FOR WEDNESDAY: (8/3) Best day for stocks to fall is Wednesday as they congest into employment numbers on Friday. Dollar may finally find support also. Crude still in trouble until Friday. If the S & P stays above 2133, it still may be a minor 4th wave matching the July 5-6 fall and be followed by a new high into Friday. By next week, stocks could unravel for 1-2 weeks.
Grains due for a countertrend bounce
FOR WEDNESDAY: (8/3) Still like the long side of meats for Wednesday and also grains for a counter-trend bounce. Macro data is centered on US employment numbers on Friday. Soybeans closed lower for the second day on Tuesday as weather forecasts show mild conditions the next two weeks and USDA late on Monday said corn and soybeans continue to do well and are quickly maturing. Wheat markets were pressured by the lower soybeans and by news that Japan and South Korea have temporarily restricted imports of certain classes of U.S. wheat after a GMO discovery in a Washington state field. Crude oil cycles are lower into Friday with cycle lows projecting 35.00 max. Not a good thing. The dog days continue!
Position trades challenging this week
FOR TUESDAY: (8/2) Employment report week is often congestive so it‘s rarely a good idea to chase markets that are overdone to the upside like gold and silver–and stocks, for that matter. Usually this week lends itself to a lot of quick trades and we’ll look for some in the morning. Getting away with position trades will be challenging this week.
Breakdown to lower levels on Tuesday
FOR TUESDAY: (8/2) Warm and wet conditions are like a greenhouse—not fun to live in but great for growing. Beans are losing their fear premium. While temperatures turn warmer into mid-August, storms continue to rumble across the Corn Belt with maps for the next seven days showing coverage in most areas. Official 6- to 10 and 8- to 14-day forecasts out yesterday are warm but wet, supported by the latest updates this morning. New forecasts for August issued Sunday confined above average temperatures to the Southwest and West, by-passing most of the Corn Belt, with above average precipitation predicted from the I-90 to I-70 corridors as far east as central Indiana.
Nothing friendly in the crop reports. Breakdown to lower levels on Tuesday seems inevitable. Hogs and cattle are indicating lows in and can be bought on dips until August 12. Hard to chase after near limit-up cattle moves.
Huge complex of cycles peaks into Sunday night/Monday
FOR MONDAY: (8/1) A huge complex of cycles peaks into Sunday night and Monday. We find that stocks often rally the first day of the month and then pullback 30-40 S & P points and congest before the employment report. Currencies are very overdone and hard to chase but overall the dollar looks weaker until Aug. 7 even if we get congestion for a bit. T-notes look higher into Aug. 7 and metals also higher. The issue with all the market is finding entries and dealing with pre-employment report congestion.
Oversold grains likely to turn seasonally higher next week
FOR MONDAY: (8/1) Hot weather is expected early next week in the western Midwest with temperatures in the mid- to high 90s forecast Monday through Wednesday in Nebraska and Iowa, and in the 80s to low 90s elsewhere. The 6-to 10-day outlook (Aug. 3-7) is hot and dry for the western Midwest and hot for the rest of that region. There are a lot of energy points on Monday and oversold grains are likely to turn seasonally higher next week and through August in places. Hogs look done for now and cattle are due for a cycle low on Monday also and higher prices later in the week. We’ll let the dust settle before bottom-picking on many of these markets.
29-day cycle might allow a recovery for grains
FOR FRIDAY: (7/29) Month-end position-squaring by funds and the 29-day cycle might allow a recovery for grains, and usually they are higher after August 1 for a few weeks. Temperatures in the mid-90s are forecast Monday through Wednesday in Nebraska and Iowa, and in the 80s to low 90s elsewhere. The 6-to 10-day outlook (Aug. 2-6) favors a 70% to 80% chance for above-normal temperatures for the eastern half of the country then. That forecast has mostly normal chances for rain then. Wheat finished lower ahead of big harvests in Europe and the Black Sea. A wheat tour in the Dakotas expects a lower average yield there and that supported spring wheat futures at times before they also closed lower. Meats continue to be difficult. Feeders came off 5.00 off of their highs. Contract rollover out of August meat contracts may continue for late-dwellers.
Expect volatile post-BOJ trade
FOR FRIDAY: (7/29) Trade waiting on the Bank of Japan data and if you’re a night owl, you may be able to take advantage of it. We also have month-end profit-taking coming and rollover for August gold happening. Not sure GDP will mean that much in the morning. Projecting 1385 on gold’s current move higher over the coming weeks.
Market over-reacts to FOMC
FOR THURSDAY: (7/28) Slightly hawkish statement led to typically illogical unraveling. Trade now waiting on the Bank of Japan on Friday and the daily rumors and retractions there are creating huge moves over there. China also unraveled badly last night and that isn’t a good sign. Failure of the S & P to make new highs on the day also isn’t a great sign. Facebook reported results which simply crushed expectations. The street was expecting $6.01 billion in revenue and EPS of $0.82. Instead it got $6.44 billion – 84% of which came from mobile – and EPS of $0.97 cents. That result is being a little helpful in the after-market.
Weather threat vs. month-end profit-taking
FOR THURSDAY: (7/28) The 6-to 10-day outlook (Aug. 1-5) favors about an 80% chance for above-normal temperatures near the Great Lakes then and 70% chance for the remainder of the Midwest. That forecast has normal to above-normal chances for rain then. Besides weather, beans were also boosted a bit by China. We’re at odds between bullish weather and end of the month profit-taking potentially lifting this market and incomplete patterns. Will have to see how it looks in the morning. Hogs and cattle look like they will come off into the end of the month.