Well the big bulls of June have now been put out to pasture and you will be hard pressed to find anybody with the nerve to buy this market. This goes to show you how the crowd can quickly turn. As you know, I got a little bullish in early June after one Friday visit to my monthly U.S. Farm Report taping where a guest speaker said corn was going to $8. Since I was heavily short, I decided to get a little defensive. As it turns out the bulls were only right for about four days and the rest of the month the market has been straight down.
So where do we go from here? I would suggest next Monday’s report will have difficulty now being a bullish surprise. Everybody is expecting at least 1.5 million reduced acres or more. The risk right now is what happens if it’s only down 500,000 acres. Second, the outside markets have turned bearish. The fear of inflation is dead for now and in fact many are starting to worry we will have a further dip in the economy. In summary, the outside markets are not supportive of bullish positions.
So what’s can the bull hope for? When the crowds give up, this is usually a good time to start moving in the other direction. Second, the big one is weather. While the crop looks good, it’s still 30 days behind. Some would say we are catching up up a little, but I have to say there is still a lot of tough conditions; low sun spot activity combined with the resumption of the El Nino has many weather people calling for a shift to dry conditions. The problem is they will not say if it’s August, September or October. So right now the weather bulls have only hope rather than actual fact. This is why the market continues to slip.
What to do? I believe it’s time to reduce exposure of speculative long positions. Look to only add to positions if the market starts taking out the previous week’s highs or closes above the down trending support line.
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