Good morning,

 

DXU9  98.215  +0.151               GCZ9  1513.5  +5.0                         ESU9  2905.25  -17.00              CLV9  53.60  -1.75

 

**7 AM CDT Headline:   China to levy retaliatory tariffs on another $75B of US goods**

All markets spun around immediately on this.  Most of the commentary below was written prior to this headline.

 

The dollar is firmer today, as a couple of Fed officials open up the festivities out in Jackson Hole with a hawkish tone, saying conditions don’t warrant further easing at this time.  Fixed income markets have been trading lower since the comments, rethinking/repricing where the Fed may be, in terms of monetary policy going forward.  Fed Chairman Powell, the main attraction at the symposium, will gives his speech at 9 AM CDT.  Numerous Fed officials will be speaking throughout the day as well.

 

Gold prices are correcting lower with the dollar strength, but the lead contract (Dec) remains above the $1500 level.  As equity prices keep swaying back and forth, but inch higher in the process, the safe haven status of gold recedes.  Assuming Powell is able to give the market a clearer picture on policy, the dollar will respond to that, most likely setting off a chain reaction in numerous markets. 

 

Oil prices came off yesterday, in part driven by a report showing China’s demand for oil declined in the month of July.  Prices continue to chop back and forth, basically within the same $54 to $56 range.  OPEC+ meets early next month, and possibly some direction regarding future production will evolve.  The options market is reporting that put skew, for both WTI and Brent oil has increased in the recent trade.  For WTI, much of the skew, or increased interest, is taking place down around to $51 to $50 area.  This makes sense, as this level has held a couple of significant tests over the past few months.  A breach of this level could draw in increased selling, looking for  breakout to the downside. 

 

Grain prices are stable this morning, trading close to unchanged levels.  The Pro Farmer Crop Tour concluded yesterday, with another round of projections of yields being worse than last year and the 3 year average.  The market really wasn’t caught off guard by this, given all of the issues experienced throughout this entire growing season.  A final tally of the crop tour will be released today.  This afternoon brings an updated look at fund positioning from the CFTC with the COT report.  Funds continue to carry a short in soybeans, and had flipped back to a small short in corn.

 

**China to impose extra 5% tariff on soybeans from Sept 1** 

 

Cotton prices have been under sharp pressure as the trade tensions have been put a drag on demand prospects.  Prices traded lower yesterday, and were bouncing in the overnight trade, prior to the China headline.  Needless to say, prices have resumed the course back down.  The breakfast drinks, coffee and orange juice are lower today.  No severe weather risks in Brazil, allowing the expectations for an abundant crop to remain.  The orange crop in Florida is also expected to be large, and coupled with consumption choices moving away from sugar products continues to weigh on prices.  Sugar prices are also trading down today, as it resumes the trajectory following a light, corrective bounce yesterday. 

 

Today is options expiration for September contracts at the CBOT.  Typically, large open interest positions in particular strikes can draw prices towards the strike.   This is more likely to take place when not much else is happening in the markets.  With the recent China headlines and the Fed symposium at Jackson Hole, there will be plenty of inputs for the market to respond to, so options expiration may not carry the same impact.

 

In addition, next Friday is first notice day for September futures contracts at the CBOT.  All long positions on this day are subject to receiving a delivery notification.  To avoid the possibility of being stopped for exchange delivery, all long September positions should be liquidated or rolled to another contract by the close of business on Thursday, August 30.     

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       900.75                   894.50                   919.50

CZ9                      425.75                   413.50                   406.25

WU9                    503.50                   488.75                   504.50

KWU9                  437.00                   438.75                   476.75

MWU9                531.00                   537.25                   560.25

SMZ9                   312.6                     313.2                     317.7

BOZ9                   28.75                     28.70                     29.44

CLV9                    56.33                     58.56                     57.16

GCZ9                    1444.1                   1377.6                   1343.2

LHV9                    71.600                   78.785                   74.615

LCV9                    106.115                 108.780                 112.170

KCZ9                    105.10                   102.85                   108.75

CCZ9                    2418                       2405                       2356

CTZ9                    63.14                     67.43                     71.24

SBV9                    12.11                     12.36                     12.77

JOX9                    104.55                   107.60                   119.50  

HGU9                  265.95                   273.00                   276.40

 

Thanks,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404