Investor concern as China Producer Prices continue to slump, bonds rally

Financials: Dec. Bonds are currently 16 higher at 158’11, 10 Yr. Notes 4.5 higher at 129’00 and 5 Yr. Notes 2.5 higher 120’22.5. Investor concern over continuing economic slow down in China have rallied treasuries this morning causing talk of a delay of a U.S. rate hike. I still feel that a rate hike whether in 2015 or early 2016 is a fait-acompli I remain spread long June 2016/short June 2017 Eurodollars. For those of you who want to be a little more aggressive and hold multiple contracts of this spread, consider selling a portion of the long end of the spread (June 2016 Eurodollars at 99.42 ( currently at 99.425).

Grains: Dec. Corn is currently 1’0 higher at 385’4, Nov. Beans 1’6 higher at 915’6 and Dec. Wheat unchanged at 516’0. Since last week’s Grain Report, which was negative Corn and friendly Beans and Wheat, we have been stopped out of any remaining long Dec. Corn positions as the market traded through my recommended sell stop of 382’2. Beans have since traded through (on the upside) the 900’0 level and looks like they want to trend higher. Beans have also been helped by a softening dollar and good demand for S. American Beans given a slide in the Brazilian Real. I will be a buyer on breaks.

Cattle: Dedc. LC closed out the day on Tues. at 137.45 and Nov. FC at 186.45. Dec. LC have resistance in the 138.80 area and I will once again return to trade this market from the short side should this level be reached. I continue to hold the short Dec. LC 135/145 strangle, currently at 362 (originally sold at 420) and will take a profit below the 300 level should the market allow.

Silver: Dec. Silver is currently 2 cents lower at 15.89 and Dec. Gold about unchanged at 1165.00. Overnight these markets ran into resistance, above 16.00 in Silver and above 1170.00 in Gold. We remain long Silver. If you are holding multiple positions, consider taking partial profits on rallies.

S&P's: Dec. S&P’s are currently 1.50 higher at 1995.25. We remain short from well below current prices but feel a bit more comfortable as the market failed to trade above the 2017.00 resistance level. Should the market trade below the 1988.00 level I will use a protective buy stop at 2007.50.

Currencies: As of this writing the Dec. Euro is currently 47 higher at 1.1442, the Yen 31 higher a 0.8381 and the Pound 160 higher at 1.5408. The long Euro/short Pound may have topped out yesterday and earlier this morning and I recommend liquidating this position and reverting to the sidelines. As for short term trades, I still recommend the Euro from the short side above 1.1450 and the Yen from the long side on breaks.