Grains - Nov 02,2009
Sunday, November 01, 2009
by PitGuru.com Authors of PitGuru.com
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The Grains Pit Review For the week of November 2nd, 2009 By PitGuru Matthew Pierce The previous week saw just how finicky our markets can be. I saw a downside bias helped by slight strengthening of the USD and a pullback in crude but a lack of harvest continued to hold the market from collapse. Both sides were seen with a midweek rally helped by excessive rains hitting late week with farmers looking at a dry forecast ahead. Month end was dealt with - nothing obvious as to future intentions with plenty of beans lost as the SX contract moves into delivery. Looking to the week ahead, things start with progress that is sure to show both beans and corn far behind historical pace with winter wheat seedings now a major issue as they roll through November. Not to ignore a delayed harvest, but is the trade forgetting the impact this will have on KWN versus WN? Obviously with the KC contract at a discount to CHI this is abnormal, offering spreaders a chance to sit in the weeds looking for an entry point. Another fundamental factor to consider is S. American planting (which offers a bearish input). There are few problems with ample rains over a majority of the key growing areas. Looking at macros, the old story applies. A weak dollar and things will trend higher while a strong dollar will help the downside. Crude is the same with gold and equities adding momentum as well. One other factor is money flow with commodities looking a bit overdone with no signal of inflation obvious. With the retail season coming and harvest sure to happen, trade has the two major inputs for November speculative capital to look at for direction and momentum. I feel harvest has priced in the delays and crop losses while retain expectations are too high. I feel both will add bearish momentum throughout the month. Looking at options I see one glaring aspect: corn and wheat vol are at or above 40% while beans, meal and oil are at 30%. This skew is exaggerated and looks like a spread situation. I like buying SH puts while selling CH puts. This can be done with or without delta. Also in options any length needs to be reevaluated with nothing on the fundamental side to help an upside bias. Look at taking off any upside position on a market spike like trade saw late last week. This market is going to grind itself lower lacking any weather shock so length is precarious... with or without a long delta. Overall the AG markets are waiting for the decline. I do not expect any major break, instead a volatility-grinding downside trend. Macros continue to offer major momentum so stay tuned to equities and the USD for best direction. In closing, I feel the upside is limited while the downside is limited until harvest is rolling. The forecast looks clear right now but that can change in an instant to read the daily wires for most recent analysis and maps.
Recent articles from this author
- Metals - Nov 16,2009 - Sunday, November 15, 2009
- Energies - Nov 16,2009 - Sunday, November 15, 2009
- Grains - Nov 16,2009 - Sunday, November 15, 2009
- Softs - Nov 16,2009 - Sunday, November 15, 2009
- Financials - Nov 16,2009 - Sunday, November 15, 2009
About the author
Daniel Cronin - PitGuru.com's Energies & Metals Guru Daniel Cronin has spent years on the floor of the Nymex as part of one of the largest energy floor brokerages in the business. His extensive experience stems from not only his Pit background but also through intense studying and implementation of complex technical analysis and market trading techniques via the mentorship of the now retired Ralph Acampora. Mr. Cronin brings subscribers a rare combination of book smarts and real world trading experience in one of the most volatile market sectors in the futures industry. Matthew Pierce - PitGuru.com's Grains Guru Mr. Pierce is a unique acquisition for Futures Press Inc. in that he has an unmatched level of real hands-on experience within the industry in addition to his floor trading expertise and top notch education at the University of Illinois College of Agriculture. Matthew has literally cultivated the perfect professional career as a grain expert by working with the industry's most recognizable companies such as Cargill, LaSalle Group, Conagra, Walsh Trading Inc. and many more. In addition to trading on the floor of the Chicago Board of Trade, Mr. Pierce writes what many in the business believe to be the best kept secret amongst trading reports available in the industry. Jurgens H. Bauer - PitGuru.com's Softs Guru Jurgens owns and operates his own order execution firm on the ICE trading floor. He has been a member since 1987. His firm, Jurgens Bauer and Associates, specializes in executing option orders for a wide array of customers and a variety of industry participants, including individual speculators, funds and members of the trade. While Jurgens has been an active member of the trading community he has also spent time since 2000 working at raising awareness of environmental commodities, educating industry professionals on emissions trading, brokering transactions between private counter parties and developing SO2 and NOx contracts for the NYMEX. Frank LaMantia - PitGuru.com's Financial Guru Soon to be Dr. LaMantia, Frank is not only one of the most educated traders on Wall Street, but also maintains an industry resume of substance and depth. Frank has worked extensively on an Institutional preferred stock syndicate desk, as a government bond specialist, and as a financial advisor all the while achieving multiple licenses in the finance field. With an extensive and impressive client list (including Citibank, Bear Stearns, Lehman Brothers, AG Edwards, Mesirow, UBS, and numerous Hedge Funds), Mr. LaMantia brings his one-of-a-kind background to his current occupation of full time trader.
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