By Mark Shore
3/10/2012

What can we say about corn basis May? Not a lot.

The market has been a real "yawner" and caught in trading range since mid December based on a longer term analysis when it bottomed at $5.8550. Since January we've had a long term buy signal, but the market is currently trapped between $6.67 and $5.99.

On a short term analysis we may be near a new buy signal as the market closed at $6.45. It is possible long and short term signals are converging towards a confirmation, however we need to see this market break above $6.70 to confirm a buy signal.

On a short-term basis $6.98 is our first resistance level, if $6.70 is broken. Somewhere between $7.14 and $7.31 would be the second resistance level. Support can be found in the $6.30 to $6.10 range.

On a longer term signal there is resistance at the $7.40 level just above the 2nd resistance level of the short-term analysis. A very strong resistance level is found in the $7.65 to $7.90 level. Currently, if the market closes below $5.99 corn could set up for a short sell-off.

Copyright ©2012 Mark Shore. Contact the author for permission for republication at [email protected] www.shorecapmgmt.com Mark Shore publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University's Kellstadt Graduate School of Business in Chicago where he teaches a managed futures/ global macro course.

Past performance is not necessarily indicative of future results.  There is risk of loss when investing in futures and options.  Always review a complete CTA disclosure document before investing in any Managed Futures program.  Managed futures can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone.  The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

By Mark Shore

The Feb 2012 non-farm payroll increased by 227k. The Private Sector increased by 233k.

The Dec and Jan non-farm payroll jobs were revised upward by 61k new jobs.

U-3 unemployment rate remained stable at 8.3%, however the U-6 rate dropped from 15.1% to 14.9%.

As we noted in last night's article on the preview of the Feb jobs report, the U-6 and job creation numbers are more important to focus on than the U-3 rate.

Over the weekend we will crunch the numbers. Stay tuned for more deets!

Copyright ©2012 Mark Shore. Contact the author for permission for republication at [email protected] www.shorecapmgmt.com Mark Shore publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University's Kellstadt Graduate School of Business in Chicago where he teaches a managed futures/ global macro course.

_ By Mark Shore
3/8/2012

On March 9th, 2012 the Bureau of Labor Statistics (BLS) will release the February Unemployment rate at 8:30am EST.  Regardless of the reported seasonally adjusted U-3 Unemployment Rate, the more important focus should be on the number of jobs created in the private sector and the U-6 unemployment rate and some of the other underlying metrics.

The BLS defines the U-3 rate, sometimes called the headline rate of unemployment as workers seeking jobs in the last four weeks. The U-6 rate, sometimes called the underutilization rate includes the U-3 rate plus workers who have taken part-time jobs because they can’t find full-time employment plus workers who are discouraged from seeking jobs. More of this can be found in an article I wrote in 2009 Redefining the unemployment rate.

The January U-3 rate was reported at 8.3%. The rate peaked at 10% in October 2009.  The January U-6 rate was reported at 15.1% after peaking at 17.1% in October 2009.

As reported by Yahoo finance, the consensus for the March report is 8.3% and job creation is estimated between 206k to 250k.

The phrase “unemployment rate is a lagging indicator” usually refers to the fact of job seekers becoming more confident of finding a job after the economy begins to grow and more jobs are available. As this happens the unemployment rate can actually increase because more job seekers are being counted into the U-3 rate as they more actively seek employment.

Therefore focusing on net job creation in the private sector and the U-6 rate are more important than the U-3 rate.

Copyright ©2012 Mark Shore. Contact the author for permission for republication at [email protected] www.shorecapmgmt.com Mark Shore publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University's Kellstadt Graduate School of Business in Chicago where he teaches a managed futures/ global macro course.

_ By Mark Shore
Over the years I’ve often heard the question “why are the U.S. House and Senate Agricultural committees given jurisdiction and oversight of financial firms?” This question sometimes appears in the managed futures course I teach at DePaul University.

With the testimony of Jon Corzine former CEO of MF Global before the House Agricultural Committee on December 8th, 2011 and his testimony with the Senate Agricultural Committee on December 13th, 2011 regarding the bankruptcy of MF Global, the 8th largest U.S. bankruptcy, this would be a good opportunity to discuss this question.

Let’s start with the basics:
The U.S. Senate Agriculture, Nutrition and Forestry Committee maintains jurisdiction on 17 topics including agricultural economics and research, agricultural commodities and price stabilization. Four of the five subcommittees including the Subcommittee on Commodities, Markets, Trade and Risk Management have oversight of the Commodity Futures Trading Commission (CFTC). 

The U.S. House of Representatives Committee on Agriculture has jurisdiction of oversight on 20 various topics including agricultural economics and research, stabilization of agricultural prices and commodity exchanges. The General Farm Commodities and Risk Management subcommittee maintains oversight of the commodity exchanges.

Of course this begs the question, why are these committees given jurisdiction over commodity exchanges and the CFTC?  

To find the answer, let’s take a walk down history lane:
Read more

Our comments from 6/14/10 stated we had received oversold signals in the U.S. equity markets between 6/3/10 and 6/14/10 and the market may be at or near at least a short term bottom. Last week equities rallied right into a very strong resistance level.

E-mini S&P futures (basis Sept) has reached a major resistance range from 1115 to 1132 range. If it breaks this area the next major resistance level would be 1150 to 1163. If the market breaks out of this range, there is a strong possibility the market could test the 1210 to 1215 range.

Initial support can be found in the 1111 to the 1105 range. If the Sept contract breaks this level than the next support level is 1097 to 1090. In the short run we are beginning to receive signals of the market approaching overbought.

The market is reaching a pivotal moment as to whether the market should take the next leg up or could it test the 1090 to 1084 area. Could this be the high of the current trading range?

The E-mini and DJ and NASDAQ markets have reached major resistance areas as well. Within the next few days we should know if the market is moving higher or correcting.

From our comments on 4/26/10, we began to ask if the equity markets were becoming overbought. The E-mini S&P futures contract (basis Sept) gave signals of the market’s potential sell off. By 5/12/10 (post the “flash crash” of 5/6/10 where our downside targets were hit) the market was beginning to rally back and we received signals of the market at least moving sideways if not higher.

In the past few weeks we have experienced an increased correlation between the decline of equities and the decline of the Euro and ever increasing volatility swings.

From a fundamental standpoint, if EU’s economies stall, they will be buying less US products and services and potentially damaging our recovery. Keep in mind the depreciation of the Euro causes $US priced items to be more expensive (including $ denominated commodities) overseas. This was seen as many commodities prices have fallen in recent weeks. As commodity markets decline, so do commodity-linked currencies such as the Canadian $ and the Australian $.

The depreciation of the Euro has taken on a life of its own as riots in Greece occurred, the fear of contagion spreading to the P.I.I.G.S. countries and possibly to other parts of Europe. 

As we witnessed in 2008, the major tenets of an economy are confidence and liquidity. If one tenet disappears or is reduced the other will also disappear or be reduced causing more uncertainty in the markets. We have been experiencing this in recent weeks due to the confidence crisis in Europe.
 
The Euro zone is a loosely tied group of countries utilizing one currency, but with no major economic infrastructure to intervene in times of economic hardship. Perhaps this is the opportunity for Europe to develop a stronger economic infrastructure.

To understand this lack of infrastructure in American terms, think of a U.S. state needing a bailout, but instead of the topic being debated in Congress, it would be debated in the other  49 state assemblies and then the Governors of each state would meet to determine if they would bailout the other state. This scenario in Europe creates an environment of slower decision making to support Greece. The slower the process moves, the more uncertain markets become and risk aversion increases.

Many economists and traders in recent weeks have called for the demise of the Euro zone. We don’t believe the demise of the Euro will occur as the Europeans need the EU and Euro zone to remain for two major reasons:  1) The Europeans want The EU as another reserve currency beyond the $US. 2)  The EU as a combined economy has stronger weighting in the world than each member country has on its own.

On 6/3/10 we received a signal in the E-mini NASDAQ futures (basis Sept) of the market becoming oversold. On 6/11/10 we received an oversold signal of the E-mini DJ market. As of this writing tonight we received an oversold signal in the E-mini S&P futures contract. With the confirmation of the equity complex being oversold, we believe the market could rally in the short term, barring any surprising negative news.

TheE-mini S&P futures (basis Sept) has initial resistance in the 1092 to 1103 area. If it breaks above this range, the next major resistance level is 1135 to 1158. There is a potential we could see a rally towards the 1210 to 1215 range.  Initial support level is the 1082 to 1074.

The Euro (basis Sept) has initial resistance in the 1.23 area. If the market continues, the next resistance level is the 1.26 to 1.28 range and potentially pushing to 1.31 as the shorts gets squeezed.

On 4/26/10 we began to question if the equity rally, since correcting in February had reached an overbought situation at the end of April. The markets seemed to need a reason for selling the equities. The situation in Greece and the selling of the Euro was the fundamental reason to offer a meaningful correction. Read "Greece is the Word".

On 4/27/10 we received longer term signals in the DJ, S&P and NASDAQ futures to at least offer a sideways market if not a selling market. During the past few weeks we have received some confusing signals. On 5/20/10, we received a stronger sell signal for the E-mini S&P futures contract (basis June).

From the recent weeks of selling, the market could find an upward bounce, but we believe the market will try once again to test the recent lows of 5/21/10 and 2/5/10 at 1051.25 and 1036.25 respectively before moving higher.

In the short term the E-mini S&P June futures has support in the 1057 to 1036 area. If this test fails and the market moves lower, than our next level of support is 1010 to 971. We do have a longer term price point of 890. This should be the bottom or near the bottom of this correction. We don't believe the market should reach the 890 price point, (unless the fundamental news gives more reason for the market to fall) but if it should it would send a lot of fear into the market and it probably be a choppy way down to that level.

The resistance for the market should be found at the 1075 to 1095 area. If the market should find a bounce, the next resistance level would be 1110 to 1130 area. As this is a holiday week, there could be a possibility for the market to bounce later this week primarily due to shorts covering their positions for the holidays.

The remainder of this week will also produce more economic reports that could add more fuel to the fire of selling if the reports are not better than expected. And of course on Thursday the weekly jobless claims will be released.

Stay tuned and put your seat belt on, this could be a bumpy ride.

Today Bloomberg news reported Abu Dhabi's Emirates Palace hotel is now offering a gold vending machine.

This is the first machine the German vending company (TG Gold-Super-Markt) has offered outside of Germany. The vending machine will offer small bars of gold as well as gold coins. The machine will monitor daily gold prices.

Historically when commodities make the headline news and reach out to the retail investor, such as all of the recent television commercials stating how gold has rallied in recent years and why investors should buy gold, this may be a telling sign of at least a short term correction in gold. Keep in mind yesterday gold price made an all time high.

In recent weeks the discussion of the Greece bailout continued to increase in popularity. Initially many thought it would quickly become yesterday's news.  However with each day uncertainty increased as to if and when the bailout would occur and would the increasing uncertainty cause a crisis of confidence across Europe. There has been a gradual lack of confidence as the euro has been selling since last November.

Since the equity markets last correction in early February, there has been a sustainable rally connected to increasing economic improvements. But in the last few weeks market participants began looking for some kind of correction. But what would cause it?

In our comments from 4/26/10 we asked if the equity markets were overbought and potentially nearing a correction. On 4/27/10 we received longer term signals in the DJ, S&P and NASDAQ futures (basis June), that at least the market could be going sideways if not selling off.

Initially the fraud charges against Goldman Sachs caused a quick selloff, but then the markets quickly bounced back. However last week witnessed the market quickly move from cautiously nervous to panic as the Dow Jones dropped 1,000 points with the fear of European contagion. Keep in mind as the euro depreciates, U.S. products and services become more expensive overseas. All of this fear could slow down the global recovery.

Overnight the EU structured an aid program to defend their currency. This has caused a relief rally overnight in the euro and equities around the world.

Is the correction over or is there more to come in either price or time (sideways trading market)?

Since peaking on 4/26/10, the S&P futures corrected 13% intraday. The emini S&P June futures contract has resistance at 1169 to 1185. Support at 1148 to 1128.

In closing, it seems fitting to quote the song "Grease" written by Barry Gibb:
"This is the life of illusion
Wrapped up in trouble laced with confusion
What we doing here?"

Since the last correction in the equity futures markets bottomed on 2/5/10 the equity indices have rallied and rallied and rallied. Intraday the markets have corrected. But based on end of day closing prices, the markets keeping grinding higher.

The Emini S&P futures (basis June) since 2/5/10 has been up 8 of the last 11 weeks.

The Emin DJ futures (basis June) has been up 9 of the past 10 weeks. And has been up each of the last 8 weeks.

The Emini Nasdaq futures (basis June) has been up 11 of the past 11 weeks.

The question everyone is asking: how long can these indices grind higher without a correction? Granted the economic news continues to show improvement and corporate earnings continue to beat estimates. But longer term indicators are showing the market overbought.

We are not looking for a crash, but just a healthy correction before the next up leg of this market.

For the Emini S&P futures (basis June), we stated on 3/8/10 the market had strong resistance in the 1220 area. Currently there is resistance at the 1218 to 1224 range and possibly up to the 1240 area.

There is initial support in the 1206 to 1191 area. If the market breaks below this range the next support level is 1169 to 1150 range. Keep in mind the 1150 range, was initially a strong resistance level for the market to break and may now be a strong support level.