FOR TUESDAY: (10/4) Monday’s violent rally was a bit of a shocker. We had cycles up for a few days and funds sometimes buy Oct. 1st for a week or so before the next USDA report but this was a bit much. Some announcement of the USDA not allowing flooded grain onto the market was a bit of a scare. Harvest in the Midwest was slowed by rain this past weekend, but should gain some traction under clear skies. More rain arrives on Tuesday and Wednesday, plus the weekly and 6-to 10-day forecasts favor rain for the western Midwest.
Stock cycles positive for Monday
FOR MONDAY: (10/3) Seemingly confirming the rumor, Agence France Press reports that Deutsche Bank is nearing a $5.4 billion settlement with the US Justice Department. This has catalyzed another leg higher in Deutsche Bank stock and lifted the whole market as it would appear that unconfirmed sources have ‘fixed’ the world’s most systemically dangerous bank (despite the fact that short-dated counterparty risk is soaring). Giving DB some breathing room is the fact that Monday is a banking holiday in Germany and that will leave traders in limbo.
The first of the month is often an up day for the stock market and cycles are positive so the market likely to accelerate and throw the bears under the bus. Given how rumors and problems so often erupt with these matters and given that cycles are messy next week for financials, we doubt we will get a clear-cut resolution. Moreover, we then have to deal with choppy trading ahead of the Oct. 7 employment. No rest for the wicked. Hard to make recommendations here on Friday and the first day of the new month tends to be a big-range volatile day anyway so have to see what unfolds.
Cattle look higher on Monday
FOR MONDAY: (10/3) Corn closed higher for the day after USDA reported smaller-than-expected Sept. 1 stocks of 1.74 billion bushels. The change in the stocks and other factors were enough to push December past resistance at the 20- ($3.34) and 50-day ($3.34) moving averages and higher for the week.
Going into October, attention will focus on the weather and harvest progress. Iowa should be dry the next few days to allow harvesting there, while showers linger in Illinois, Indiana and Ohio. The 6- to 10-day outlook (Oct. 5-9) favors more rain for Iowa. We are open for grains to recover a day but beans are a safer sell and corn could hit 340.50 and wheat 414 first. Hog and Pig report was bearish but how much more can it go before we get a bounce? Cattle look higher on Monday from limit down and key 119 level reached for Dec feeders so what to do but be patient.
Deutsche Bank climax by Oct. 9
FOR FRIDAY: (9/30) Deutsche Bank continues on the tilt-a-whirl, suggesting a Lehman moment, and of course they’re spouting rhetoric of how all is OK in the same kind of denial that Lehman spouted days before they collapsed. Some investors are starting a minor run but ultimately the government will come in and save DB. Starting to think climax by Oct. 9 so it continues to seem safer to be short overnight for a world and market on edge. Still, we won’t discount the power of the oligarchs to keep their world going and richer so those expecting the end of the world with DB or a Trump win will be disappointed. One of my favorite movies by Luis Bunel, The Discreet Charm of the Bourgeoisie, is a reminder of that: whatever the ups and downs and craziness of this group, they continue to grow and prosper and rule.
Continue to sell grain rallies
FOR FRIDAY: (9/30) Last of the month is often short-covering and profit-taking for funds no matter what the USDA comes up with. Hard to imagine anything friendly. Rallies will continue to need to be sold with harvest pressure and hard to imagine beans having a good number. We’ll continue to play cycles and patterns. We probably still need to be short corn and beans next week unless there’s a huge surprise. Cattle close to being done and hogs may be lower all of next week if the report goes poorly, as cycles are there for problems.
T-notes look lower one more day
FOR THURSDAY: (9/29) Still lots of data coming out and now we’re moving toward position squaring by fund managers at the end of the quarter. They push often stocks lower into the end of the month so they can buy them back for the seasonal October buy. T-notes look lower one more day. Everything is starting to get a bit more overdone.
Cattle getting close to being done
FOR THURSDAY: (9/29) Hard to be short grains but market may continue short-covering on Thursday, and Friday’s report reaction may also continue with short-covering. Harvest selling should pick up by Sunday. We may have to continue to take profits on grains if we can get lower. In the end, we’ll have to sell any rallies on Friday or Sunday if they manifest. Cattle are getting very close to being done but still a few more days left to sell. Hogs are sideways before Friday’s Hog and Pigs report.
Harvest selling should pick up by Sunday
FOR WEDNESDAY: (9/28) Crop fundamentals remain bearish with harvesting under way in much of the Midwest this week and forecasts call for dry weather the next few days. The seven-day forecast also favors dry conditions for much of the Midwest, while the 6- to 10-day outlook has above-normal chances for rain in Iowa and for much of the northwest quarter of the country.
Not sure what the late rally was about except some short-covering before Friday’s report. Hard to be short grains on Wednesday but market may continue short-covering on Thursday and Friday’s reaction may also continue short-covering. Harvest selling should pick up by Sunday. We may have to continue to take profits on grains. Meats gave up gains late and not sure what to do with them now. Cattle close to key targets so a recovery could happen on Wednesday.
Month-end profit-taking on S&P?
DEC. E-MINI S & P 500
ANALYSIS FOR WEDNESDAY: (9/28) Resistance overnight at 2157-2159.50. Much above 2160 and we may have to rethink the pattern and what’s happening. The most bullish scenario and would probably project 2122 on futures. Cash still wants to fill the 2164 gap from Monday. Deutsche Bank isn’t any better and that will still hang over the market.
OVERALL: Key support at 2122-2125. Three larger waves down could easily go to 2087 or 2072 this week and we had started to give up on that scenario after the Yellen save last week. Open to more if news gets messy but usually you can’t get too bearish in October. We’re waiting for the Merkel save after her practical and realistic announcement this week. Given the EU bail-in capacity and the impact on the economy, she is not thinking like a businessman.
WEEKLY CHART All the patterns and seasonals point to higher prices into October, with 2218 being the next larger target. Will need some major unexpected news item to rattle the markets and so far it may be Deutsche Bank but maybe more coming.
SHORT-TERM: (9/26) Market may consolidate before Oct. 7 employment report and then take off, with Oct. 17-19 possibly being a pullback area. Until we see lows in Sept. 30, we’re not totally sure and what the pattern is saying. Given at least a 3-3-5 pattern happening, the 2100 region is a minimum target if 2125 holds, we bounce and then fall another 50 points or so.
LARGER PICTURE: (9/22) The proportions of the weekly and monthly charts from the 2009 low suggest that the whole move up won’t be complete until 2018 at around at least 2409. For those waiting for a crash or major bear market, we think they will be disappointed. The wave-one low from 2009-2011 took three years. We have been looking for a January high toward at least 2320 once the Sept. pullback is over.
Will be hard to take out S&P 2149 and 2153
FOR TUESDAY: (9/27) Lots of news this week and lots of Fed Governor speak and Deutsche Bank bubbling in the background. Hard to tell would tip DB over the cliff or when it will happen and would really have to do some work on it. Sometimes these news events just gather momentum out of escalating fear that is unfounded. Who know? We always worry about sucker punches as the powers that be do not let these markets fall for very long. Will be hard to take out S&P 2149 and 2153 now. Have to take one day at a time. Not sure how much the debate will really mean except big points for the media.