The Assad regime fell in Syria over the weekend, though gold didn't show much reaction overnight through early Monday morning.
60 Minutes did a piece on Ripple, sparking the expected outrage from keyboard Crypto Warriors.
Last Friday saw live cattle packers blink first, reportedly paying $190 to $190.50, up $1 to $2 for the week and creating a new level of interest in cattle futures markets this week
Morning Summary: Three things got my attention over this past weekend, events I thought might “Ripple” through the markets as they began to open Sunday. To begin with, the Russia-supported Assad regime fell in Syria after “13 years of civil war and more than 50 years of his (“President” Bashar Al-Assad) family’s brutal rule”[i]. (Of course the dictator fled to Russia, where he’s going to find winter is a bit different than in Syria.) This recent uprising in Syria, and the power vacuum left in its wake, is one of the reasons I’ve expected gold to stay supported[ii], but it took a while to get rolling overnight. Eventually, the February contract (GCG25) would rally as much as $19.50 (0.7%), maintaining the sideways trend on its daily close-only chart. Then came the 60 Minutes piece on Ripple (XRPUSD), including an interview with its president Brad Garlinghouse. Naturally, the keyboard Crypto Warriors were up in arms as soon as the segment was over, calling it a “hit piece”, among other things. Last week, a good friend asked me my thoughts on Ripple. Since all I could think of was potato chips, I had him visit with my son. Lastly, which actually happened first, cattle packers caved and paid $190 to $190.50 late Friday, possibly changing the course of cattle markets this week.
Corn: The corn market was quiet to start the week. I could add the word “mixed”, but it doesn’t seem a qualifier is necessary. For the record, March (ZCH25) was sitting fractionally lower at this writing on trade volume of about 16,000 contracts, May was unchanged while registering 3,000 contracts changing hands, while July was fractionally higher with less than 2,000 contracts traded. Yes, it was that exciting, but not unusual for this time of year. As we start a new week, the structure of the corn market has not changed: Commercial traders continue to provide most of the support while the noncommercial holds onto its net-long futures position. Last Friday saw the National Corn Index calculated near $4.1550, as compared to the end of November $4.0675 indicating immediate-term demand continues to pull on available supplies. National average basis came in at 24.5 cents under March futures, as compared to the previous week’s 26.25 cents under and the previous 5-year average weekly close for last week of 17.25 cents under March. Additionally, the March-May futures spread covered 25% calculated full commercial carry, versus the previous Friday’s 32%, with the May-July holding at 12%, both below the bullish threshold of 33%.
Soybeans: It was a similar story in the soybean market where the January issue (ZSF25) posted a 4.75-cent trading range through early Monday morning on trade volume of less than 9,000 contracts. That isn’t much, but it does highlight the idea Eastern Hemisphere buyers weren’t interested to start the week. At least not to the degree the market showed last week. When the closing bell rang Friday afternoon the Jan-March futures spread was covering 20% calculated full commercial carry while the March-May covered 34%. The previous week saw 24% and 45% respectively. As with corn futures spreads, this tells us immediate and short-term demand remains solid. If we look out at the Brazilian-influenced May-July soybean futures spread we see it closed covering 40% as compared to the 43% the previous Friday. However, we know by looking at other Brazilian markets weather is becoming an issue again early in South American meteorological summer. Sugar and coffee have been on a run of late, with Brazil the world’s largest producer of both. The question in soybeans is if continued commercial buying will eventually spark a round of noncommercial short covering. The latest CoT report showed funds holding a net-short futures position of 98,500 contracts, a decrease of 7,400 contracts from the previous week.
Wheat: The wheat sub-sector was in the green to start the week with Chicago (SRW) leading the way. Here we see the March issue (ZWH25) rallied as much as 6.75 cents on trade volume of 6,700 contracts. There are a number of potential talking points with wheat including global weather, the weekend events surrounding Syria and Russia, and the rehashed idea the US will still see increased global demand for its abundant supplies. To me, though, the bottom line is the large net-short futures position held by Watson (my name for algorithm-driven investment trade in general) in all three wheat markets. The last Commitments of Traders report (legacy, futures only) showed funds held a net-short futures position of 61,500 contracts in Chicago, 22,700 contracts in Kansas City (HRW), and 27,400 contracts in Minneapolis (HRS). These were increases of 9,300 contracts, 6,000 contracts, and 2,100 contracts respectively. I still find the recent head fakes by winter markets interesting, turning technical patterns on the respective weekly charts intermediate-term bullish. The bottom line is both could extend recently established uptrends on nothing more than noncommercial short covering. Speaking of which, the noncommercial short futures position in Minneapolis reached a new record large of 42,300 contracts, increasing the likelihood of a short covering rally.
[i] From a Reuters piece by Maya Gabeily and Timour Azhari: (LINK)
[ii] I talked about this in last week’s Kitco News Gold Poll: (LINK)
