Monday, January 31, 2011

Let Them Eat Cake....That Might Be Tough With These Wheat Prices

After an initial pull back crude oil gained some strength overnight as investors seem to consider the Egypt unrest as little threat to the flow of oil through the Suez canal. It is great to play the threat of disruption in our trades but there is little proof that oil and energy is ever effected by these tense situations.

Still, many hedge funds and commercial traders got stuck on the wrong side of the trade last week as the Egypt fiasco unfolded right as many fund managers were peeling back their long crude positions. But maybe the trade we should be talking about is wheat. Wheat is the cause of the tension in Egypt as the population faces food shortages and other governments around the globe are increasing their wheat and rice inventory. Jordan bought 150,000 metric tons of wheat last Thursday and is in the market for more. And Libya did the same, buying 100,000 metric tons of wheat. Many companies in the middle east are selling gold reserves just to fund these massive purchases of wheat and rice.

Have we missed this trade and is a short on wheat in order? Stochastics and the RSI are overbought and are turning bearish hinting that a double top with last August's high might be forming. Closes below the 20 day moving average crossing at 8.03 3/4 are needed to confirm that a short term top has been posted. With everything else that has gone on in wheat in the past year it would take a lot of nerve to sit on a short position in wheat at this point. This may only be the beginning.

Here's your pivot point, support and resistance numbers for Monday morning......

Crude oil was slightly lower overnight before gaining some strength as it consolidates some of last Friday's rally. However, stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 90.12 are needed to confirm that a short term low has been posted. If March extends this month's decline, the 50% retracement level of the May-January rally crossing at 83.06 is the next downside target. First resistance is the 20 day moving average crossing at 90.12. Second resistance is this month's high crossing at 93.46. First support is the 38% retracement level of the May-January rally crossing at 85.51. Second support is the 50% retracement level of the May-January rally crossing at 83.06. Crude oil pivot point for Monday morning is 88.06.

Natural gas was higher due to short covering overnight as it consolidates some of the decline off last Monday's high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If March extends last week's decline, the 62% retracement level of the October-January rally crossing at 4.225 is the next downside target. Closes above the 10 day moving average crossing at 4.506 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 4.492. Second resistance is the 10 day moving average crossing at 4.506. First support is last Friday's low crossing at 4.252. Second support is the 62% retracement level of the October-January rally crossing at 4.225. Natural gas pivot point for Monday morning is 4.315.

Gold was lower overnight and remains poised to extend this month's decline. Stochastics and the RSI are oversold and are turning bullish hinting that a low might be in or is near. Closes above the 20 day moving average crossing at 1363.20 are needed to confirm that a short term low has been posted. If February extends this month's decline, the 25% retracement level of the 2009-2010 rally crossing at 1296.40 is the next downside target. First resistance is the 10 day moving average crossing at 1343.7. Second resistance is the 20 day moving average crossing at 1363.20. First support is last Friday's low crossing at 1309.10. Second support is the 25% retracement level of the 2009-2010 rally crossing at 1296.40. Gold pivot point for Monday morning is 1332.70.

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