Head and Shoulders (Knees and Toes)

Besides the death cross, another technical formation that tends to get much media love is the head and shoulders pattern.  It seems that we have just such a pattern forming today.  Aside from the fact that 1125 represents a resistance level that we’ve tested and held several times, now it’s the market’s neckline–a double whammy!  Let’s hope we don’t break that level.

30 Year Seasonality

Despite the announcement of operation twist today, if recent seasonality holds, rates may be more likely to move higher rather than lower in the coming months.  In ’09 and ’10 rates moved in almost the exact same pattern that they have moved so far in ’11.  Rates rose into the spring, peaking around April/May before falling hard through the summer.  The bond rallies ended in both years right around the beginning of October.  Will 2011 make it three years in a row?

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The Effect of Food as Fuel

CF industries produces fertilizer, an important input when growing corn.  The company presented at a conference this week and included the following slide showing the dynamics of the current corn market.  It’s pretty amazing how much corn production is being converted into ethanol in the last few years.

Stock to use (right scale) is a measurement of the tightness of the corn market, a lower ratio means that supply is tight. We’re at levels that are the tightest in at least a decade, at least partially due to policy pushing corn into the fuel stream.  Not surprisingly, the price of corn has benefited (quoted in cents per bushel).

Good trade for NFLX CFO

One of the first chinks in the NFLX armor came back in December when its CFO unexpectedly left the company having exercised $20m worth of options.  For a while it looked like a bad trade as the stock ran another 50%.  With today’s miss, the stock is back below where he left though.  Cheers to you Barry McCarthy.

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