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A powerful overnight rally faded from the first minute of trading today as investors realized the Chinese Yuan revaluation might not be the positive sign that many hoped.  The dollar ended up rallying on the day as commodities and the Euro took the brunt of the beating on the opposite end.  Volume was very light on the day and breadth was moderate.  The morning rally looked like it had the high volume feel of a powerful confirmation day, but the bullishness failed to materialize as volume was anemic all day and investors never put s strong bid under the market.

The recent rally in stocks has been in the face of many deteriorating macro factors and several investors have attributed the move to nothing more than technical factors.  If so, we are sitting at a crucial level as the right shoulder of a multi-month head and shoulders pattern unfolds.  The next few sessions and weeks could prove vital for what is certainly a very fragile market.

From Daily Futures:

U.S. Economy
Some commodities finished higher after China announced over the weekend that it would allow greater flexibility for its currency, the yuan. U.S. leaders have been urging China to let the yuan rise with hopes that China would then be persuaded to buy more U.S. goods.

Grains and Cotton
December corn opened higher, but ended down 5.75 cents at $3.747, even after traders were encouraged by today’s higher yuan. Also, parts of the Midwest are experiencing flooding from too much rain.

The USDA said that China bought 120,000 tons of U.S. soybeans in the current 2009-2010 season. November soybeans closed up 5.5 cents at $9.36, the highest close in five weeks.

Yesterday’s 6 to 10 day forecast from the National Weather Service is expecting above average temperatures for most of the U.S.

The USDA said that last week’s export inspections for:
Corn totaled 24.5 million bushels, down 43% from a year ago.
Soybeans totaled 7.2 million bushels, down 53% from a year ago.
Wheat totaled 11.5 million bushels, down 18% from a year ago.

After Friday’s close, the USDA said that there were 10.494 million head of cattle on feed as of June 1st, up .8% from a year ago, as expected. Placements in May were up 23% from a year ago and marketings were down 4%. August cattle closed up 1.12 at 89.32, the best close in two weeks.

August hogs jumped up 1.70 to 94.35, the highest close in five weeks, with hopes that China will want to buy more pork as the yuan rises. Tomorrow afternoon, the USDA will release its monthly cold storage report.

Housing demand remains painfully slow and the foreclosure crisis is not going away easily. September lumber fell $6.50 to a new contract low of $199.00.

After Friday’s close, the USDA said that they expect world coffee production to be up 11% in 2010-2011 to a record high 139.7 million (60-kg) bags. They also expect the world’s ending stocks of coffee to be up 5.0 million bags to 36.3 million bags, or 27% of annual use. September coffee ended down 1.30 cents at $1.6080.

According to Agrimoney.com, Commerzbank thinks that the recent rise in coffee prices is the result of a temporary short-term squeeze (see article).

September copper closed up 5.80 cents at $2.9595 with hopes that a more expensive yuan will result in greater demand for copper.

August gold dropped $17.60 to $1,240.70, blamed on profit-taking.

The September Australian dollar closed up .73 at 86.88, the highest close in five weeks, helped by today’s rise in the yuan.

Statistics Canada said that national net worth was up .6% in the first quarter of 2010 to C$6.2 trillion.

Japan’s government said that its All-Industry index was up 1.8% in April, slightly less than hoped for. The September yen fell .0032 to 1.1005.

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