The Energies sector was in free fall mode while US stock index futures jumped to start the week, all on more “peace in Iran" headlines.
Meanwhile, the Grains sector reminded me of the Red Wedding scene from Game of Thrones, particularly the oilseed sub-sector.
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Last Friday's Commitments of Traders report showed solid buying across the board in the Grains sector, though not enough to switch. the SRW position to net-long futures.
Morning Summary: I was going to refer to The Bangles song “Manic Monday[i]” for today’s Morning Commentary but realized I do that nearly every week. So, I changed it up a bit with “Walk Like an Egyptian”[ii]. Does that have anything to do with markets to start the week? Not at all. In fact, if ever the label “Manic” fit the commodity complex, it’s today. Let’s go through the usual checklist: The Energies sector is free falling with Brent crude (QAU26) down 9.2%, WTI off 7.8%, distillates (diesel fuel) down 2.4%, and petrol off 4.25%. Given this break, we would expect the Indices sector (US stock index futures) to be higher, which they are. S&P 500 futures are up 1%, DJIA futures are 1.1% in the green, and Nasdaq futures are up 1.6%. We can also guess the headline this morning: “U.S. and Iran pause fighting to give peace talks ‘space’…”. No, I’m not making this insanity up. That’s what the lead headline reads. Meanwhile, gold is up 0.6% (GCQ26) while silver has added 1.3% and Dr. Copper the economic indicator was 0.6% in the green early Monday morning. Out in the Barn, given the explosive rally in stock index futures and last week’s closing rally, I’m expecting both cattle markets to stampede once the opening bell rings.
Corn: If you happen to be the hedge fund who spent millions of dollars betting on a weather market in new-crop corn last week, through the call option spread, don’t look at the quote screen pre-dawn Monday. December (ZCZ26) dropped as much as 15.5 cents overnight on trade volume of 64,000 contracts and was sitting 13.75 cents lower at this writing. Why? Does it really matter? My Blink reaction is there was some rain across the US Plains and Midwest this weekend, but that was in the forecast late last week. Monday morning’s weather map shows only a few scattered showers floating around, though today’s forecast (slide 3) calls for better chances stretching across much of the US growing area. Let’s see what happens as the day unfolds. Grab your popcorn because it could be exciting. A couple of statistics from last Friday: First, national average basis remained weak, coming in at 29.25 cents under September and 52.5 cents under December futures. Next, as I mentioned in Weekly Analysis, daily stochastics completed a bearish crossover above the overbought level of 80% at Friday’s close. Finally, the latest Commitments of Traders report showed Watson added 55,190 contracts to its net-long futures position as of Tuesday, July 21.
Soybeans: Given what we’ve already talked about this morning, you won’t be surprised when I tell you the oilseed sub-sector was in the red to start the day. Soybean oil was down 2.1% (the more heavily traded December issue) while soybean meal was off 2.6%. November canola also dropped 2.1% to open the week. And then there’s soybeans. If you get queasy thinking about train wrecks, then look away. The Jar Jar Binks Contracts (August and September) were down 33.0 cents and 34.0 cents respectively, both about 3.0 cents off overnight low. But the contract most of us are watching is November (ZSX26), which lost as much as 38.5 cents overnight on big trade volume of 55,000 contracts and was sitting 34.5 cents (2.8%) lower at this writing. Meanwhile, the latest 6-to-10-day weather forecast (slide 4), for August 1 through 5, continued to call for above normal temperatures and below normal precipitation across the US Plains and Midwest. This is made more interesting by the old idea that the US soybean crop is made during August, aka the Dog Days of Summer. Does this mean there was something more to the Manic Monday Meltdown? I asked Barchart’s AI analyst CARL and all it wanted to talk about was Iran (slide 5).
Wheat: With what we are seeing in corn and the oilseed sub-sector, soybeans in particular, I will say the wheat sub-sector held together relatively well. Sure, all three markets are lower, but a look at the pre-dawn Monday quote screen doesn’t bring to mind the Red Wedding from Game of Thrones[iii]. September SRW (ZWU26) was down 8.5 cents to start the day after sliding as much as 13.0 cents on trade volume of 16,666 contracts (fittingly enough) overnight. In case you missed it Friday afternoon, I was a bit surprised when the latest Commitments of Traders report came out and Watson still held a net-short futures position in SRW of 7,010 contracts. While this was a decrease of 9,300 contracts from the previous Tuesday, the September issue had finished the positioning week with a gain of 33.0 cents. That being said, given the overnight selloff, September SRW is now down 8.0 cents from last Tuesday’s close. Over in HRW we see the September issue (KEU26) down 8.0 cents after losing as much as 12.5 cents while registering 4,000 contracts changing hands.
[i] Recall the standard Trade Week: Manic Monday (the second half of Wrap-around Weather-market Weekend Activity), Turnaround Tuesday (or just the first three and last letters of ‘Turnaround’), Watson Wednesday (the first day of the new noncommercial positioning week), Throwaway Thursday (the name says it all), and Frantic Friday (the first half of the Wrap-around Weather-market Weekend Activity).
[ii] Three words: Susanna Hoffs’ Eyes. Every male alive in the 1980s knows what I’m talking about.
[iii] True story: I watched one scene of one episode of HBO’s Game of Thrones, and it just happened to be the infamous Red Wedding scene.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.