Issue Date: July 10, 2009
U.S. Economic Outlook
Even though it does appear that the worst of the global economic downturn is behind us, there is a feeling that the anticipated recovery will take longer than previously thought. There are a variety of fundamental factors that the bears and the “slow growth proponents” on the economy are citing. One of these is the nonfarm payroll report that was released on July 2nd. The market was shocked by the news of a 467,000 decline, when a drop of only 365,000 had been expected. This number was especially disturbing to those searching for “green shoots” in the economy, especially since there had been a pattern of smaller declines in employment reductions for the previous four months. It didn’t matter that the unemployment rate was not as bad as anticipated at 9.5%, when 9.6% was guessed, or that manufacturing payrolls declined by only 136,000, when a 150,000 drop was anticipated. Traders focused on the bearish headline nonfarm payroll number. The bears on the economy continue to cite the rising unemployment rate, which according to some analysts, could rise to over 10% later this year.
By Alan Bush
|
Speculative Nightmare
Once again it is time to blame the messenger as the free markets and oil comes under attack. The greatest way to get a fair price for oil devised by the mind of man is getting reviewed by the CFTC as they try to determine whether or not the Federal government should reduce liquidity in the futures market by reigning in speculators. Now it is not just the US but governments across the globe are blaming speculators for the volatility in prices as opposed the real culprit the nation’s financial crisis. They see the speculators as the cause of the crisis but in reality they are the effect. The Wall Street Journal reports that “policy makers on both sides of the Atlantic launched an effort to crack down on what they called speculation in oil markets, underscoring concerns that a sharp rise in oil prices could worsen the global economic downturn the moves come at a time when the hotly debated idea that speculative investors are driving up prices is gaining credence, and political momentum is building to stop them. In recent months, oil producers and Asia's biggest oil-consuming nations have called for regulators to address the issue of price volatility, and the U.S. Senate has blamed speculators for high commodity prices.”
By Phil Flynn
|
Is The Fund Selling Over?
Wheat remains severely oversold and has not experienced a short covering rally to speak of. If the modestly higher trade of the last few days is the short covering rally, this market is in trouble. Or should I say more trouble.
I still expect the market to correct to the upside, but do not expect to see a sustained rally at this time. I expect this correction to be the result of a lack of selling in an extremely oversold market. If the fund selling is over, I do not see another big seller willing to take their place at this point. The same can be said for the corn market, which would provide support to the wheat market. It appears the heavy selling in both of these markets has passed for the time being. I estimate trend following funds to be net short 45,000 wheat contracts in Chicago. Regardless of the accuracy of my estimate, they are very close to holding a record net short in wheat. Additionally, they have effectively liquidated their net long position in corn.
By Brian Henry
|
|
|
