Macro event trade: Wheat and Rice to gain

There is a drought condition in North China which is a major Wheat and Rice growing area. The drought is said to be worst in last 50 years. The first alert for the drought came in Feb 2011 when the rains were totally dry season.  What makes it worse is that China is world’s largest producer of Wheat.

The drought has come at the time of sowing season with very less of sowing season remaining now.

Since China has the world’s highest population it has many mouths to feed. This combined with the affluence of Chinese the per capita wheat consumption of China has increased a lot.

The wheat rallied to new highs in Feb and fell to supp[ort levels after that to 700 levels.

The commodity is trading in a range as of now but any further supply disruption can take it to new highs.

There are news of Ukraine starting wheat exports which can calm the markets for short term as of now.

But one can keep this commodity on the watch list for some time.

Silver Swing high below 50 DMA

Silver is making swing high below the 50 SMA.

The daily RSI has also failed to cross 50 levels and in now trading below 40 levels.

Copper: At Breakout levels

Copper is at major trendline resistance after bouncing from below 50 DMA.

The setup is very similar to Gold a few days ago which broke out from the triangle formation.

Copper being regarded as barometer of economy will be worth watching. The effect of Europe rate rise will surely reflect on this commodity as it is highly sensitive to economy growth.

Action worth watching:

US Indices and Commodities vs 50 DMA

The US indices y'day closed below the 50 DMA after 130 days. Here are the charts

 

The commodities meanwhile are still above the 50 DMA. The Base metal index has broken the 50 DMA.

Is all this sign of QE ending?

Wheat going higher and higher

Lat time I wrote about wheat in Egypt crisis post.

The commodity since then is making new highs and is at fresh 52 week highs.
It has been just 9 days since then and the commodity has moved up 8% since then. Good to know that kind of move especially when one is trading India which is making new lows now.

There are couple of global events and clomate factors behind this kind of move. Here is the chart:

Tin: Where is it heading?

Tin a very less know metal is making new highs and has even crossed the 2008 peak. Only the chart.

Dow Theory: Sign of caution or Crude effect

The latest signal from Dow theory is of caution. The last sign was of bullishness when Indu was at 11250 levels. Post here.

Now the Transports has broken the 50 DMA and has last swing high below 50 DMA while the Industrials INDU is trading above the 50 DMA. Chart:

While this could be the effect of crude as Transport companies use crude as their primary input and is there main cost. If crude stays above 90 levels then for sure it could have some effect on the Industrial index also as crude is used in every aspect of life which could for sure increase the inflation. More discussion can lead to debate here.So lets see charts.

The second way we can look at this is that divergence can be a buying point for Transports as Industrials is still at new highs. For that lets see how the broader US indices are telling us.

Not much of signs of caution in Midcap and smallcap indices.

Crude has moved to new highs though failed to cross the resistance there. The structure is still bullish of crude.

This all could be attributed to Egypt effect which lead to fresh highs in commodities. Reuters commodities index CRB broke to fresh weekly highs. Link here.

Egypt effect in charts

Lets see the effect of Egypt in charts.

First Egypt index. There is 20% staright fall in just 1 week.

Now the commodities. CRB Index broke out and is now at 52 Week highs.

Most important if we look at what are major commodities Egypt trades, there are two main: Oil export and Wheat import.

Oil everyone knows so here is the chart of wheat. This particular commodity is up because whole of middle east imports it and the last thing they would want is food riots.

World Asset Allocation: SPY is the mover

This is a new report I am starting to know how globally money is flowing and to know if there any major changes in asset allocations. Planning to make it a fortnightly issue so that we can get more accurate picture.

The title is apt for this post as US SPX has moved most this year by 2% while the emerging markets moved lower by 2.5%. Are all the $$$'s flowing back?

Funds are withdrawn from Bonds also. The Dollar was -ive and it even broke the old support. The Dollar effect moved up the commodities index CRB as it was slightly +ive.

Gold & Platinum: Two different ways

The two precious commodities Gold and Platinum are headed into different directions.
While I was bearish on Gold form Dec (Post here) and the commodity did came to target of 100 DMA (Post here), the Platinum has broke out and is at new highs after breaking of old top made in Nov.

Attached are the charts.

There is a fundamental reason behind this divergence. Since Platinum is mostly used in cars and recently there has been increase of demand of cars in China its import of metal has increased much more and this has lead to breakout in prices.

Commodities reversal pattern

Several commodities exhibited trend reversal candle y'day.
Prominent are the Gold and Crude ones. They both made a new high but then closed lower.
This shows heavy profit booking at higher levels.

Attaching chart of Gold which reversed from 1420 above levels.
The weekly charts indicate more range trading possible here.

In the chart is shown similar formation from June 10 period where similar patteren emerged and after that the prices remained within a range for quite some time.