- New Science in old markets -

An extension in a grain market, Stocks weaken a bit; $ too. No clarity in bonds

Only a little news today – a new bottom extension in soya oil. This is the weakest of the grain complex as the balance of prior decades has been upset by the large rise in demand for soya meal as animal feed in protein-hungry China. Soya oil is effectively relegated to the status of by-product whose price is no longer simply a function of the supply and demand of oil itself. When something this weak makes a bottom extension, the assumption we make is that other grains must be also cheap. We recommended buying wheat on a recent break upward of a compression (where trends begin, to remind you) and this should add fresh impetus to that market. Stay long and we will advise. Charts:

Stocks have been weaker since top extensions around the world 8 or 9 trading days ago and those signals are still ‘in date’. Stay short for now – we may find (as first suggested in the September 17th edition) that this short could be very profitable. For now however it’s just a normal trade and we will advise the moment that we think it could be something more. Updates:

The $ has weakened a bit more since we advised taking some or all profits on short positions. The Yen particularly has made up some ground against the $ and this will probably continue. You may wish to re-buy the Yen hereabouts. The picture against the European currencies is different – there has been another extension in £/$ and this is a repeat of the same signal that made us recommend that profit-taking in the September 19th edition. We are inclined to wait for more information before re-committing to short $ long European currency positions. The pictures:

Still no news of any importance in the bond markets. They continue steady and are trading above recent compressions (just – see the ten-year example here) - this makes us slightly bullish but uneasy. If you must have a position, be long but we wait.

More soon.