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First, lets examine the iPath DJ AIG Grains Total Return Sub-Index ETN (NYSE: JJG). This ETN tracks a basket of corn, wheat, and soybean futures. Since June 7th, 2010 the JJG was trading as low as $33.32. Since that time the JJG has soared higher by 76.0 percent. On January 14, 2011 the JJG made a fresh new 2 year closing high and remains very strong on the charts by trading above its weekly 20, and 50 moving averages. There will be some daily chart resistance for the JJG around the $54.00 area. Therefore, it is possible to see a pullback or consolidation around this current level. However, the weekly resistance levels will be at the $59.00, $62.00, and $67.00 areas. Should the JJG pullback or consolidation there will be near term support around the $50.00 level. Take careful note of these levels, include them on your charts, watch and profit from them.
Quick distraction from exams.... I STRONGLY recommend all those new to this site/trading in general read this article and the article linked within it:
http://www.proptraders.net/so-you-want-to-be-a-trader/
http://www.articlealley.com/article_44528_63.html
Ok it refers to futures prop trading, but the principles are still the same! Those looking to go into prop trading will find proptraders.net pretty handy too, lots of useful info.
What the developments today tell us is that there are more risks to the global economic outlook than most of us would prefer. Active efforts by China to tame inflation could lead to slower growth while consumer spending in the U.S. has failed to live up to expectations. The recent increase in price pressures is a problem that most countries around the world are struggling with. China has responded with an RRR hike, the European Central Bank is talking about the possibility of raising interest rates if inflationary pressures are too strong while the U.S. is left standing on the sidelines. If the global economy was performing well, inflation would not be a major problem but central banks could soon find themselves in the tough situation of taming inflation at the expense of growth. The latest U.S. economic reports reflect the ongoing pressures on the U.S. consumer who is highly indebted, out of work and forced to deal with higher prices. Don’t expect next week’s economic reports to make investors feel any better. Manufacturing data could show additional improvements but the housing market has been one of the weakest parts of the U.S. economy and we do not expect any major upside surprises in next week’s housing data.
The rate increases in the Asian markets are certainly one of the major catalyst for the recent sell off in gold, silver, and copper. This morning spot gold is trading lower $22.00 to $1365.00 and ounce. The highly popular SPDR Gold Shares ETF (NYSE:SPY) is trading lower by 0.89 cents to $133.15. This decline in the GLD comes after a sharp decline yesterday afternoon. Southern Copper Corp. (NYSE:SCCO) is also trading lower by just 0.6 cents to $46.31. Copper stocks all declined sharply yesterday afternoon and could be under pressure again today.
The important consumer price index (CPI) was released this morning in the United States. The CPI was 0.5 percent. The core rate was up just 0.1 percent. It is important to realize that the core CPI excludes food and energy. What else is there besides food and energy in the real world? In any case there are food riots going on around the world and this report is telling us differently. It might be time to get a better economic gauge for the economy. In any case the Federal Reserve Bank's $600 billion quantitative easing program could certainly be part of the blame for the rising food prices around the world. Well, as long as our CPI does not get too hot I'm sure they won't even notice or address it.
Next up, today is a Friday. As many of our loyal readers know by now we rarely experience a sharp decline on a Friday. This is usually because the powers that be do not want a bad headline before the weekend. You see, the weekend is when most of the U.S. consumers will spend money. If the Fed's quantitative easing program is going to work for a while it will require the U.S. consumer to spend money. Please realize that consumer spending accounts for 70.0 percent of the gross domestic product (GDP) in the United States. The second reason that we rarely see a sharp Friday decline is so the Asian markets will not panic on Sunday night when they open. Asia is now financing the European debt markets lately by purchasing debt from countries such as Portugal, and Spain. Its a global economy and the game of hot potato is being played by every major country at this time. As for today look for a flat trading session.
While Jobless Claims were poor, after early selling, the markets recovered to the flat line. This is common and something that has been happening since before Thanksgiving. Between the extreme, unnatural light volume and the Federal Reserve propping via POMO, the markets are unlikely to see much selling until something very negative happens. Whatever occurs must be a shock to the system and something the Federal Reserve did not expect. If that happens, volume would shoot higher leaving the Federal Reserve unable to prop the markets up.
The SPDR S&P 500 ETF (NYSE:SPY) is currently trading at $128.58 with no change on the day. The leaders today are the Nasdaq 100 stocks. Amazon.com, Inc. (NASDAQ:AMZN) has been strong from the start as well as Research In Motion Limited (NASDAQ:RIMM). Banks are mixed as they await JPMorgan Chase & Co. (NYSE:JPM) earnings pre market tomorrow. The weakest stocks seem to be some of the highest flying commodity plays like Exxon Mobil Corporation (NYSE:XOM). To gain more analysis, guidance, swing trades and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
