Weekly Review---Favorable Export Demand Trend Continues. 

     Looking at the overall market this 3 weeks (this is my first post in 3 weeks since I have been traveling across the Midwest & Great Lakes to participate in meetings associated with Price Outlook and Crop Insurance), we have seen a gradual improvement in one of the 2 key demand factors which I've been highlighting all winter for commodities:  Index-Fund Related Buying Demand & Export-Related Demand. Export Demand for Grains and Livestock were notable healthy, and on a general Macro-Economic level, Weekly Jobless Claims falling to 348K puts this number at the lowest level since Feb. 2008. As a result, with US Equities leading the rally and challenging 4-year highs, we've seen the SP-GSCI Commodity Index hit 6-month highs this past week. The natural progression of this rally--if it to be extended in commodities specifically--should be an increase in Index-Fund related buying in the coming 1-2 weeks...the sooner the better in my assessment.

     Thus, in this week's weekly copy to clients and subscribers, I will be laying-out the analysis of this possibility, and what the possible consequences for specific commodities could follow. I'll focus especially hard on the Grains--since this is the time where crop insurance prices for the crop year are established (Base Price), and also look in-depth at the S&P 500 Index, since it is only 20 or so points from its May, 2011 high, and therefore near a 4-year high if this level is violated. It is especially interesting and worth noting that on Saturday the WSJ reported China has announced plans to cut its Reserve Requirement to its banks by .5% effective Feb. 24th (the same day we'll receive new USDA 2012 supply-demand data from their Agr. Outlook)--and how this move by China helps confirm that their economic slow-down could be due to factors greater than the New Year Holiday in January...and therefore more serious. To give you an idea of where this weekend's copy heading--in terms of anlaytical conclusions--it would seem to me that the S&P 500 and the Soy Complex both have had strong rallies which are now at levels of risk-premium that need to be justified:  that in order for these markets to go higher, they need new fundamental/demand bullishness to "feed" their rallies. For Feed-Grains, because new export demand has been seen in a significant manner this past week, I would be expecting a lot more out of this complex...especially in relation to the Dec. Corn being able to rally against the Nov. Beans in order to maintain a higher '12 acreage base. I would also suggest that in order for the markets to see stronger, Index-Led rallies in the short-term, we need to see the spread-trading, which has been so prevalent in the markets these past 3-5 months, be less and outright buying being more prominent in the trade.

     Lastly, As a special reward to the readers of this blog, since I have been traveling these past 3 weeks without commentary, I would like to invite you to download free of charge the inaugural edition of my new monthly analysis/newsletter, The GCAC Global Commodity Monitor on the "Newsletter/Subscription" Tab. This newsletter is specifically focused upon helping to better understand the Macro-Micro Linkages in the Global Economy as they particularly pertain to the commodity sector. There are instructions on how you can obtain a subscription to this newsletter:  it has been very well received by those who have looked-at it, and for those who have been asking me to do analysis like this because of how I look at the commodity sector from a Macro- perspective. I hope you enjoy the trial! For those of you receiving this weekly update through a 2nd party, my website is www.globalanalytics.biz

--Mike Zuzolo, President

General Risk Disclosure-There is substantial risk of loss in trading futures and options, therefore you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. The information above is not meant to be advice to buy or sell futures and options.
Options Risk Disclosure-The purchaser of options should be aware that he could lose all premium paid for such options as well as any commissions and fees. Further, purchasing deep-out-of-the-money options have a remote chance of becoming profitable. The writer or seller of options should be aware that there is unlimited risk and could result in such seller being required to maintain a futures position with any associated liabilities for margin.
Past performance is not necessarily indicative of future results.
Information Disclaimer-The information and data contained herein was obtained from sources deemed reliable. Their accuracy and completeness is not guaranteed. Any decision to purchase or sell based upon such information is the responsibility of the person authorizing the transaction.
Copyright, 2012 Global Commodity Analytics & Consulting LLC