A new high for the Aussie?

By Erik Tatje

Australian Dollar (CME:ADM14)

The Aussie Dollar has been trending higher since late January and the currency appears to be on the verge of a new leg higher. Price broke above a previous high during yesterday’s session and the level that was previous resistance at 9069 has now become support for price. Both near term momentum as well as the intermediate term directional bias in this market remain positive and the highest probability opportunity appears to be on the long side of the Aussie. Continue to use the 9069 pivot as support going forward. Ideally, price should remain above this support pivot; however, in the event of a more significant pullback in the price of the Aussie, look to the 9009 – 9000 area to be the next zone of support. Until price breaks below the 8955 low on the chart, the directional bias will remain positive, and buying corrective pullbacks into support will remain a plausible strategy to implement in the Aussie Dollar.

Australian Dollar, 30-minute Bar Chart, eSignal

Natural Gas (NYMEX:NGJ14)

Natural Gas continues to look weak as price broke below the 4300 level yesterday before eventually finding support at the 4265 suppot pivot on the chart.  Price has has a bit of a corrective bounce off this level in the early mornign session; however, sentiment in this market remains bearish.  Look for the recent corrective rally to lose steam around the 4335 area on the chart. In the event that price is able to push above this level, the 4375 – 4382 resistance band is the next valid upside target. The directional bias in this market is lower and selling corrective rallies into resistance is a valid strategy to implement until price proves otherwise. Keep in mind that Natural Gas is in the process of rolling over from April to the May contract so look for volume in the April contract to dissipate as the week progresses.

Natural Gas 30-minute Bar Chart, eSignal

Cotton (NYBOT:CTK14)

Despite yesterday’s big sell-off in the Cotton market, the technical framework of price action in this market remains firm. Prices have been trending higher nicely for the past few months and the recent corrective pullback could present a valid opportunity for those bullish on Cotton prices to enter the market from a better price. The area from 90.41 – 90.83 appears to be a solid zone of support from which price seems to be respecting at the current time. Any further weakness in price would be expected to find support around 89.20 – 89.60 on the chart. The intermediate term higher high higher low structure will remain valid until a break below the low at 86.12. Although near-term momentum may be unclear, the longer term directional bias remains positive in the Cotton market.  The RSI showed an extremely oversold signal following yesterday’s big move, which is to be anticipated after a large sell-off. The question now for traders will be whether or not yesterday’s price active was merely a corrective pullback or the start of something bigger.

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Bio Tech could be impacted by “Eiffel Tower Power & Gravity!”

by Chris Kimble

CLICK ON CHART TO ENLARGE

The left side of Eiffel tower patterns are fun if long. The right side of Eiffel Tower patterns are not near the fun.... if one remains long. If one harvests longs at the peak or is short on the right side of the Eiffel pattern, that is a different story!

Eiffel Tower Power (right side) could well be felt if Bio Tech ETF (IBB) breaks support!

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How This Central Bank Bubble Ends

by Bill Bonner

Explaining the End

I sometimes get the feeling that somewhere across that huge puddle, in America, people sit in a lab and conduct experiments, as if with rats, without actually understanding the consequences of what they are doing.

• Vladimir Putin, 4 March 2014

We promised to explain how it ends. The world, that is. The world we live in now. The one in the middle of a rapidly inflating central bank bubble.

First, we need to understand that this is a very different world from the world of the 19th and early 20th centuries. It is a world where central bankers play a role somewhere between con artists, mad scientists and God Himself.

They deceive and cheat. They conduct their experiments without any real idea how they will affect people. And they move almost every price in the world – sending investors, householders and business people all running in one direction.

Their experiments change not only prices quoted on the Big Board and the supermarket. They also change the physical world. Jobs are lost to machines that – without such low interest rates – would not have been built.

Monetary Fantasy

Those in the 1% are only as rich as they are today thanks to the Fed’s manipulations. America’s super-sized houses also are largely the result of the Fed’s 2002-07 real estate bubble. And many a mansion has been built in Aspen or the Hamptons with money from Wall Street bonuses, which wouldn’t have been possible without central bankers’ grand designs.

And China is the way it is today – with its gleaming towers, its mega-factories, its empty cities and clogged roads – largely because US officials made it easy for Americans to buy things they didn’t need with money they didn’t have.

Central bankers – along with central governments – have created a kind of monetary fantasy… which depends on ever increasing amounts of credit. But where can all this new money go? Real output can’t keep up with it. So prices must adjust. In the event, they bubble up … first one market, then another … first one sector, then another …

And after the bubble, what? The bust!

That’s what we’re waiting for. A bust in the biggest debt bubble of all time. When the credit inflation ball bounces off the ceiling, it produces an equal and opposite reaction in the other direction. Asset prices fall. This is deflation. It begins with asset prices … and then makes its way into consumer prices.

Making Volatility Your Friend

Most investors think they need to protect themselves from this kind of volatility. Academic studies show that more volatile stocks under-perform less volatile stocks – they call it the “volatility anomaly.” And it is obvious that if your stock goes down 50% you need 100% on the upside to get back to where you started. Losses and gains have “asymmetric” effects on your portfolio.

But at our small family wealth advisory, Bonner & Partners Family Office, one of our principles is that you need to “make volatility your friend.” Because volatility is not the problem. The real problem is risk. There is risk that you will buy the wrong investment at the wrong price. Then you’ll get whacked.

EZ money policies – low rates, QE, paper money – produce an apparent stability. As long as the money flows freely, even some of the worst businesses and the worst speculators can borrow to cover their losses. Stocks go up and up and up. It looks good. But it masks real risk. As the bubble in credit increases the risk of a major blow-up increases… until it becomes a certainty.

This is where volatility can be your enemy and your friend. Just as Fed policies have made stocks too expensive… the equal and opposite reaction of the financial markets will be to make them too cheap. (Stay tuned.)

So, there you have it. The first stage of “the end” will be a major selloff of stocks. At present prices, of course, they’ve got it coming anyway. But the implosion of the debt bubble and the collapse of asset prices are not likely to be the end of the story. Not as long as we have delusional activists running central banks and central governments.

Tune in tomorrow for the second stage of the end.

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Insiders Become Extremely Pessimistic

by Pater Tenebrarum

Nejat Seyhun's Take on the Flood of Insider Sales

It should be pointed out that insiders have been heavy sellers of stocks for quite some time. Insiders are almost always early, both in their buying and selling. This is no surprise, as by the very nature of the situation, they have an  informational advantage and are bound by legal constraints, which expresses itself inter alia as an often considerable lead time in their activities. If one tries to time one's investments by relying solely on insider data, one will often find one's patience taxed, since what is needed for the investment to produce a positive return is usually that other market participants begin to recognize what the insiders have known all along.

So what is the current situation? As noted at the beginning, insider selling hasn't just picked up recently – it has been quite heavy for a long time now. What makes the current situation remarkable is only that insiders haven't expressed this much skepticism about valuations for some 25 years, as Mark Hulbert reports. He has some interesting information on how the data on insider activity need to be parsed to arrive at actionable intelligence:

“Corporate insiders are more bearish than they have been in almost 25 years. That isn’t good news for the stock market, since these insiders — corporate officers and directors— know more about their companies’ prospects than the rest of us. In fact, you may want to take their pessimism as a signal to ditch some of your stocks or shift into industries in which insiders aren’t heavily selling, such as energy, financials and basic industrials. Just be aware that this record bearishness isn’t evident from many of the insider indicators that get widespread attention on Wall Street—those based on a ratio of insiders who are selling to those who are buying.

According to the Vickers Weekly Insider Report, published by Argus Research, which calculates a proprietary version of this sell-to-buy ratio, insider selling over the last eight weeks, relative to insider buying, is higher than average, but no higher today than it was one year ago—when the S&P 500 was poised to produce an impressive double-digit gain. And in late 2003, just as the 2002-07 bull market was gathering steam, the insiders’ sell-to-buy ratio rose to even higher levels than it is today.

But insider sell-to-buy ratios can be misleading, says Nejat Seyhun, a finance professor at the University of Michigan who has extensively studied insider behavior. That is because the government’s definition of insiders includes a group of investors whose past transactions, on average, have shown no correlation with subsequent market moves: those who own more than 10% of a company’s shares.

Though on rare occasions such a large shareholder also will be an officer or director, in almost all cases it will be an institutional investor—such as a mutual fund or a hedge fund. These entities are outsiders in all but name, and they have the least forecasting ability. For example, Seyhun found that far from being a laggard, the average stock sold by these largest shareholders actually outperformed the market by 0.7% over the subsequent 12 months.

For his calculation, Seyhun strips out the largest shareholders from the sell-to-buy ratio. Currently that adjusted figure shows a record level of insider bearishness. According to this measure, corporate officers and directors in recent weeks have sold an average of six shares of their company’s stock for every one that they bought. That is more than double the average adjusted ratio since 1990, which is when Seyhun’s data begin. One year ago, Seyhun’s adjusted ratio was solidly in the bullish zone, he says. And in late 2003, the ratio was more bullish still. The current message of the insider data “is as pessimistic as I’ve ever seen over the last 25 years,” he says.

(emphasis added)

We weren't aware of this 'large shareholder effect', but it certainly makes sense the way it is explained here. Whenever one looks at insider activity in individual issues, one does after all focus on what directors are doing as well. An exception to the 'large shareholder rule' is investment or divestment by a bigger company in the same line of business, which presumably must be regarded as meaningful as well. The fact that traditional insider data services fail to make the differentiation proposed by Mr. Seyhun may be one of the reasons why so far, phases of heavy insider selling have not meant as much as one might expect. However, as the report above indicates, things have now changed rather dramatically. Insiders could of course still be early. They are not necessarily stock price forecasters – they only have information about the performance of  the underlying business (obviously, stock prices and business performance can frequently be different cups of tea for extended periods of time).

Moreover, insiders are constrained when material information (such as a big earnings miss, news on the regulatory front, etc.) is about to be disclosed. So it is usually a judgment call about valuation, and often probably a hunch that either trouble or better times for the business are in the offing further down the road. A CEO or CFO might e.g. see some trends in the numbers the meaning of which he can judge from experience, but which do not rise to the 'material information' standard that bans trading activity prior to public disclosure.

According to Mr. Seyhun's methodology, the following sectors are currently experiencing the most determined and aggressive selling by company directors: capital goods, technology, consumer durables (i.e., automobiles, construction and appliances) and consumer non-durables (food and beverages, clothing and tobacco). As we have pointed out, we see the recent weakness in technology stocks as a warning sign, and the above observations about insider activity lend support to this hunch.

Our guess would be that corporate officers are mainly concerned about valuations at this stage, but one cannot rule out that they are aware of a subtle deterioration in business that will only become obvious to other market participants at a later stage.

The NDX has reached a new high for the move in early March, but since then is looking a tad wobbly. The past two trading days have seen sharp declines on heavy volume – click to enlarge.

XLY, the consumer discretionary ETF. This one has not diverged from the broader market, but it suffers from internal divergences – for instance, the stocks of car makers have failed to confirm the recent move to new highs in XLY – click to enlarge.

XRT, the retailer ETF. Note that it has now diverged from the SPX twice in a row – click to enlarge.

A More Hostile Fed

Monetary expansion and its lagged effects remain supportive factors for the market, but even there we see a reversal in trend and a far more hostile Fed.

Note in this context that every time a new Fed chairman/chairperson has taken over since Volcker in the late 1970s, monetary tightening was on the agenda. We suspect that most Fed chairmen are trying to bow out on a 'high note', this is to say, with money easy and the stock market elevated. By contrast, new chairmen are usually under pressure to prove that they are in agreement with the official 'inflation fighting' (ha!) orthodoxy of the central bank, and finding monetary conditions loose, begin to tighten in the early part of their stint as Fed chief.

It happened this way with Volcker, Greenspan and Bernanke, and only Volcker managed to dodge a stock market crash (although the 'double dip' recession in the early 80s was not a fun time for the stock market either). Ms. Yellen arrives on the scene with the market one of the historically most overvalued in history, a veritable mania in junk debt that absolute dwarfs anything that has been seen before in this asset class and with monetary policy the loosest of the entire post WW2 era. So our guess is, she isn't going to be able to dodge a crash either, the main question is when it will happen.

Conclusion:

The list of signs suggesting caution is getting longer by the day. Caveat emptor, as they say.

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Why Good Numbers Matter for the Livestock Sector and How Decision Makers Can Improve Them

by TheCattleSite

Better data is needed in order for sustainable livestock growth strategies to be implemented appropriately, a new World Food and Agriculture Organisation (FAO)report has found.

Ugo PicaCiammara and Nancy Morgan, an agricultural economist at the FAO, write that growing demand for animal produce in developing countries requires more maths and science in food production.

The growing demand for food of animal origin in developing countries represents a major opportunity for poverty reduction, writes Nancy Morgan.

Livestock ownership is recognized as a significant contribution, and in multiple ways, to households’ livelihoods, including through the provision of cash income, food, manure, hauling services, savings, insurance and even social status.

This is the area covered in the FAO's latest report, Investing In the Livestock Sector: Why Good Numbers Matter.

The FAO's recent publication looks to address the myriad of challenges associated with generating useful livestock data.

In order to sustain and promote the livestock sector’s development, good quality data are needed for designing and implementing policies and investments. However, available livestock data, and the derived statistics, are largely considered inadequate for effective decision-making.

While a review of existing agriculture- and livestock-related datasets for African countries suggests that some livestock-related indicators do exist at the country level, they are few in number, are rarely collected on a regular basis, and their quality is often questioned by livestock stakeholders with regards to their timeliness, completeness, comparability and accuracy.

There is often limited institutional collaboration between data collection agencies and furthermore, statistical systems rarely, if ever, generate data on pastoral production systems, which are of considerable relevance to many African countries.

In an effort to address the myriad of challenges associated with generating livestock data useful for decision makers, the Livestock in Africa: Improving Data for Better Policies Project was developed.

The Project was implemented between 2010 and 2013 by the World Bank, the UN Food and Agriculture Organization (FAO), the International Livestock Research Institute (ILRI), and the African Union, in collaboration with the pilot countries of Uganda, Tanzania and Niger, and with financial support from the Bill and Melinda Gates Foundation. One of the main goals of this collaborative initiative has been building the capacity of national governments to collect better quality livestock data and using this to guide investment decisions for the livestock sector.

At the conclusion of the Project, a Sourcebook was produced--Why Good Numbers Matter: A Sourcebook for Decision Makers on How to Improve Livestock Data. It summarizes the project’s lessons learned and presents possible solutions to the challenges facing professionals in the public and private sectors collecting and analyzing livestock data.

In particular, the Sourcebook: (i) develops a framework for and presents tools and methods on how to improve a livestock statistical system; (ii) identifies the core livestock indicators needed by decision makers; (iii) provides guidance on improving the content of household and farm level survey questionnaires; (iv) presents examples of methods on how to improve livestock data; and (v) provides practical evidence on how country governments could use data for the proper formulation of policies and investments.

At the minimum, the report recommends that national governments collaborate to develop a set of core indicators targeting the production, social and environmental dimensions of agriculture for five core livestock items--cattle, sheep, pigs, goats and poultry, as they contribute to more than 99 percent of meat, milk and egg production across Africa. Such data is critical to help decision makers identify the constraints faced by different livestock stakeholders and develop policies or make investments that aim to relax or remove such constraints.

When developing these core indicators, regional and international collaboration is critical, emphasizes the Sourcebook, as it enables data integration across countries, regions and continents. For example, current practice for collecting data on milk production is sometimes based on gross data, which includes the milk sold and that suckled by young animals, or net data, which excludes milk suckled by young animals.

Similarly, data on livestock value added in some cases does include manure as one of the outputs of livestock, but in others it does not. Recommendations in the Sourcebook on how this could be achieved include, for instance, developing international standards and classifications, a common data platform at the regional and pan-African level, and an integrated survey framework based on best practices identified in survey design and implementation.

Furthermore, collaboration within national governments is important to ensure that other social and economic surveys, such as the Living Standards Measurement Surveys, include questions about livestock. This will show how livestock contributes to household livelihoods and for designing policies and investments that maximize the sector’s impact on poverty reduction. For example, one study cited in the Sourcebook (Benin et al., 2008), found that a one percent increase in livestock GDP per capita was anticipated to reduce national poverty by 0.34 percent.

To help stakeholders involved get started in improving these livestock statistical systems, the Sourcebook includes a table of recommended core livestock indicators for Sub Saharan Africa, along with the recommended frequency of their collection, and level of representativeness (i.e. regional, national, district or lower administrative level).

It also presents a short, a standard and an expanded version of a livestock module for agricultural surveys and for multi-topic surveys. The three versions of the module are starting points for countries to develop templates that fit their specific needs. So far, through collaboration with the WB’s LSMA-ISA project, Niger, Tanzania and Uganda have used it to improve the livestock content of their questionnaires.

The livestock module, as well as the development of integrated indicators and survey frameworks, are among the several recommendations detailed in the Sourcebook to improve countries’ quantity and quality of data on livestock numbers. Additional recommendations include, for example, methods for addressing challenges with collecting data in nomadic areas, which requires different survey tools such as satellite imagery and spatial analysis techniques.

Though the risk of designing bad policies and investments can never be entirely eliminated, a statistical system that generates data on core livestock indicators and some other ad hoc indicators, complemented by consultations with experts and rigorous pilot projects, can assist decision makers in designing and implementing policies and investments that are more effective in promoting a thriving and sustainable livestock sector.

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Corn returns to resistance, while wheat and soybeans close higher

By Allendale Inc

Corn: Bulls arrived early to help push the corn back up to resistance levels on Monday. While most corn news was quiet, there was some spillover support from wheat again. When trade ended last week, there was a forecast for major rains in the HRW areas, most of which were removed Monday, offering support to wheat and corn support.

With the upcoming stocks report just a week away, there is solid reason why old-crop corn traders would want to be light buyers anyway. Corn has already rallied well on strong sales reports all year long but Monday could show corn bulls that we have less corn on hand than we thought. Right now it is only a guess what we will see next Monday, but bulls will likely be happy to pre-buy going into the report. Bears should remain in the new-crop contract.

Yet another widely watched forecaster mentioned the need to watch the quickly building El Nino probability. He went as far as to say that these conditions have not been seen since 1997. Looking back to how December traded in 1997, it is interesting to know that the chart appears almost identical to our current December chart. So, what happened going forward? In ’97, the December corn topped on April 1 and fell 24% into July. While there was a bounce found after that by the end of the contract corn was still off 15% from the April 1 high…Ryan Ettner

Soybeans: The week’s trading stated out on a positive note as Friday’s sellers seemed to turn into today’s buyers. The day’s trade volume could be called moderate at best. New information to trade was lacking with spillover support from the strong day in wheat and corn providing the best support for the market.

There continues to be talk within the industry that China is doing its best to get out of bean purchases as well as try to resell its buys into the United States. The problem for the trade is there is still no confirmation yet to how many bushels have been canceled or sold into the United States. The latest rumor is that 10 or more cargoes of Brazil soybeans are headed to U.S. shores. These were ordered by Chinese buyers months ago but due to sharply lower demand, they are trying to find someone else to take the product.

U.S. prices currently have almost a $50 per tonne premium over Brazil. Today’s beans inspections came in at 732,132 tons, which was viewed a little negative as the trade was expecting inspections to come in closer to 770-925,0000 tons.

AgRural estimated Brazil’s crop at 86.0 mmt and that 63% of the crop had been harvested. Last year 60% of the crop had been harvested at this time. Safras e Mercado said 67% of the Brazilian bean crop has been harvested. Funds were an estimated buyer of 6,000 beans today.

Next Monday, the USDA will be releasing both the quarterly stocks report as well acreage report. The quarterly Grain Stocks is a survey of grain holders revealing how much grain is left over after the second quarter of usage. USDA will use this report to evaluate the unknown demand in the grain industry and then use this information to make adjustments on upcoming monthly WASDE reports. The Prospective Plantings report is the first official survey of farmer expectations for this spring. Traders should use caution as we get closer to the reports as the release of these reports tends to lead to dramatic moves one direction or another…Jim McCormick 

Wheat: Wheat finished the day higher Monday as we made a push to test the recent highs amid buying on concerns that the Russia and Ukraine standoff doesn’t appear to be getting any better.

We saw good buying enter the market overnight around the time the European markets opened and continued to find strength through the trading session. We failed to move into new highs for the move but we did still have a strong day on moderate volume for the move. This break in the market was enough to push us below the recent uptrend line but the break was not enough to convince trade to liquidate additional long positions.

Managed money added longs last week bringing their total to about 25,000 positions, up 13,000 week over week. We could see these longs add additional longs if we do break into new highs and with the lack of precipitation to relieve dry conditions in the plains and a Ukrainian Russian situation continuing to escalate we wouldn’t expect a mass liquidation of longs based on these two issues.

We do have a quarterly grain stocks report on Monday which could affect these markets on Thursday and Friday. Look for resistance near the recent highs but a breakout suggested the longs are still firmly in control of this market.

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