Commodity Roundup

13 Dec 10
Commodities

Corn
Looks like we are starting to get another wave higher after bouncing off of the 61.8 fib retracement. My swing trade system has initiated long positions. I’d like to see a rally past the 620 high CH11. If that occurs my next upside objective would be 675. Weakness before taking out 620 could spell a new downtrend. I think we have room to run higher.

Soybeans
Similar situation in the beans however last week ended a little weak. The rally needs to take out the high of 1355 to confirm strength. If that happens, my next upside objective would be 1470 SH11. RSI and MACD all are trending higher. Weakness below 1355 could begin a downtrend for the time being.

Wheat
Wheat in both KC and CBT have had a good couple of weeks. We are now up against resistance and overbought. We risk a double top if the market gets weak here which would signal to me a new trend lower. If we rally past the resistance in the face of being overbought, that would indicate pretty good strength.

Cattle
Looks like both feeders and lives are trying to let off some steam from recent strength. From the last wave in the LCJ11 contract we are nearing the 50% correction We are still clearly in an overall uptrend so long as the 104.1 area doesn’t get taken out by weakness. Watch the 61.8% fib (106.382) for market direction. Strength above it buy. Weakness below it sell. RSI and MACD are both trending lower indicating more weakness to come.

Bean Fundamentals

Here are a few charts based on the recent USDA report data. My general view of the bean market is extremely bullish. We haven't seen such tight numbers right after a harvest in many years.

The first chart is total useage. You can see even with current high prices of 1280 SN11 useage is still smoking the previous four years. In my view even with current high prices we really haven't started rationing supply. With useage so strong here prices will have to surge higher to fight for acres next spring. That says nothing to the fact that we may have potential production problems next year.



Stocks to Use, my favorite fundamental indicator. It's a formula that figures current stocks to current useage. It's a pretty good gauge to how tight supplies are compared to useage. Typically a stocks to use under 7% or 8% is extremely tight. The latest USDA report came in at an amazingly low 4.89%. My records go back as far as early 90s and I've never seen s/u this tight.

Final chart is ending stocks and tells the same story. We haven't seen numbers this tight after a fairly large harvest in many years.

BULLISH BULLISH BULLISH

USDA DEC 2010

Beg. Stocks: 151
Production: 3375
Total Supply: 3536
Total Use: 3371
Ending Stocks: 165
Stocks to Use: 4.89%