692-718 trading channel.
Copper looks like it wants to stabilize in the $3.40-$3.50/lb range and a small positive RSI divergence has emerged but it’s too early to call an end to the current downtrend and a retest of $3.30 still remains a possibility.
US crude continues to attract support above $84.00/bbl and is currently trading near $86.25 but still needs to clear $88.50 trend resistance to call off the current downtrend.
UK crude is showing signs of life today, bumping up against $110.00/bbl with next resistance near $112.00 and current support near $109.00.
Gasoline is forming an ascending triangle base in the $2.60-$2.80/gallon range with next resistance on a breakout near the $2.85 old neckline then a measured $3.00 and $3.10.
Natural Gas continues to consolidate in the $3.25-$3.60/mmbtu area.
Corn remains steady in a $7.30-$7.55/bushel trading channel.
Soybeans are getting pounded for a second straight day. After breaking $15.00/bushel on Friday, soybeans have gone into a full scale selloff diving toward $14.30 with next support near $14.00, $13.70 and $13.25 on trend.
Wheat has been knocked back under $8.70/bushel, continuing to reel back after peaking near $9.10 last week. Next support appears near $8.50 then $8.30.
FX this morning
Gold continues to consolidate recent gains with its $1,725/oz breakout point emerging as new support. A break through $1,745 would signal the start of a new upleg with next resistance on trend near $1,755 then $1,780.
Silver remains well supported near $32.50/oz. It needs to clear $32.75 to signal the start of a new upleg with next resistance near $33.50 then $34.40. Current support appears near $32.00.
USDCAD continues to flirt with par, but remains in an uptrend with initial resistance near $1.0040 then $1.0080 with initial support near $0.9975 then $0.9925.
EURUSD is stabilizing above $1.2700 and a growing positive RSI divergence suggests that its recent downswing may be coming to an end. Initial rebound resistance appears near $1.2800 then $1.2875.
Major breakdown for GBPUSD today as the pair takes out $1.5900 and completes a bearish descending triangle. Next significant downside support appears near $1.5760.
USDJPY bounced off of a key support line near 79.00, keeping its current uptrend intact. An ascending triangle continues to form below 80.50 with next resistance on a breakout near 81.70.
AUDUSD has resumed its primary uptrend, climbing back above $1.0400 after a successful retest of trend support late last week. Next resistance on trend appears near $1.0480 hen $1.0520.