Gary Wilhelmi 6/1/2012 Weekly Column

Dow breaks 200 day moving average line and falls through support at 12,200 with the S&P 500 back below 1300. Trouble within German leadership core drops DAX by 3.5% one of the biggest declines I have seen. Spanish 10 year bonds at 6.7% qualify as junk, while German rates are negative and US 10 year down to 1.5%. Crude oil is down to about $83 with support at $80 on demand concerns some of which relate to China where their manufacturing index is down to 50.4 from 53.3 in April.

US employment report was horrible adding just 69,000 new jobs versus a hoped for 150,000. Unemployment rate here up .1% at 8.2%, but the euro zone is running at 11%. Our real unemployment rate is around 18%. The US savings rate hit a four year low in April. If you don’t think inflation is a problem just go up and down the grocery isles. I had not been in a grocery store in four months and that makes one realize the path of prices.

Corn firmed early Friday on old crop tightness and selected areas of dryness. Watch the Palmer Dryness Index for a measure of Midwestern drought. Rains of late will make next weeks crop updates interesting and focus directly on conditions in the west and northwest Corn Belt. June and July are key yield making months for corn and beans and here we go. Spring wheat looks spectacular while winter wheat crop ratings have been deteriorating. Black sea wheat has benefited from improved rains of late. Adequate plantings in Brazil, assuming normal weather will help relieve global soybean tightness. Areas to watch are $5.00 support on December corn, and $13.00 support in July soybeans. July wheat has a possible $6.00 down side target.

The volume of trade has decreased in all markets and that enhances volatility. Risk aversion has become the bi-word of speculators. Gold popped up Friday in a scramble to find a speculative safer harbor.
It is also a worrisome time at the meat counter as economics drives consumer demand. This weekends features were led by an assortment of cheaper cuts of meats all offered at $2.48 per pound. Ground beef demand remains threatened by slime concerns as we enter the early summer hamburger prime time. Cash cattle are expected to become established at $121 as choice boxed beef reaches a $197 all time high. Hogs bounced off support as pork cutout firmed, but pork is not the summer meat of choice.

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