GENERAL
EQUITY – The stock indices are rallying today. In my opinion as I’ve said the markets can bounce and are due a correction. It is my contention that the stock market has entered a bear market and the fundamentals won’t turn for some time. It is my thought people want to underestimate the slow down we are seeing. In addition, the interest rates will continue to move up. The FED may well need to bump 1 point this month and 1 point in AUG. It is also my thought this may not fully adjust the situation. The cost of capital will certainly weigh on profits with the companies reliant on debt. This is not commentary on the individual stocks, rather the overall state of the economy. It is probable we are in the second quarter with negative growth. It matters little if we have negative growth in the third consecutive quarter. Rather no growth is also bad. We are entering stagflation. It is my belief that the policies enacted directly contribute.
CRUDE – The crude is back around 105 per barrel. The trip to the Middle East was a disappointment to say the least. The increase in the global output will be nominal if it occurs. This while we are still pumping less than pre covid with no plan to increase. The only saving grace is that the use is off by most accounts. This decline however signals the consumer is struggling in my opinion which means overall economic contraction.
SOY
The beans came under pressure today. The near term forecast adds some moisture in the forecast over the next week or so. This does help. The crop conditions also remained unchanged at 62% good to excellent. This will add to the short term down as well. The bean market will certainly remain volatile as the bean crop is made in August. I remain bearish macro, however sharp rallies can happen at any time. MEAL/OIL – The oil share in the Aug closed at approx 41.5 %. The July got under 40%. The global oil market has fallen of late with Indonesia releasing exports in large volume. This recent break may reach a near term bottom at present. Demand is showing up, also Malaysia does not have the proper amount of workers to pick the fruit. The market could at some point here react to that. I remain macro bearish veg oils. However a rally that drives share back up is possible in the near term. Look for sharp moves and exercise caution with a quantifiable risk.
CORN
The corn today like beans reacted to the potential improvement in weather. The conditions declined 1% yesterday. The market in my opinion is between being ample supply, to a difficult position if the weather turns hot and dry. We are entering or are in the critical period at present. The next few weeks will be key. There are at present areas on a global scenario that could swing world numbers. The Brazilian winter harvest is rolling ahead of schedule and offers resistance. The Black Sea needs to be watched in general as it is related to feed grains. Exercise Caution.
BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
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