China inked a deal to buy 1.92 MMT of US beans with 120 designated for old crop. The new crop deal is far more political than economical with a Chinese delegation in the US over the past weeks to make this deal. This is a yearly thing that means little to the actual trade. The old crop sales, combined with hefty weekly export sales points to a major upside move in beans with the SX 200-day MA acting as the key pivot point. Subscribers can see a chart on the morning wires.

Corporate earnings are not knocking the cover off the ball but housing numbers are keeping the market relatively positive. Consumer confidence is down but not slowing the market down too bad today. A 0.5% increase may not look huge but considering this number has not been positive in 3 years we should be receptive about it. Job security is the main reason for the bearish result of the Consumer Confidence Index number. People are very nervous about job security and if the White House is going to secure jobs for the American people. We can look at Obama’s healthcare project in a couple of ways. One, if Americans keep losing job they will need healthcare, so consumer sentiment may change if unemployment rises over 12%. People may not care who pays for health care even if the wealthy get taxed more. Why work hard, get an education, work up the corporate ladder if you can sit home collect unemployment and get free healthcare? We can see this happening already with people that are disgruntled from being laid off.

beans are at a pivot point with the SX 200-day MA sitting just over the market at 933.50. daily high is 932. Watch for short covering above this level if and when we break above.

Today’s beans are supported by talk of an early freeze by Drew Lerner of Cropcast. He called an analog year 1965.

Wheat and corn are alightly higher in sympathy with wheat gaining nicely against corn

We’ve seen some downward spikes recently among the soft markets. Cocoa does it, cotton and coffee this week have done it. And these spikes didn’t last, well it didn’t last long in coffee, cotton has been fairly quiet the past few days and hasn’t recovered from the down move, but I sure don’t want to be short cotton here.Subscribers have been reading about my concerns that a 200-300 point drop was possible, yet I recommended buying cotton and got filled early on the day of the drop. I didn’t stop myself out. Instead, I’m actually looking for an opportunity to buy more, and no not simply to average my cost down, that’s a losing strategy from the get go.

Cotton Export numbers were expectedly poor, (some might say worse than that), which gives rise to the need for the recent price drop. Cash cotton business needs a boost and the US will be more competitive with lower prices. Will the recent price shift downward do the trick? Doubtful in and of itself, but I strongly believe that this market has other reasons to move up. Firstly, because we have the smallest crop in my memory (and I’ve been around since cotton trading 1980) and small crops only get smaller.  Second the trade are already holding short futures against their long physical position and they aren’t aggressively available to sell additional shorts heavily into strength. So, if (and when) the market gets strong from spec buying, who is going to sell it to them?

It is a fact that as physical cotton moves in the form of sales (principlly exports as domestic use is nominal) the trade will need to cover their shorts against sales they make. That means they’ll buy too. So the downside looks very limited in my eyes from current levels. The upside however is another story. We could see a tremendous bull mkt in cotton. Thus purely from a risk reward basis cotton looks ripe for a big move up.

Faith in the USDA is waning following their “special” report announcement for Aug 12th. The agency is at the whim of larger political powers with farmers now crying for their “bailout”. With cash prices plummeting, the government is going to mysteriously lose 1-2 million acres of corn to encite fresh buying. This is right after the congress agrees to limit speculation in agricultural markets. Will someone make up their mind please?

Gold looks to be holding above $950 here not breaking down below $944 as the USD continues to weaken.

Crude API #’s called for an inventory increase of 3.1 million barrels but we only saw an increase of 2.2 million.  Thisis wht led to the spike after these numbers and a close above $65.

It is obvious that during the summer doldrums it is easier for big orders to push prices around. We saw this happen yesterday, Tuesday the 21st, in cotton. We are seeing it again in Cocoa and coffee today. Is sugar next?

Regardless of the declines, regular subscribers should know that I had been calling for a 200-300 point drop in cotton, I remain friendly long term towards cotton as well as coffee. Coffee got flushed today when a large 400 lot order hit stops and KCU dropped quickly to 116.35, less than a minute later it was back to 119. Go figure….I also believe that sugar is headed higher long term, but that market may be overdo for a shakeout. Cocoa is far too crazy and thin.

The net impact can change charts considerably, so be aware of the impact that large orders can have in these thin summer markets.

August is generally a slow month, so if the market can’t get moving we may see a bear market again! People take vacation, move, or just sit and watch the market in late summer. This doesn’t mean t will happen but is something we should watch. The dollar 78.97 should be on the rise while the stock market drops; inversely the Euro 1.41 will pull back. Yes, we are seeing stronger earnings from Boeing, Pepsi, Caterpillar, and Merck this week but inflation woes and language the Fed is using is confusing the nation. Corporate cutbacks does not mean a company is profitable or creating income from customers. That games is getting old! Stop pushing back recession dates, telling us jobs are going to be created, and that everything is under control. We need to see and understand the truth. I know I sound like a pessimist but being a believer in our country I want to know all of the information and not half truths or off kilter language. We shouldn’t have to interpret!

We have completed the head and shoulders technical trend but the market has remained resilient and not plummeted like many expected. Luckily, we saw this and went towards the long side. Next level of resistance is 920 on the S&P, that is if earnings and economic reports remain positive. Day traders play the game for the short term score and are loving this, while the long term investor is definitely acting squeamish.