Extreme hot and dry weather

Extreme hot and dry weather in the U.S. Midwest has sent crop prices surging since mid-June.

Corn prices increased by 47%

Wheat price +35%
.

And soybeans price +25%

The unprecedented heat and the extreme dry weather over extended period this summer are causing havoc to the U.S. farms. U.S. Department of Agriculture has revised downwards the crop production figures for 2012. International food prices will be greatly affected so will the Crude Palm Oil price. However, how much the CPO price will move up from here will have to depend on the actual global CPO supply and demand as well as the movement of the speculative funds in the commodity market.

I expect the CPO price to continue with its current monthly downward trend due to the gloomy global economy. Once the commodity speculators turn bearish, the price will come down really fast. The adverse weather condition in the U.S. may only have a short term impact on the CPO price.

My reading on Dow remains bearish

Option 1 : Long-term bearish

.

Option 2 : Short-term bearish follows by a last surge.

.

The plantation index

Bursa Malaysia Plantation Index gained 99 points (+1.14%) today to close at 8,836 level. The index has added 352 points or 4.14% during the 7 trading days in July. The strong performance could due to the surge in the Soybeans price.

During the first 6 trading days in July, soybeans price runs from a low of $1400 on July 2 to a high of $1570 (intra-day high) on July 9 for a 12% gain.

As expected, the CPO price moved in tandem with the soybeans price as shown above.

My wave count for the plantation index remained the same. Since the 2009 low that marked the end of major wave 4, the index has completed 5 waves, i-ii-iii-iv-v, with the potential of ending the major wave 5 at 8925 level to complete the mega wave (III).

However, if the soybeans price continues to move higher and the CPO price moves in a similar way, the major wave 5 may have 9 waves.  The 18th May's low of 8104 can be the wave vi and the current run-up can be the wave vii of major wave 5 as shown below. But the index will have to break its previous high of 8925, another 89 points to go. 

 

Roubini's perfect storm for the global economy may be unfolding, there is still times for a last surge for soybeans, CPO and plantation stocks. One thing is for sure, the risk is getting higher, be prepared to cut and run for your life, if you are caught on the wrong foot. Remember the October 1987 'Black Monday'.




.

Global Recession

Shanghai SSE Composite Index dropped 52 points (2.37%) today to close at 2170, which is 22 points away from its January low of 2148. The drop is due to the concern that the economy is experiencing weak growth. Hang Seng dropped 1.88% and Singapore STI dropped 1.66% in tandem.

Courtesy of www.tradingeconomics.com

Official data released today showing China's consumer price index (CPI) for June rose only 2.2%, continuing the down trend since July 2011, from a +6% level. The CPI is projected to fall further.

The June producer price index (PPI) contracted 2.1%, moving further into the negative territory.

A deflationary spiral would certainly spell trouble for the Chinese Government that used to inflate its way out of debts as well as for borrowers with the value of their assets/collateral that continue to shrink.

Marc Faber : We are in recession in Europe. We have an economic slowdown in the U.S. We have essentially a slowdown in economic growth in Asia. We have sliding commodities prices.

"I think we could have a global recession either in Q4, 2012 or early 2013. That's a distinct possibility."

Nouriel Roubini : Four elements - Stalling growth in the U.S. Debt troubles in Europe. Slowdown in emerging markets, particularly China, and military conflicts in Iran would come together in to create a storm for the global economy in 2013.

Click "My perfect storm is unfolding now."to read.



.

The last straw

While the European leaders are still messing around, trying to solve their debt problems with more debts, trying to postpone the possible collapse of the Eurozone.

Some started to talk about a possible derivative bubble - 6 largest banks in US with a total assets of only $6 trillion have more than $224 trillion of exposure to derivatives.

On Tuesday, the CEO of Barclays resigned over Libor Interest Rate-Rigging Scandal that affects a $800 trillion markets.
Can this be the last straw that breaks the camel's back ?
Click 'The Biggest Financial Scam in World History' to read about the scandal and how the big banks robbed the whole world.

Courtesy of channelingmyself.com

.

Soybeans - Getting interesting

Courtesy of farmtofair.blogspot.com

The price of soybeans surged to its upper trend line heading towards July 2008's historical high of 1660. Is this the last surge to form a 'double top' reversal pattern ? Or is the price going to break this resistance line for a new bull run and to set a series of new historical highs for soybeans ?  This is going to be interesting in the coming weeks, so are the plantation stocks in Bursa Malaysia.

Click 'Beans' to have a peep at Nora's childhood on a soybeans farm.

Courtesy of Lauritzenfarm

.

Bursa Malaysia - Plantation

Bursa Malaysia Plantation Index gained 112 points (1.3%) to close at 8,656 level, 3% below its February 2012 high of 8,925. The index has completed 5 sub-waves.

If Soybeans is unable to break its upper trend line and starts to move lower after completing 5 waves, I will expect the plantation index to stop below the 8,925 level and starts to move lower in tandem with the soybeans price. Watch out for the bearish double-top reversal pattern.

 
The CRB commodity index has been moving lower within a downtrend channel since mid-2011. it has yet to complete its major wave C. Commodity may not be able to perform in the next 12 months.

Dow - Can the surge last ?

Dow surged on Friday, up 277 points or 2.2% to close at 12,880 level when the European policymakers reached an agreement to allow European bailout funds to pump money directly into troubled European banks, rather than make loans to governments to bail out the banks. With this arrangement, the banks can then buy more government's bonds that are in trouble.

Able to borrow more money will only raise the debt levels and it will only make the debt problem worse and nothing else. I don't think the surge can last. The potential of a financial meltdown is still there.

My two possible options for Dow remain the same.

For option 1, this run up will complete the mini wave (ii)

 For option 2, it will complete the mini wave b.

Seahorses

.