We examine the latest developments in commodity markets.

Commodities saw notably divergent performance during the first quarter of the year. Natural gas, palladium and WTI performed particularly well, while gold, silver, copper, and wheat tumbled. Stocks, as measured by the S&P 500, advanced an impressive 9.7 percent in the period.

Macroeconomic Highlights

The quarter was a strong one from the perspective of investor appetite for risk. Catapulted by the resolution of the U.S. “fiscal cliff” at the start of the year, stocks climbed steadily throughout the period. Though the “sequester,” or $85 billion worth of automatic government spending cuts, went into effect, it did little to derail the rally. With political intransigence no longer an issue, investors were able to focus on the emerging strength in the U.S. economy.

The data have been unquestionably bullish. Housing indicators for sales, construction and prices are at the highest levels since 2008 or 2009, while the unemployment rate is similarly at the lowest level in four years. 

At the same time, the Federal Reserve has maintained its ultra-loose monetary policies, pledging to continue its $85 billion worth of monthly bond purchases until the unemployment rate falls even further.

But while the U.S. has been a bright spot in the global economy, elsewhere, things aren’t as rosy. China’s growth remains rather tepid, with expectations that the Asian giant will grow somewhere in the range of 7.5 to 8 percent this year. That has dampened demand growth for commodities such as copper, oil and soybeans and is likely why prices suffered thus far this year.

Europe is also a drag. The banking crisis in Cyprus is just the latest indication that the eurozone is not out of the woods when it comes to its debt problems. While far from the record levels set in 2011, Italian and Spanish bond yields are relatively high near 5 percent, suggesting that markets remain concerned about the debt burden in those countries.

.......read page 2,3,4,5 or Full Article

Farmers have been taking on mounting debt, creating an unsustainable increase in land prices and risking a crash that would ripple through our economy.

Eeyore should have been a farmer. It’s almost impossible to find a farmer happy about his situation. The weather’s too hot, cold, wet, or dry, and prices are too low or too high, depending on whether we’re buying or selling. We can’t, at least in front of our peers, admit to prosperity or even the chance of prosperity. Although we’d never admit it at the local coffee shop, the last few years have been good, at least for Midwestern grain farmers. Prices have been strong — strong enough to make up for much of the production lost to last year’s drought. That’s terrible news for livestock producers, who’ve been faced with drought-damaged pastures and high feed costs, but for farmers producing corn and soybeans, it has been a profitable few years.

.....read the entire article HERE

Last week's chart illustrated how the US stock market (as measured by the S&P 500) has outperformed other major international stock markets since the financial crisis. For some further perspective on the post-financial crisis rally, today's chart illustrates how much of the downturn that occurred as a result of the financial crisis has been retraced by each of the five major US stock market indexes. For example, the S&P 500 peaked at 1,565.15 back in October 9, 2007 and troughed at 676.53 back on March 9, 2009. The most recent close for the S&P 500 is 1,570.25 -- it has retraced 100.6% of its financial crisis bear market decline. As today's chart illustrates, each of these five major stock market indices has recouped all losses incurred during the financial crisis (i.e. all are above 100% on today's chart). However, it has been the often overlooked S&P 400 (mid-cap stocks) that has been the star performer. The S&P 400 has recouped over 140% of its financial crisis decline -- a very impressive performance.

Notes:
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With a scary bank crisis in Cyprus driving the headlines a couple of weeks ago, gold could barely muster a rally. Notice in the chart below that the high of the move failed to clear a minor peak at 1619.70. Had it done so, we would have given bulls a fighting chance, since it would have created a bullish “impulse leg” with the potential to power quotes as much as $120 higher in just a few weeks. Instead, buyers showed themselves to be gutless, allowing the April contract to relapse down to within inches of the lower trendline. It could hold, but we doubt it.

Still worse is that a breakdown is likely to send the futures down to at least 1553.50, a Hidden Pivot support identified here a couple of weeks ago when the futures were trading above 1600. If that “hidden” support should fail as well, look out below, since the next stop would be a more important one at 1487.00 that was flagged at the same time. That would represent a 5.5% fall from current levels, which would hardly be disastrous. But it would also turn a trendline that has provided support since July of 2011 into resistance, opening a path to significantly lower prices into autumn.

Three Scenarios

Because the trendline is so clear, it seems all but certain to be tested. It comes in at around 1570 this week, and you should expect it to be breached. Once that has occurred, things could play out in a few different ways. Most bullish of them would be a sharp rebound that vaults the 1619.70 peak by mid-April. That’s what we should expect to happen if the smart money is planning to shake out the weak sisters in order to run gold steeply higher without being burdened by nervous profit taking. But if gold proves unable to get serious loft within a week or two, be prepared for a downdraft to 1487.00. Another possibility is a tedious game of footsies on and around the trendline. Beware, however, if settlement occurs below the trendline for two consecutive weeks, since that would imply distribution.

Because the long-term trend in gold is bullish, we should be willing to give it the benefit of the doubt under any circumstances. Technically speaking, it would take an “impulsive” rally on the hourly chart to turn us bullish again. At present, that would imply a swift thrust hitting 1612.90 within three or four days of any fleeting dip below the trendline. We’d lay three-to-one odds against it at the moment, but stranger things have happened.