Over the past two weeks we have seen an interesting battle play out on the volatility front instead of the flat price forum. The government of Mexico bought corn straddles and strangles in July-Dec while buying a 7X1 put ratio in wheat in May-Dec. They have inflated volatility in corn by 3-4% while in wheat volatility is up 3-5%. This is an inequity that was reversed today, in a big way. As talked about this morning during the broadcast, wheat volatility between May-July has widened to 5%. (July @ 39%, May at 34%) This was simply too juicy an apple to ignore. Paper sold both July and Dec vol with the latter getting hit hardest. Paper sold 1,000+ WZ 600 straddles starting at 160 with a standing offer at 155 going home. The pit was only bid 151 on the close. This illustrates the opportunity available if you look at markets from outside the box paying attention to abnormal skews in the optioons market.

MPI

Corn inspections at 20.696 million equates to 580 TMT. This is not enough to cause front end concern. I continue to favor bear spreads with subscribers aware of my plays.

The gold market has sold off in recent weeks as the USD takes a serious charge against other currencies to liquidate the market from $1,158 to $1,085.  There is a huge support level at $1,070 and this should be used to bottom feed the market if it gets backj down there.  looks like the Euro/USD has found a bit of a bottom at $1.40 so that should help steady the price of the Gold market for now.  It is amazing that Gold hasn’t sold off more on the move in the Euro/USD from $1.52 to $1.40.  Gold is only down $120  or 6% in that time.

Crude Oil has declined from the overcrowded market above $80 and now has sold off to the 200 day moving average of $73.50.  This is a very critical support area and with rising inventories and a strengthening dollar it looks like it is only a matter of time that the $73.50 mark gets broken.  Unemployment still unhealthy and job creation at an all time low is not good for the energy sector.

It’s no coincidence that Barack Obama has made the decision to forge an all out effort at directing attention to paint our financial institutions as “the source of all that is evil” in the United States. Obama has lost healthcare by losing Massachusetts and it is becoming increasingly obvious that his administration desperately needs something else to make them pertinent .. and they need it quick. So attacking the “evil doers” is ideal. This is all about getting the people back on his side and since most Americans aren’t particularly fond of banks or credit card companies, they seem an appropriate, if not ideal, scape goat. “Banks are easy targets for a demagogue.”

Is Obama ready to die on this? He foolishly (in my opinion) now has Democrats scrambling for a new issue and focus and this one should serve to provide Democrats a position to make them look like the good guys, (you know fighting for the little man). At the same time it forces the foolish Republicans to take the opposite side and try to defend Wall Street. Combine this with The recent Supreme Court ruling regarding political “Free Speech” and the role of corporate money and ….well, it sets the tone for another round of “wealth envy,” and likely the true motive to play in the coming November elections. But is it worth the fight? What things bad could happen?

The agricultural markets lacks any real fresh information leading to the choppy two sided market in beans and corn. The bearish tone is winning due to sagging macro markets and an overall quiet tone to start the week. I like a rally this week due to oversold technicals and commercial interest in corn at current levels.

http://www.cnbc.com/id/34874608

My morning wire was completed prior to exports so I’m adding them here.
Corn: 327.3 TMT
Wheat: 181.9 TMT
Beans: 754.1
Rice: 192.8
Meal:356.7 WOW!
Oil: 50 TMT, marketing year high.

Overall a minor impact but with heavy meal and oil sales look for action in oilshare today.

MPI

The market had a decent recovery today moving dramatically off daily lows with good fund buying into the close seen as the reason. There is nothing fundamentally to look at so we have to focus on moneyflow, OI and macros. I feel this marketplace is due for a recovery, especially beans with this pit offering the best chance of recovery. There is talk that traders are looking to buy OTM strangles heading into the weekend due to a very flat volatility skew both up and down. I like the idea but this is for traders that use and understand volatility. It is a bit tricky playing volatility outright making this a game for the “bigboys” moneywise. Individual investors can look at buying upside calls in beans with call spreads no longer advised due to extremely low volatility.

MPI

 Its scary how the Fed can be profitable yet they can’t find jobs for a couple million people. I believe it’s their American duty to create jobs no matter what the situation is. Those that are out of work should be able to put their resume in to see if they have the education requirements to maintain a government or state regulated job. I know Wall Street guys that are bar tending and computer technicians that are cleaning floors to put money on the table. But what about those that cannot find a job doing anything currently? Right now a job is a job and providing for their families is number one. We have a small trading range of 1136 - 1147 on the S&P.