ETF Golden Crosses (50/200dma) Galore

IWM (Russell 2000 small caps) daily:

FXE (The Euro) daily:

DBA (Agriculture commodities) daily:

FXI (Chinese stocks) daily:

QQQQ (Nasdaq 100) daily:

Disclosure: I am short EUR and own QQQQ puts.

Commodities have entered a bull market

Yeah, the head and shoulders reversal in DBC technically hasn't completed as it hasn't closed above $22.89, but I'm gonna go ahead and call this. If you look at pretty much any individual commodity besides natural gas (UNG) you'll see a clear uptrend over the past three to six months. Oil, agriculture, gold, etc, are making higher highs on increasing volume. The H&S pattern on DBC targets about $28, but this could take some time to play out. Natural gas is the one area where prices haven't been uptrending but after today's surge it looks to me like UNG has formed a double bottom. Time will tell but I feel comfortable in saying that a new bull market in commodities has begun.

Disclosure: I have a large time and strike spread in UNG calls.

Inverted H&S on POT

Coiled Commodities (DBC)

Commodities as a whole are poised to make a large move soon as the recent range has narrowed substantially. The daily Bollinger Bands, a series of higher lows since December and 50 dma all seem to be converging on $20. It seems to me that a large retracement of the 2008 decline may be in order after support has shown up in the low $19s. Commodities could also break lower but I'd be more scared of a false breakdown than missing the decline. It just seems to me that now would be an appororiate time for the dollar to weaken against tangible assets (commodities) with all the money being printed in Washington. We shall see...

Awaiting the 5th wave...

Its always important to be aware of the longer term picture and what I see in the two year weekly chart is a one and a half year old bear market. It seems to fit well with an Elliot wave pattern where we've completed the first two of three downwards cycles. That is, we have moved beyond denial (wave 1), more recently acceptance (wave 3) and now we await the final downwards cycle (the fifth wave) of panic. A big unknown is how far we will rally in wave 4. I would guess that the 200 dma could be reached but its moving lower each day and I'd place an upper limit at $650 on the Russell 2000. A lower target is very tough in such extremes but I'd guesstimate somewhere near $250.

Since we're waiting for panic I think it's appropriate to look at the fear index. Below I have the VIX plotted over the same period of time as the $RUT above. The index is currently down trending but there seems to be major support at previous resistance of 37.5. I could see the VIX drifting lower for some time but holding that level because a break of 37.50 should send it significantly lower which would ignite stocks. I'd conjecture that eventually a compressed VIX would pop big, beginning the fifth and final wave lower in stocks. Under that scenario the ultimate bottom is likely to coincide with new all time highs on the VIX. But again, the VIX could drift lower for a time lifting stocks.


On the more bullish side, a number of commodities are looking better on intermediate term time frames. If the recent lows in equities like DBA below can hold, it may great year for commodities. DBA has the potential to form a nice inverted head and shoulders with a target near $33 when/if $27 breaks. DBA could pullback further, as low as $23, before rounding out the right shoulder so I'd wait for lower prices to buy dips. Good luck, it should be a very interesting week between the Obama inauguration and a string of earnings reports.

Lanworth's Final 2008 Spring Crop Report

I was passed on a pdf with this information from a Lanworth representative. Since I'm not sure how to upload a pdf here I'm just going to copy and past the text and plots. As a reminder, Lanworth uses satellite images to estimate crop yields and other useful agriculture information. See my previous posts for more info. Enjoy:

"US Spring Crop Production 2008
Final Report: 16 January 2009

Corn production: 12,216 million bushels
Soybean production: 2,987 million bushels

This is Lanworthʼs final report on US corn and soybean production for the 2008 agricultural year.

It represents Lanworthʼs best estimates of year-end production based on planted acreage, harvested acreage, and modeled crop yields at district and sub-district levels. In its 12 January 2009 Crop Production 2008 Summary report, USDA revised both its corn and soybean production estimates upward by approximately 1%. In doing so, USDA brought its production estimates for both commodities into close agreement with those issued in Lanworth's 21 November 2008 report and, indeed, those issued earlier in the year (Figure 1). To effect its revisions, USDA adjusted acreage and/or yield estimates for most producing states. Because Lanworth accepts USDA acreage estimates for states not mapped by satellite and USDA yield estimates for states not modeled, USDAʼs adjustments do affect Lanworthʼs production estimates, albeit slightly. In what follows we present updated corn and soybean production estimates incorporating USDA revisions in unmapped and unmodeled states. Here Lanworth updates its 2008 US corn production estimate to 12,216 million bushels, a negligible upward revision of roughly 3 million bushels. Lanworthʼs current estimate stands only slightly higher (115 million bushels vs 74,641 thousand).

Methods

To develop production estimates, Lanworth used planted acres mapped by satellite for 13 key states. Harvested acres for these states were determined by applying harvested fractions derived from the most recent USDA Crop Production report. In flood-affected states (IL, IN, IA, MO), Lanworth calculated harvested acres directly by applying 5 year average harvested fractions to planted acres and then subtracting lost acreage mapped using satellite imagery (see previous reports). For the remaining, unmapped states, Lanworth accepted USDAʼs current harvested acres estimates. Lanworth then allocated harvested acres to districts either directly for satellite-mapped states or, for other states, indirectly using each districtʼs historical share of state planted acres.

For each district in 18 key corn and soybean producing states and 7 spring wheat producing states, Lanworth ran a series of deterministic yield models representing a range of soil, weather, and planting conditions. Model results were weighted and combined to produce representative district yields. For minor states, Lanworth used the projected yields published in USDAʼs most recent Crop Production report. Production was then computed for each district and summarized by state.

Lanworthʼs current production estimates are provided in the accompanying spreadsheet. The data will also be published to http://ray.lanworth.com.

(click on image)

Contact: Nick Kouchoukos, (630) 250-1428, nkouchoukos@lanworth.com ©2009 Lanworth, Inc. All Rights Reserved"

I think the key here is in these last two plots. The most obvious thing is that Lanworth has clearly been estimating higher yields than the USDA for most of the year aside from some mid August corn reports. And what has the Corn and Soybean market done during this time? It plunged. Of course the agriculture market is driven by both supply and demand but its safe to say that the underestimation of crop yields by the USDA is bearish because supply is turning out to be bigger than anticipated. The second thing I noticed was how erratic the USDA's #'s were relative to Lanworth's estimates. Clearly Lanworth's method yields a more stable estimate which has got to be good for a number of reasons which are mostly beyond me. It seems to me that the actual crop numbers, the reality, is going to be relatively smooth and stable. How rapidly could the actual yield change? Maybe if there was some major flooding or other rare natural disaster, but on average I would think that yields don't make erratic moves like the USDA numbers. I continue to be very impressed by this technology.

Click here to download the original pdf file. Also, find the latest Lanworth related news here.

Jim Rogers is covering US stocks, buying Yen, Francs, agriculture, China. Watch the dow ticker!!

I really like his perspective on the issue of government intervention in the stock market and how it will actually destroy liquidity.

Lanworth Expects USDA to Raise Estimates

Yesterday, Lanworth 's Nick Kouchoukos said he expects the USDA to raise their corn estimates based on higher acreage. This is somewhat unusual as they normally don't release any info publicly ahead of USDA reports. Their clients pay to know that info ahead of everyone else. Kouchoukos said he thinks frost is pretty much a non issue now but interestingly, he seemed to suggest that high demand will lead prices higher. Tomrrow we'll find out if Lanworth was right about their USDA projections.

Watch the video here.

Crashing stocks may bounce, but not for long

With all the horrific news over the weekend (and the past few weeks (and months (over a year really))), today's 500 point decline in the Dow should come as no surprise. Rather, I'm surprised it has held up for so long and that we didn't decline more today. AIG, one of the dow components and the largest insurance company in the world, declined over 50% today after losing $30B in market cap last week. That is jaw droppingly, mind blowingly insane to me. Just, wow. Luckily for the dow, the components are price weighted so an $8 decline is bad but not -50% bad when you compare it to the other dow 30.

Tomorrow the fed will come to the rescue (sarcastic smile on my face) and the bulls have a good chance for a bounce based on the dow chart I have above. There is support around 10,830 and today's decline brought the dow well below its lower Bollinger Band. Typically a drop below the lower BB leads to a short relief rally or at least few days of sideways movement. On the other hand huge volume today (over 2B) confirms a follow through of the long term trend lower as we made a new closing low for the year. Furthermore, the dow is not oversold on a daily time frame by any measure. I would expect any rally to be short lived. The only reason to buy stocks now is for a high risk, short term rally. Owning or buying stocks at this point is only for people who like loosing money. When (not if) minor support at 10,830 breaks, the measure rule targets another 1000 points lower and I bet it happens fast. Bears rule the world right now. The god damn hurricane brought the bears with it:



And here's the S&P, it actually broke down pretty bad today but there is also some minor support just below at around 1,175. Similar to the dow, the S&P closed well below its lower BB and a bounce seems likely tomorrow there as well. Of course the longer term trend is down so anyone playing for a bounce is doing so with a low reward to risk ratio.


One thing worth noting is that futures on both indexes are down significantly right now, currently at:

Dow: 10,823 (just below support)
S&P 500: 1,177 (at support)

Here's the VIX, it had a nice breakout today. The VIX is actually getting up to levels that most would say is a sign of capitulation. While the VIX is indicating some sort of bottom here, I think it has plenty of room to go higher. Why shouldn't the VIX break all the previous bear market highs (37.57), shouldn't market participators be more scared now than ever? Many traders will see VIX in the upper 30's and cover their shorts as a result. That might catch many off guard and allow the market to fall further. Its just that far too many people are now using the VIX to find bottoms. For now I don't want to try and be too smart for my own good and I will just be cautiously expecting a rally.


So if you put a gun to my head I would say the market does gap down to support tomorrow and rallies all day until the fed does what ever it is they do, then shortly after the plunge resumes. Tomorrow around 3pm EST (FOMC decision at 2:15pm) may be a great time to sell stocks. If the fed cuts rates significantly (0.5% or more) then we may get a nice rally in commodities. My favorite, as you know, would be agriculture (DBA). Good luck tomorrow, its gonna be crazy.

High Tech Agriculture Futures

How would you like to know the earnings numbers for some stock before the market release? Sure, it would be illegal, requiring inside information, but you could definitely make a lot of money if the market was making a poor prediction. I guess that's why analysts get paid so well; they estimate corporate earnings which can be very profitable for their clients if they don't screw it up (as we've noticed they often do). But what if you could really and legally know the numbers?

That's exactly what Lanworth does for the US agriculture market. They look down on crops via satellite (from earth orbit) to estimate harvest yields for their clients ahead of the traditional, and frequently revised USDA report. And as we noticed Friday, the USDA report has a substantial effect on commodity prices. After the report Friday morning, Corn opened limit up and closed there. Other agricultural futures made similar moves higher. Their clients are primarily hedge funds, farmers and buyers who want an "alternative analysis to complement the USDA's Crop Production Report." Check out yesterday's release from a representative of Lanworth, which discusses the USDA numbers as compared to their own satellite-based analysis.

If I were a big time grain futures trader I would certainly love to have this info ahead of the market. I would just hope that they are better at predicting the harvest than a Wall Street analyst is at predicting losses at their own banks. Lanworth doesn't typically pre-release (before the USDA) their numbers to anyone but their clients, so it's tough to gauge, but I would guess they are pretty accurate. After all, they are directly looking at what they are estimating, and it sounds like Lanworth has a good handle on the weather. Being able to estimate frost events would be mighty, mighty useful for a corn trader, especially this year as pointed out in yesterday's report. I think this technology is pretty cool.

USDA Corn Yield Revisions Align with Lanworth Estimates

September 12, 2008 - The USDA released the September Crop Production Report numbers today, bringing their view on yields into alignment with Lanworth's current estimates.

The USDA revised their corn yield estimates from last month, into an almost exact correlation with Lanworth's early numbers that were shared with customers 10 days ago. In the September Crop Production Report, the USDA lowered corn from 155 bu/acre to 152.3, bringing their position very close to Lanworth's original Sept. 1 estimate of 152.1.

The total corn production estimates from Lanworth continue to differ slightly from the USDA's due to varying assessments of planted acres and acres lost to flooding.

Though yield and production estimates are still developing in this unusually delayed growing season, Lanworth has had a more conservative view of the corn yield since early August. The company says frost will likely play a role in final estimates next month.

"Due to late planting and cooler than normal temperatures in many areas, frost is a very practical threat to current production expectations," says Dr. Nick Kouchoukos, Lanworth's Director of Information Services.

Lanworth uses daily satellite imagery to detect frosts as they occur and to assess resulting production losses. A detailed analysis at the crop-reporting district level allows Lanworth to indicate the probability of frost occurrence, as well as the extent of possible damage to corn and soybean acres.

About Lanworth Inc.

Lanworth is an information technology company specializing in the application of aerial and satellite remote sensing to natural resource management. Lanworth assists clients in making informed decisions in the forestry, government, agriculture, real estate, electricity, gas, and transportation industries. Lanworth supplies its clients with detailed geographic and resource information on a global scale. For more information, visit www.lanworth.com.

For media inquiries, please contact:

Lauren Eichmann

E-mail: lauren.eichmann@walkersands.com

Phone: 312-265-3089

"42% of 'tradable' stocks were down more than 5%"

According to Trader Mike today and I will add that 100% of tradable commodities were down today as well. Deflationary days are these.

Do or Die for Oil

Earlier this year Oil broke out of a long term, beautifully formed rising wedge. Since that break out crude rallied big then sold off hard and recently returned to the apex of that wedge where the 200 dma also lies. Oil seems to be at a major pivot here, any lower or sideways would mean that breakout had failed and a long term down trend would be in place. I think the more likely scenario would be a continuation of the long term trend upwards off support here. If the world really is going into recession though it would make some sense for oil to go into a bear market with stocks. Looking at the ag commodities, DBA seems to be breaking out of its recent multi-month downtrend and headed back to the upper end of the 2008 range, like it did in June. I'm looking for DBA to retest the highs as inflation picks up speed with falling interest rates world wide.


Disclosure: I own some DBA calls

Possible DBA Cup n' Handle

DBA Long Term (weekly):
DBA intermediate term, potential cup n' handle:

The constituents of DBA look bullish in the long term, like corn:

And wheat:

Especially soybeans:

Disclosure: I own DBA leaps

Still Bullish on Agriculture (DBA)

I'm back from vacation! While I was out relaxing on the ocean blue I couldn't escape from headlines about soaring commodity prices. This should come as no surprise given the federal reserve's extremely inflationary policies, and nowadays it's status quo for crude to be making new all time highs. I certainly wasn't stunned by the news that corn and soybean prices were making new all time highs after all the wet weather we've had here in the Midwest this growing season. As you may recall, I posted on the DBA chart (DBA is an etf of corn, soybeans, sugar and wheat futures) about a month ago suggesting a buy under $36 as the consolidation seemed to be wrapping up. Here's what happened:


As expected, DBA broke out of its descending triangle like clockwork just before the apex, and since then it has been going straight up. The 50-day moving average is now sloping upwards with the 200 day, and aside from being overbought in the short term (stochastics and RSI), things look really good. Before, I had been targeting the previous highs at $43.50 and I still think that will be an area of strong resistance (and a good place to take profits). However, if DBA can break through those previous all time highs, then this thing could really fly. Here's a weekly chart:


First of all, DBA expanded 80% on the last push upwards so it has a lot of momentum. Volume has been very healthy and the consolidation pattern looks just about as nice as any bullish chart could. Using the roughly $8.50 size of the recently formed base/cup, I get a target of $52 once $43.50 breaks. There's nothing to dislike about this chart if you can overcome the fact that making money off DBA means people are starving because they can't put food on their plate. Hate the game, not the players, right?

Due to the overbought nature of the daily chart, I'd try and buy/add on a pullback to around $39, but now that it's broken out, you might not get a pullback. I remain extremely bullish on DBA and it just might be my favorite long for a while. I'll be sure to let you know if things change. Of course, I still feel strongly about all four summer trades as well (long IBKR, JASO, short JWN, HD). Hope everyone is having a great summer. -py

Disclosure: I have no position in DBA

The Consolidation in Agriculture Prices (DBA) May Be Almost Over (Descending Triangle)

Until late February, DBA was in a very strong uptrend. As you may have noticed on TV or at the grocery store, agriculture prices have gone up substantially in the past year. The exchange traded fund DBA represents a composite of Sugar, Wheat, Corn and Soy Beans so it has captured much of the recent move up in edible commodities. However, in late February DBA made a new high and has been consolidating ever since, just look at the descending triangle above.

I always thought of the descending triangle as a bearish pattern but according to Bulkowski, "if price rises into the pattern it breaks out upward 73% of the time." Clearly, DBA was rising before this pattern formed, and the consolidation looks healthy. Using Bulkoski's measured rule (and statistics) this pattern has a target around $45 but if that hits a much larger breakout will be in place (so it should go up much more). I'd conservatively shoot for the highs ($43.50) and set a stop at the bottom of the pattern ($35.35). Thats a very high reward/risk ratio if you can get in under $36. If you buy in to Jim Roger's thesis then it seems like a good time to be buying DBA.

"I have some gold right here in my pocket" -lol

"A New Era of Hunger"

Making ethanol from corn may have been the dumbest idea in the history of mankind, but even without bio-fuels agriculture prices are tied to the price of energy due to transportation costs. As long as energy keeps flying higher I suspect food will do the same. I wonder how much of the recent surge in agriculture and energy prices is related to fed encouraged speculation via low interest rates and the falling dollar.

After seeing this video and noticing all the headlines I thought the agriculture commodities must be making new highs again but I was wrong. The Corn, Sugar, Wheat and Soybean tracking etf DBA hasn't made a new high since late February and is still consolidating after a major run. It actually looks about ready to resume the uptrend soon, see below.

Bizarre Action in the Wheat Market

" Instability characterized U.S. grain markets Wednesday, featuring bipolar trading in wheat futures, which forced some prospective buyers to pull all cash bids.

Winter wheat futures closed about 80 cents a bushel higher on the day, even though cash contracts of spring wheat plunged 5-10%.

"Iraq bought 550,000-600,000 metric tons (20-22 million bushels) of U.S. hard red wheat overnight," said a CBOT market report. "The Iraq buying was partially offset by news that Japan (recently a major buyer of spring wheat) canceled their weekly wheat tender."

With spot wheat futures now seeing daily trading ranges of $2-$3 per bushel, and neither buyer nor seller confident of current market values, export basis bids for all classes of spring and winter wheat were left completely unquoted by USDA late Wednesday.

At this point, it is difficult to rationalize what has happened in the wheat market," said Benson Quinn Commodities analyst Dave Lehl. "Fear and greed have become the predominant factors driving price direction for wheat."" -read the full article at futuresource.com

This certainly could help explain why DBA, an agriculture exchange traded fund (ETF), made a new all time high and traded the heaviest volume ever today:


*Update: One dead body so far, or should we call this guy a rogue trader?