NEAR-TERM MARKET FUNDAMENTALS: The wheat market saw a seesaw battle yesterday. This resulted in an early burst of buying that took the December contract to a 2-week high. This followed by new highs for the day late in the day session, but a late sell off trimmed the gains substantially. One trader said that this “curbed the enthusiasm” of many bulls who are now expected to wait for a signal from the dollar or export sales before they resume their buying. They will need to wait an extra day to see the USDA’s latest export sales totals which will be released on Friday morning this week, one day late due to the Veteran’s Day holiday. Weaker overnight price action in wheat reflected the slowing of the down trend in the dollar which had that index up overnight. Egypt is in the market for 55,000 to 60,000 tonnes of wheat this morning. US wheat may have a hard time being competitive with wheat from France and the Black Sea region in this tender. The toughness of this competition was highlighted this week by the USDA’s increases in production for all of the major producers from the former Soviet Union. Basis levels for soft red wheat at the Gulf have steadily improved since early August with a minor burst to the upside seen in late October and again in early November. China’s government think tank, CNGOIC, left its estimate of their 2009 wheat crop unchanged yesterday at 114.95 million tonnes. This was up from 112.46 in 2008.

TODAY’S GUIDANCE: Wheat staged an apparent breakout rally early in the day yesterday, but pulled back into the close and overnight. This would seem to indicate that the rally was another burst of ‘catch up’ short covering in wheat that will go nowhere in the long run. Look for a modest setback into the end of the week. First support in March wheat starts at 541 and then at 530 3/4 and then 522. A push below 517 would likely attract enough selling to push the December contract down near 480 to 490. First resistance remains near 560 and then near 584 3/4 to 590.

This content originated from - The Hightower Report.

NEAR-TERM MARKET FUNDAMENTALS: The corn market traded lower overnight with late losses that largely paralleled a move upward in the dollar index. This followed a day of seesaw action yesterday with a general downward trend. Traders said that moderate fund buying yesterday helped to support the market early, but this evaporated later in the day. Weather forecasts remain dry into Saturday in most corn growing areas, although more rain is expected to push into the SW Corn Belt starting on Sunday and then into central Illinois to start next week. Amounts are not expected to be as heavy as recent systems, and these rains are expected to become lighter and scattered as they push east later next week. China’s government think tank, CNGOIC, left its estimate of their 2009 corn crop unchanged yesterday at 163.00 million tonnes. This was down from 165.92 in 2008. Basis levels notched upward at the Gulf so far this week, with a minor downtrend seen in central Illinois. The USDA will issue its latest Export Sales report on Friday this week, one day late due to the Veteran’s Day holiday.

TODAY’S GUIDANCE: The failure to accelerate to the upside in corn yesterday may keep buyers on the sidelines through the end of the week, and possibly longer. Signs of stabilization in the dollar, however temporary, could cause funds and individual investors to also take a wait and see attitude in terms of buying commodities for the short term. However, all of this could change very quickly if importers start to accelerate their buying of US corn. Another run of wet weather or a resumption of the downtrend in the dollar could also bring a fresh wave of buying, but until that happens, corn could sag back lower in the trading range to the 360 to 370 area in the December contract. We could even set back to the 100-day moving average which currently stands near 348 3/4. First support is at 380 to 382 in the December contract and then near 370 to 375. Resistance is now at 400, then 405 and 427 1/2.

This content originated from - The Hightower Report.

NEAR-TERM MARKET FUNDAMENTALS: Without help from outside markets, soybeans came under pressure overnight as the market resorted back to the outlook for good harvest weather this week and bearish news from the USDA this week which attracted new selling. Funds have been active buyers of soybeans and commodity markets in general recently with a declining US dollar and a very easy-money policy by the Fed helping to attract new investors. Solid gains in the US dollar appear to have turned the psychology more negative for those commodity markets which do not seem to have the fundamentals to move higher. For soybeans, the outlook for US ending stocks to increase by 95% to 270 million bushels and world soybean ending stocks to increase by 35% to 57.39 million tonnes has soured the price outlook. In addition, traders are not ruling out an even higher yield and higher production for the US as harvest weather has turned from near disastrous to near ideal. The USDA also reported record high production forecasts for Brazil and Argentina for the coming season for the crops which are just being put in the ground. There are still concerns with the dry pattern for key growing areas of Argentina but at this early stage, traders seem to be taking a wait-and-see attitude regarding the slow planting pace with planting progress near 33.8% complete as compared with 40.8% as normal. Argentina is expected to see some rain early next week although this could miss the very dry southern soybean belt there. Dry weather is expected in all areas until then which will increase the need for moisture, especially in the western and southern growing areas. Traders believe China buyers will slow down on purchases in the coming weeks, according to a survey of buyers from the China National Grain and Oils Information Center. China has already booked near 15 million tonnes of US soybeans and there is talk that they are booked through January. October soybean imports from China reached just 2.52 million tonnes which was down for the 4th month in a row and compares with peak of 4.7 million tonnes in June. Funds were noted as active buyers yesterday but there is a growing concern that funds could turn sellers if we go through a period of steady or higher trade in the US dollar. The latest weather forecasts call for increased rain in the Midwest from late in the weekend into early next week. The weather models overnight seem to be even wetter for early next week. Dry weather into the weekend should keep harvest active. Gulf basis was firm yesterday. The overnight deliveries against the November soybean futures contract were 222 contracts. Friday will be the last trading day for November soybean futures.

TODAY’S GUIDANCE: The market appears poised to push sharply lower “if” the fund buying spree slows and the focus shifts back to the soybean market fundamentals. A series of lower highs off of the October 23rd highs leaves the technical set-up a bit negative as well and a short period of a higher or even steady US dollar could spark aggressive selling from funds.

TODAY’S MARKET IDEAS: March soybean selling resistance comes in at 979 with 967 1/2 and 941 1/4 as next objectives. Use 905 1/2 as next downside target. January soybeans look set to test key support at 940 1/2 with 971 1/2 as close-in resistance. March Meal selling resistance is at 285.40 with 267.40 as next swing target.

This content originated from - The Hightower Report.

The stock market continues to grind away on the upside overnight off what we think is generally up beat overall macro economic psychology. With a couple voting US Fed members yesterday, suggesting that the US economy is into a sustained recovery mode, the stock market seems to have gotten beyond the disappointment of the last US Non farm payroll reading. With another sharp upward jump in Chinese manufacturing output readings overnight and the Chinese economy getting a large measure of focus because of the US Treasury Secretary visit, the favorable Chinese economic news is probably getting more coverage than usual. In addition to the favorable Chinese economic news, the market is also seeing up beat macro economic views from US shippers and that would seem to leave the bulls with ongoing control today. With the December S&P already managing to climb above the October highs in the early going today, we suspect that bullish momentum is capable of controlling the trade today. In fact, with a partial holiday eliminating the prospect of negative scheduled data flow, there would not appear to be an event to derail or trip up the early bullish tilt.

S&P 500: With the S&P already into new highs for the move in the early going today and the trade seeing a number of other positive developments overnight, it would seem like bullish momentum is going to remain in place. We suspect that critical support in the December S&P moves up to 1098.50 but there might not be much in the way of significant resistance until the market reaches up to an extension target of 1110.30, which is a critical gap area from the 2008 meltdown period.

DOW: One almost gets the feeling that the Dow is poised to draft off favorable Chinese economic news overnight, as a 19% expansion of Chinese output for the month, is certainly a big enough number for the markets to embrace the idea that the Chinese economy will indeed help pull the world through the recession. The Dow has already forged another distinct upward thrust on the charts early this morning and it would seem like the December Mini Dow is capable of rising to the next resistance zone of 10,312. Critical support in the December contract now moves up to 10,227.

NASDAQ: A big range up extension in the December Nasdaq in the early action today would seem to leave the 1800 level as the next logical target. A favorable projection for Apple phone sales overnight also adds to the overall up beat macro economic view that has seemingly become entrenched again. Critical support in the December Nasdaq moves up to an old quasi double top at 1777 and unless news from the US retailing front later this morning alters sentiment, the bull camp looks set to control prices today.

TODAY’S MARKET IDEAS: The trend is up, don’t fight the trend.

This content originated from - The Hightower Report.

With the bond markets closed due to a US holiday and nothing in the way of US economic reports due out today because of the holiday, the Treasury trade will be left to the electronic action. The market did see a decent auction result yesterday for the 10 year notes and that helped the markets forge another trading session just above critical support on the charts. The Treasury market could have been undermined by comments from the Fed, which were generally indicative of an economy in recovery, as that could begin to foster talk of when the Fed might be inclined to extract some easing from the equation. We suspect that firm equity prices and generally up beat macro economic psychology from international readings overnight is set to give the bear camp a slight edge in an extremely thin market condition today. With the UK overnight predicting that inflation would probably remain under control for the near future, that in turn might diffuse some of the light downward pressure on prices that is presenting in the early going today. We continue to see the 118-00 level as a key technical support zone in December bonds but since the market has temporarily violated that level 5 times in the last three weeks of trade, we can’t rule out a temporary slide down to 117-22, which is a recent key low. In addition to the up beat Fed dialogue, the IEA was also out yesterday with suggestions that massive amounts of oil investment were going to be needed in the coming years, just to offset a natural decline in global oil output and that could become a factor that serves to send oil prices soaring.

In the end, we see a weak downward bias today, especially if the equity market manages to extend the early pulse up move. On the other hand, we doubt that the market has the near term capacity to forge a noted downside breakout on the charts below what has become fairly significant consolidation support. We suspect that the Fed is ok with a very slow grinding rise in market perceptions toward interest rates but that they will probably step in to provide support if it appears that sentiment is forcing rates up too quickly. In the end expect a really tight trading range ahead.

This content originated from - The Hightower Report.

DOLLAR: The Dollar has already forged a fresh downside breakout on the charts this morning and that leaves the down trend pattern intact despite signs that the US economy might be gaining some footing. Apparently the currency trade continues to doubt the pace of the US economic recovery and it also doubts that US interest rates are destined to rise anytime soon. It goes without saying that the world sees the push for US health care reform, as an ongoing burden for the deficit. In short, the market bias remains down toward the Dollar and even a measure of economic optimism doesn’t seem to temper the negative track in the Greenback. Not surprisingly, the Dollar showed almost no life in the wake of statements from Geithner overnight that the US wants a strong Dollar. The market also didn’t seem to buy into the Treasury Secretary comments that the US will eventually get its deficit under control. In short, the bear camp doesn’t seem to have any fear of a counter trend move. Near term downside targeting in the December Dollar is seen down at 74.15.

EURO: So far, the Euro hasn’t taken out the October highs, but the Euro has managed to rise above the 150 level, which in recent weeks, was pegged as an extreme exchange rate level by certain ECB officials. Given strong gains in global equity markets again overnight and generally positive economic data flowing from China overnight, that should leave the recovery currencies like the Euro with a definitive edge against the US Dollar. Near term support in the December Euro now moves up to 150.24 and there might be little in the way of significant resistance until the 150.62 level.

YEN: While the Yen managed an impressive range up extension overnight, that move was clearly rejected in a rather aggressive manner. The bull camp has to be disappointed that beneficial Chinese economic data failed to sustain a strong Yen, as that dampens the idea that the Japanese economy is going to draft off the Chinese economy. The yen also continues to show signs of weakness in the face of market environments, that show an increase in risk appetites and therefore we see the overnight highs in the Yen as really significant near term resistance. In fact, we see closer-in resistance in the December Yen over the coming 24 hours to be 111.36.

SWISS: The Swiss is seemingly poised to return to and above the old highs. Apparently the up beat global economic outlook has caused the Swiss trade to toss aside the threat of central bank intervention. After some initial resistance up at 99.71, the December Swiss is probably set to move to an even higher trading range in the coming trading sessions and that should in turn make the old highs critical support.

POUND: The BOE comments overnight seem to have taken the Pound out of the recovery currency mode this morning. In other words, the BOE suggested that their easing efforts are working, but that inflation looks to remain under control in the near term. In a real rally killer, the BOE also suggested that the chance of an absolute disaster had diminished and that clearly prompted traders to stand aside from the Pound to other less risky currencies. In the end, seeing the BOE remain in an excess easing posture, seemed to prompt traders to bank profits on a currency that has had a fairly aggressive run up off the November lows.

CANADIAN DOLLAR: A definitive range up extension in the Canadian Dollar overnight would seem to project the December Canadian back above the 96.00 level in the coming trading sessions. We suspect that ongoing defined down trend pressure in the Dollar and very up beat macro economic views toward the Chinese economy, plays right into the hands of the Canadian Dollar bulls. In fact, we can’t argue against a December Canadian trade of 96.93 in the coming week.

TODAY’S MARKET IDEAS: More down in the US Dollar ahead, with the Canadian, Euro and Swiss the primary benefactors of the currency market trends.

This content originated from - The Hightower Report.

The market continues to hold a stiff premium of February hogs to the cash market but the recent set-back has helped to pull December back in line with the cash market. Cash markets look steady today and the market awaits any evidence that export demand could be picking up with the weak dollar seen as a reason to suspect better export demand soon. The market remains in an overbought condition and after a flurry of harvest activity recently, traders are a little nervous that producer marketings could pick-up soon. December hogs pushed slightly lower on the session while February was a little firm at times as the market saw some additional rolling of positions from December to February by index funds. While trend-following funds are exiting the last of their net short position on the recent rally, index funds are now net long 75,897 contracts from near 50,000 early in the summer. The buying trend has been more pronounced in recent weeks and Index funds were net buyers of 2,443 contracts for the week ending November 3rd. Strength in outside markets provided some support yesterday but weakness in the pork product late on Friday and a mixed tone to the cash market helped spark some additional selling. The premium structure and the overbought condition of the market helped to spark some of the selling as well. The CME Lean Hog Index as of November 5th came in at 55.32, up 57 cents from the previous session and up from 53.85 the week before. The estimated hog slaughter came in at 431,000 head yesterday. This is up from 428,000 last week but down from 438,000 a year ago as this time. Pork cut out values, released after the close yesterday, came in at $58.76, up 13 cents from Friday and up from $58.68 the previous week. Loins were strong to help support but the market seems to be more worried about ham prices which were down 86 cents to $56.77 from $59.23 last week at this time. The lower than normal increase in production from the third quarter to the 4th quarter (lowest in 13 years) has provided underlying support.

TODAY’S GUIDANCE: December has pulled back to near the cash market but there may be additional downside correction in order to pull some of the premium out of the February before finding support. Cash is called steady today and the market still needs to absorb a hefty near-term supply. The market is still operating under the negative influence of the sweeping reversal from November 5th and the overbought condition. December hog support is at the 55.25-54.55 zone with additional support at 54.20. February hog support is in the 61.90-61.40 zone.

This content originated from - The Hightower Report.

The market has seen a decent correction off of the highs and open interest is beginning to come down from the highest level in near 15 months. The market continues to find selling pressure on rallies due to slow employment news and ideas that consumer and restaurant demand for higher-priced beef cuts will remain at recession levels. However, while demand news is expected to remain weak, supply is still a potential positive force into the end of the year as slaughter levels taper off. In addition, the December futures are trading discount to the cash market and this will help clean-up any backlog of cattle in the country as producers have an incentive to move cattle now before cash markets slip. The market inched higher in quiet trade yesterday. Strength in other commodity markets and a surge higher in the US stock market helped to provide some support. News of fewer restrictions on exports to Taiwan along with some improvement in beef prices and ideas that production will begin to decline ahead helped to provide some support. The estimated cattle slaughter came in at 121,000 head yesterday. This was up from 119,000 last week and up from 111,000 a year ago as this time. This is the second day in a row in which slaughter came in below trade expectations and this would indicate a weakening demand structure from the packer. Packer margins remain deep in the red and this means that either beef prices need to remain in a short-term uptrend or that cash cattle needs to move to a lower price in order to revive packer demand. Boxed beef cutout values were up 73 cents at mid-session yesterday and closed 15 cents higher at $140.93. This was down from $141.63 a week ago. Last year, beef prices moved from this level to a peak of near $158 before a resumption of the downtrend in the depths of the recession. Beef production in the 4th quarter is expected to be down 1.4% from last year. More importantly, the drop in production from the 3rd quarter into the 4th quarter is expected to be the third largest decline in the last 21 years.

TODAY’S GUIDANCE: The market remains in a short-term downtrend as traders wait for either beef prices to move higher or cash cattle to come lower with packer margins deep in the red. Last year, beef prices rallied sharply at this time of the year so we would not rule out higher beef ahead. February cattle buying support comes in at 85.62 with 87.30 as resistance and 88.87 as upside target.

This content originated from - The Hightower Report.

CRUDE OIL MARKET FUNDAMENTALS: Crude oil has snapped back in the overnight trade with price support coming from a sharply weaker Dollar and firmer equity market trade while the market also looks to be getting weather related support from a hurricane in the Gulf. Hurricane Ida moved into the Gulf of Mexico over the weekend and has forced the LOOP to stop taking tanker deliveries and some off shore oil production to be shut down which has partly been responsible for the short covering move in the oil futures markets overnight. Also, the strength in oil prices can certainly be tied to fresh speculative buying in connection with the slide in the Dollar raising investor risk appetite and the appeal of oil as an inflation hedge, especially with gold being propelled to a new all time high. Oil has gained as the weekend G20 meeting failed to provide any Dollar supportive commentary with the currency also under pressure after last week’s bearish employment news will likely ensure a loose Fed policy for some time. We also suspect some of the oil strength may be technical buying since the market held above key support last week despite last Friday’s sell off. The bull camp has certainly gained the early edge and supportive outside markets along with storm fears may be enough to lift January crude oil back above $80. But we are skeptical price gains into the upper end of the range will hold. The Gulf storm has been downgraded to a category 1 hurricane and if it continues to lose strength and become less of a supply threat, oil prices could start to back peddle later in the session. With oil supplies high, there will need to be structural damage done to off shore facilities in order to have more of a lasting impact on oil prices and hurricane Ida would likely have to pick up strength for this to occur. While oil is being swept higher by the general strength in commodities this morning, we are skeptical the market will be able to hold at higher price levels since the demand outlook has certainly been undercut by last week’s jump in the US unemployment rate. The Nov 3rd COT report with options for crude oil clearly shows the market to be overbought with the combined fund and spec net long position climbing to a record level as of early last week and money managers holding the highest net long position in crude oil in over three years. Therefore, outside market support may not be enough to thrust the market beyond the October highs unless macro economic optimism is also revived. Since we don’t see the supply/demand situation for crude oil improving in the near-term, we suspect fresh fundamental doubts will be stirred up on a rally back into the $80 to $82 range to prevent a move into a new higher price zone. The bull camp has the early edge but don’t be surprised if the rally in crude oil stalls out near $80.

GASOLINE: December gasoline has bounced in the overnight trade and has been able to retrace a good portion of last Friday’s losses with both technical and Dollar related action providing firm price support. Part of the buying in December gasoline looks to be chart based after the market was able to bounce off the $1.90 level last Friday and also held a.618 retracement of the October range. The weak Dollar may also be drawing some fresh speculative and fund buying interest back to gasoline since the outside market action including higher gold & equity prices is creating a bullish environment for commodities. News that China’s passenger car sales jumped sharply last month may be easing some demand side concerns. But last week’s inventory data left the supply/demand setup for gasoline bearish and the weak US employment report raises doubts that the pace of the economic recovery is strong enough to significantly lift fuel demand. The November 3rd COT report with options for gasoline shows the net long position of the funds close to a record level and money managers also holding a net long position in gasoline close to three year highs. Therefore, despite the support coming from the weak Dollar we are skeptical the market will be able to add enough additional length to drive December gasoline back over the $2.00 resistance level unless the fundamental outlook can improve.

HEATING OIL: December heating oil has also been able to snap back in the overnight trade on weather related jitters and buying tied to the weak action in the Dollar. The market has moved back above the critical $2.00 support level and that may be encourage some additional short covering. But with the fundamentals for this market decidedly bearish, a lack of cold temperatures in the forecast and if the Gulf hurricane continues to lose strength we suspect the rally in heating oil will stall below the $2.10 resistance level. With last week’s bearish employment news suggesting industrial fuel demand could stay week for some time, we have doubts that bullish outside market influences will be enough to lift December heating oil too much higher. Also the traders positioning in the Nov 3rd COT report with options for heating oil may make it difficult for the market to gain much upside traction since funds held a record net long position as of early last week and money managers were also closing in on the highest net long position in three years. While the bull camp has regained early control, we can’t get too positive on this market until a close back over $2.10 is seen while a break back under $2.00 should trigger more chart based selling.

TODAY’S ENERGY MARKET GUIDANCE: The bull camp has the early edge as hurricane related supply jitters and outside market influences paint a bullish environment for commodities. But with the COT report showing oil markets remain overbought we suspect this rally will eventually stall out unless macro economic optimism for a recovery in oil demand can be revived.

This content originated from - The Hightower Report.

OUTSIDE MARKET DEVELOPMENTS: With the Dollar forging a distinct downside breakout on the charts this morning, equities showing moderate strength overnight and a number of physical commodities posting early gains, the outside market environment seems to be favoring the bull camp in the precious metals markets. Apparently the trade saw a lack of G20 focus on the weak US Dollar in their latest meeting as a sign that the Dollar might be allowed to fall even further. Therefore, the currency market influence on gold and silver prices this morning seems to be sitting definitively in the bull’s court. It is also possible that news of two rather large Asian IPO’s overnight and definitive upside gains in global equity markets are serving to gloss over the disappointing US Non Farm payroll readings that were seen at the end of last week. While the US economic report slate this week looks to be somewhat thin, the trade will be presented with a series of US debt auctions, with a somewhat large $40 billion sale of 3 Year notes seen later in the Monday session. In fact, this week’s auction tally presents the trade with yet another record quarterly auction of US debt and to some in the gold trade that is a significant inflationary development.

GOLD MARKET FUNDAMENTALS: The gold bulls overnight are pointing to the lack of G20 discussion on the slide in the Dollar as the primary driving force in the gold market this morning. With the Dollar falling to a fresh new low for the move in the early going today, it is difficult to discount the influence of the currency market action on the gold market. It would also seem like there is an interest in “risk” this morning in global equity markets and that would seem to keep the market from directing its attention back to the ongoing trouble in the US employment sector. With Indian gold prices very firm overnight and the Press carrying stories about the Russian central bank possibly buying gold from the Russian state depository, there would seem to be mostly bullish classic fundamental news flow facing the US Monday morning gold trade. While the trade continues to rehash a story suggesting that Chinese central bank gold buying interest might be put off, the trade continues to benefit from the news last week of Indian central bank gold buying interest. It is possible that a mid day US auction result will provide a volatility event in the gold market, but with the US economic report slate today mostly devoid of 1st or 2nd tier readings, the bear camp might not be able to rekindle the fear of slowing easily.

SILVER MARKET FUNDAMENTALS: Clearly the silver market is being lifted by outside market action in the early Monday morning trade. With a fresh downside breakout in the Dollar and a fresh upside breakout in the gold market, the silver market is apparently seeing positive guidance from a number of different fronts. In fact, the bull camp in silver is probably seeing some support from the upside action in global equity prices, as that action seems to countervail or gloss over the slack US employment readings that were seen at the end of last week. However, with a host of physical commodity markets also making impressive early upward bids this morning, it would seem like silver is even seeing support from its industrial commodity market background. Like gold, a weaker Dollar, higher equities and rising energy prices would seem to give the silver bulls a number of themes to support their cause this morning. While some players think the slack US payrolls from last week are destined to hold back the industrial commodities, December silver has nonetheless managed to rise by roughly 30 cents since the US non farm payroll release!

PLATINUM: The platinum market is catching a lift from the gold market and from the ongoing weakness in the Dollar. While the November 3rd Commitment of Traders with Options report for Platinum showed the Non-commercial position to be net long 19,304 contracts, with the Non-reportable position net long 4,030 contracts, that made the “combined” spec and fund position net long 23,334 contracts as of early last week. In other words, the platinum spec long is building but in the near term, the threat of a technically overbought condition is unlikely to rob the platinum market of more gains. Critical support moves up to $1,356, with an initial upside target in the January platinum contract seen at $1,372.

This content originated from - The Hightower Report.