TKUK1! trade ideas
The CPI Fantasy And Commodity PricesRodney Dangerfield was one of my all-time favorite comedians. He was a master at the one-liner, and while his catchphrase was “I don’t get no respect,” he got plenty.
Rodney passed in 2004, but his legacy lives on in films. His role as Thornton Melon in the 1986 comedy classic Back to School continues to have a cult following. As he sat in an economics class, the professor created a theoretical company that sold widgets, the favorite product of academics. The lesson included funding the company and developing a marketing strategy for the widgets. Rodney’s character, already a wealthy businessman, attempted to point out the realities of starting a business, but the professor objected. Rodney then glibly asked the economist if his factory was in “fantasy land.”
While the film was a fictional comedy, there is a fine line between fiction and nonfiction. The US Federal Reserve continues to call rising inflationary pressures “transitory.” Long ago, the economists massaged the consumer price data to extract a core that excludes food and energy prices called “core CPI.” Thornton Melon would call the core data “fantasy land” as food and energy are the critical factors that take a bite out of consumers’ budgets.
Another significant increase in the inflation barometer
Core CPI is fantasy land
Look at the evidence- It costs more to power our lives and fuel our bodies
Transitory in Fed Speak and the literal definition is not the same
The trend is always your friend- Economists are behind the curve
Another significant increase in the inflation barometer
In June and July, the previous month’s consumer price index data was off the charts, indicating rising inflation. This month, the July CPI reading rose 5.4%, another sky-high level. While the number was in line with the market’s expectations, core CPI, excluding food and energy, was up 0.3% compared to the forecast level at 0.4%. The market interpreted the core number as less inflationary as it was below the expected reading.
Core CPI is fantasy land
Economists are social scientists, making their projections and interpretations highly subjective. They argue that core CPI better reflects inflationary pressures because food and energy prices can be highly volatile. Excluding them from the inflation barometer smooths the data.
In statistics, the science of data, hedonic regression is the application of regression analysis to estimate the impact of various factors on the price of demand for a good. Hedonics is commonly used in real estate pricing as a quality adjustment for price indices. When it comes to inflation, excluding food and energy from the CPI is similar.
The problem with core CPI is that food and energy make up a significant part of budgets. Rising prices for the products that fuel our lives and provide nutrition for our bodies is taking an ever-increasing bite out of paychecks is a reality, while eliminating them distorts the actual cost of living for the majority of people. Economists massage data. The US Federal Reserve relies on statistics in its monetary policy decision-making process. Thornton Melon would say that core CPI only exists in “fantasy land.”
Look at the evidence- It costs more to power our lives and fuel our bodies
Anyone that fills their car with gasoline, heats or cools their homes, or eats, will tell you that prices are a lot higher in August 2021 than they were in August 2020. Futures prices are real-time objective data as they reflect where buyers and sellers meet in a transparent environment. The evidence pointing to the reality of rising inflation from the August 2020 high to the August 13, 2021 closing level on the nearby futures contracts is clear:
Nearby NYMEX crude oil prices increased from $43.78 to $68.44 per barrel, an increase of 56.3%.
Gasoline moved from $1.4395 to $2.2626 per gallon or 57.2%.
Heating oil and distillate prices rose from $1.3054 to $2.0779 per gallon, a 59.2% rise.
Natural gas appreciated from $2.743 to $3.861 per MMBtu or 40.8%.
Corn rose from $3.53 to $5.6825 per bushel or 61.0%.
Soybeans rallied from $9.67 to $13.73 per bushel or 42.0%.
CBOT wheat increased from $5.5175 to $7.6225 per bushel or 38.2%.
Coffee rose from $1.3080 to $1.8275 per pound or 39.7%.
Sugar moved from 13.28 cents to 19.95 cents per pound or 50.2%.
Live cattle appreciated from $1.08225 to $1.28125 per pound or 18.4%.
Lean hogs are up from 56.70 cents to 86.525 per pound or 52.6% over the period.
The substantial increases in food and energy commodities paint a very inflationary picture. Moreover, the price rises reflect wholesale levels. Retail prices have risen far more over the past year. Yesterday, I paid over $4.20 per gallon for gasoline in Las Vegas, double the price last year. Food and energy prices are the tip of an inflationary iceberg. Education, health care, and housing costs are soaring. All raw material prices have moved appreciably higher.
Transitory in Fed Speak and the literal definition is not the same
In reality, prices are soaring in the Fed’s “fantasy land,” the core CPI data does not look all that bad as they only rose 0.3% in August. However, our food and energy bills went up a hell of a lot more last month.
Over the past months, the Fed blamed rising inflationary pressures on lumber, new and used car prices, and other “transitory” factors created by bottlenecks in supply chains and other pandemic-related factors. The academic ivory tower where the economists sit is far above ground zero, where consumers shop each day.
The definition of “transitory” is not permanent. Adjectives are temporary, transient, brief, short, short-lived, fleeting, and passing. “Transitory,” in a literal sense, requires an end date. So far, the Fed has not provided that data to the market. When asked about the period the central bank measures its 2% average inflation target, Chairman Powell replied it is “discretionary” or available for use at the user’s discretion. Transitory and discretionary is Fed-speak for leave it to us. They are non-answers to critical questions about the Fed’s interpretation and policy stance. Transitory reflects the central bank’s hopes and wishes, while discretionary tells us they will figure it all out someday.
The trend is always your friend- Economists are behind the curve
The bottom line is that the most objective measures of inflation are the wholesale futures prices and the retail costs of living. Food and energy prices are only a microcosm of rising prices across all asset classes. Money’s purchasing power is eroding because of the tidal wave of central bank liquidity and tsunami of government stimulus. Even if the Fed bites the bullet and addresses rising inflation, the government continues to spend without abandon. A $3.5 trillion budget initiative before the US Congress with an infrastructure rebuilding package only increases the debt level.
The Fed is living in “fantasy land” as inflation continues to rise. In August 2020, gold made a new record high. In May 2021, lumber, copper, and palladium prices rose to all-time peaks. Grains and oilseeds rose to eight-year highs in 2021. In July, coffee futures rose to their highest price since 2014. Bull markets in the volatile commodities sector rarely move in a straight line. The ascent of prices has been nothing short of a bull market relay race, with one commodity handing the baton to the next. The most recent recipient was the sugar market, which rose to over 20 cents per pound last week, the highest price since 2017. Even if we use statistical methods to smooth the bullish price action, the underlying trends reveal that the Federal Reserve’s approach to monetary policy is far behind the inflationary curve.
Inflation can be a challenging beast to tame. As it rises, the central bank’s refusal to acknowledge and address the economic condition will reward it with the lack of respect it deserves. We live in a stark reality created by policies that continue to erode money’s value.
Rodney Dangerfield was a comedian. There is a fine line between comedy and tragedy. If the approach to monetary policy that hides behind massaged data were not so tragic, it would be funny.
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analysis zc daily hello traders
this is my view about the market of zc , since last August the corn market has gone up and as you can see and at the end of June the corn fell and we maintain a balance
transitory these nuts I expect a bottom happening here in corn within the next couple days. 08/06 to be more precious and another one in sept 21. the sept 21 should be a multi year low.
a 300% move coming within the next 3 years and all dips should be bought.
Corn Futures poised for break through on weekly chart Break of dotted line signals downside breakout with target down near 420. Upward break of 580 suggests further range consolidation with upward bias. Potential for wave 4 consolidation here near support.
Corn will find a new support around $500 It's a risky trade to buy or sell corn at this stage. Corn is at no man's land so it could either go high or low. We have seen corn go past $500 commonly after 2007 which was a rare event before.
I can't predict the future but I can see why corn will make new support in this region.
$550 - risky
$500 - good opportunity to buy
$450 - great opportunity to buy
$350 - buy corn with all your money. You will make a fortune.
December CornDec21 Corn-Daily: So far price action has respected both the red downtrending fork and the gray uptrending fork. It appears that if we continue with strength today that the bounce off each red and gray line match up with a bull flag and could follow through to fill the 5.99 target. That downtrend line will be tough resistance, but if broken I will line up remainder of targets above and would expect that a hit on the gray median line (highlighted with gray bubble) could mark the high (at least for some time ).
Corn Futures Expected to Move Lower Towards 563'4Disclaimer
The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. At the time publishing, I have a position in Corn Futures ( ZC1!).
Trend Analysis
The main view of this trade idea is on the 2-Hour chart. ZC1! Hit some resistance around the 572’2 price level and is expected to move lower in the short term. This resistance is a lower high on the commodity and is expected to make another leg lower.
Technical Indicators
ZC1! is currently above its short (25-SMA), medium (75-SMA) and fractal moving averages. This price increase appears to be a counter trend move of an overall decline in the commodity. The RSI was overbought and is now trending lower towards the 50 level. Moreover, the KST is also displaying negative divergence as the indicator had a negative crossover.
Recommendation
The recommendation will be to go short at market. At the time of publishing ZC1! is trading around 563’4. The short- term target price is observed around the 548’6 price level, towards the medium term SMA. A stop loss is set at 572’2. This produces a risk reward ratio of 1.56.
Dec21 CornDecember 21 Corn - Daily: The red down trending pitchfork is offering resistance against the 50% retracement at 5.59. I am not certain about the placement of the pivots for the gray uptrending fork, but the angles of ascent look appropriate based off the 3 previous moves up. A move above the 5.60 area will next target 5.71, 5.88, and 5.99. I believe these targets should be looked at to get caught up on sales or hedges (puts). I can still paint a picture that could move Dec corn to new highs that would have targets up to 6.75 (or higher), and I can make a case for risk at 4.88 to 4.55. Courage calls, puts, various option spread strategies can be looked at to manage risk on both sides.
Sep21 CornSep Corn – Daily: One could look at this and draw a triangle formation, or a down trending channel (as shown). Currently price action inside the cloud, with resistance overhead at the red Kijun line and 62% target of 5.85. 6.03 and 6.14 would be next key targets. A breakout above the channel would target the previous swing highs with retracement targets above up to 6.91 and 7.31.
Support is 5.61 and then the swing low at 5.20. Further risk at 5.01, 4.87, and then 4.67
Continuous CornCorn – Weekly Cont: Sep contract leading the continuous chart. The recent swing low at 5.20 nearly filled a correction target. If this low holds, retracement targets above will be used. First hurdle is the 24% retracement at 5.71. A weekly close above will give the bulls some breathing room. The primary target above is the 88% retracement at 7.10, but any target can turn this chart lower…
Support is 5.20 with risk down at 4.66
December CornPossibly put the highs in for Dec Corn here...as shown in chart, we faded the gains from the bullish July USDA crop report (which showed lower acreage) on better weather forecasts after wknd of the 4th...weather maps less threatening in corn belt as of late and is bearish feature for the next few weeks should forecasts confirm. Condition ratings expected to increase. Spreads are firm though and there is some support from Bean oil as the Canola mkt is experiencing production issues due to ongoing drought. This feature could have potential to pull CZ higher but I believe the upside here is limited. I expect CZ to trade down to ~520 range and b/c range bound from there.
Corn Nears Critical Test - Will Bears Gain More GroundCorn prices are up against the wall after a sharp multi-month drop. The rising 200-day Simple Moving Average (SMA), along with an area of support from January to March trading, may offer bulls a chance to regroup. The MACD and RSI oscillators indicate downward momentum may win out, however. A break lower likely opens the door for further losses.
corn experiencing wild movement. back at support.Corn made a scary move upward, and had an equal downward reaction.
Those moves were so volatile I don't know if it means they cancel each other out, or what the deal is, but corn is basically back where it started, which is above a trendline break and low in the range, which is an area for long considerations.
corn maybe.Corn is potentially setting up for a good move higher, but the staggered double top might dictate price lower still.
🌽𝘾𝙤𝙧𝙣 𝙛𝙪𝙩𝙪𝙧𝙚 - we buy canned food for the New Year🚜ZC1! : 🕐 2W
Most likely, wave (V) of the "Supercycle" degree unfolding the ending diagonal I-II-III-IV-V , in which the growth is in wave III .
ZC1! : 🕐 1W
The growth marked with ((A)) is most likely over, although one more local maximum is not excluded. Further, a rollback is expected within the wave ((B)) of III , which has the right to take the form of any corrective pattern.
CORNUSD :🕐 1D
When the correction forms appear, at the completion of the corrective wave ((B)) of III , I plan to take a closer look at a long position on one of the available trading instruments, as well as at companies in the agricultural sector.
The wave marking in the double circle parenthesis corresponds to the green marking in the circle on the chart.
Corn Opening Bell Winner once againOnce again, I love volatility. The 9:30 opening bell is so many times an incredible thing. Look at the huge sideways action all night long and into this morning. I put a buy order in at 645 in case price action goes crazy at the opening bell and it did - straight up through my 30 HMA to my Take Profit of 40 points. Beautiful Monday!!
Corn Prices May be About to CrashCorn futures (ZC1!) just came off the highest monthly RSI print since 2008 around an 82 handle. We're likely going to see a vicious correction in the near term. Seems like everything is on the verge of a major correction at this point. I wish the Fed luck...
ZCZ2021 Dec21 CornDecember 21 Corn - Daily: (red) Downtrend pitchfork’s median line is working with the (grey dashed) uptrend line to attract prices lower toward support identified at 5.15 to 5.25. Further risk 4.90 to 4.71
Key resistance targets above at 6.08 and 6.22. A breakout above could target any of the upper retracements in search of the primary target at 7.23
ZCN2021 July21 CornJuly Corn – Daily: The (red) Downtrending pitchfork is in a battle with the (grey dashed) uptrend line. Price action may still target a move lower following the median line if the uptrend is broken. Support is 6.02, pattern targets have risk at 5.64 to 5.43.
Resistance at 6.69, 6.85 and 7.07. If met, 7.07 should act as strong resistance and a breakout above could lift strong and fast to the Primary target at 8.17. **For trades, not much time left for the July contract before first notice day**
ZC1! Continuous Corn ChartCorn – Weekly Cont: July Contract leading the Cont. chart back towards testing the blue Tenkan line at 6.60. A close below the blue Tenkan line is the first since August of 2020…Important for corn bulls to see this week close above the Tenkan. Support below is the May low at 6.02 and then the red Kijun line (trending higher) at 5.85
Resistance above at the recent swing high of 7.17 and then the 7.35 high. Targets above at 7.92, 8.36, 8.60 and 8.93.
