July Soybeans

After the close recap on 7/2/10: My resistance was 9.65 3/4, just .01 1/2 from the actual high, and my pivot acted as support and was 9.54 1/2, .04 1/2 (but just .00 1/2 in open outcry) from the actual low.

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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

July Soybeans Daily Numbers & Trade Ideas for 7/2/10

Jul 03, 2010



This report was sent to subscribers on 7/1/10 2:00 p.m. Chicago time to be used for trading on 7/2/10. Everything is done by Howard Tyllas, no program or black box.

July Soybeans

After the close recap on 7/2/10: My resistance was 9.65 3/4, just .01 1/2 from the actual high, and my pivot acted as support and was 9.54 1/2, .04 1/2 (but just .00 1/2 in open outcry) from the actual low.

Results for 7/2/10 were:

Soybeans: My resistance was .04 3/4 from the actual high (only .00 1/2 away in open outcry); my support was .01 1/4 from the actual low.

Corn:    My resistance was .01 from the actual high; my support was .00 1/4 from the actual low. 

Crude Oil: My resistance was .06 from the actual high; my support was .43 from the actual low.

S&P:    My resistance was 8.50 from the actual high; my support was 4.75 from the actual low. 

Gold:     My resistance was 0.50 from the actual high; my support was 2.80 from the actual low. 

Euro:    My resistance was .67 from the actual high; my support was .80 from the actual low. 

Bonds: My resistance was 10 from the actual high; my support was 5 from the actual low. 

Nat. Gas: My resistance was .063 from the actual high; my support was .055 from the actual low.   

Cattle:  My resistance was .07 from the actual high; my support was .10 from the actual low. 

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9.76                              $9.79 is the 200 DMA

9.65 3/4                        near bracket line resistance    

-------------9.54 1/2       Pivot

9.43 1/4                    

9.30 1/2                    

  

Trend                   

5 day chart...      Down from last week same day                                                

Daily chart   …. Sideways                   

Weekly chart …Sideways           

Monthly chart   Sideways $9.79 is the 200 DMA

ATR 13 1/2        Oversold 34%


I continue to say "Bulls recaptured the long term uptrend line, and they have been retesting the downtrend line resistance to no avail. Last week's low is support, downtrend lines are resistance".

I also said "Long term uptrend line is in play this week and will act as support, if the last price is near there it will become pivotal, and if the price gets below it will become resistance going forward in time".

July Soybeans for 7/2/10:

In my daily numbers on Thursday; my pivot acted as resistance and was .06 1/4 from the actual high; my pivot also acted as support and was .04 3/4 from the actual low.

Grains: I will be switching to new crop this weekend. Exact high and spot on support in corn, and accurate soybean numbers. I am not surprised to see corn follow through on Thursday; I am still shocked at the 300 million shortfall in stocks. USDA numbers from March to June and all of a sudden they cannot find the corn. What part of their previous reports was wrong does not matter to me, what matters is that I do not fight the charts, and try and look for trade opportunities no matter long or short, and have the risk reward in my favor before I take a trade idea.

Looking at the action I would not be surprised if we can fill the gap at $3.73 1/4, and if we can get above there we should see the $3.85 level near the bracket line resistance get tested. If corn can close higher today, those resistance levels will be in the bull's eye when we open on Monday night. Profit taking could be seen today, but even with the extremely overbought condition we have a 50/50 chance to see those resistances tested by next week. Lastly, if corn can get to $3.85 that would be a gain of $.60 from the June low, and that would equal last year's summer rally ($.60 is a normal summer rally).      

Soybeans closed on the long term uptrend line that is now pivotal. Downtrend line is clearly seen as well as the report day high that will be resistances. Corn's weak sister needs all the help it can get with the added acreage and adequate supplies going forward if normal trend yields occur. I would sell this market for a day trade at resistance levels and risk $.05.

I do not want to take home a position into the 4th of July weekend; it's too risky especially now that we have some room to the downside again. Day trading the numbers works for me and allows me to not have an opinion (when I do not have a bias) and not have the risk exposure overnight. My approach also allows me to be flexible and take overnight trades when at chart bracket lines, and longer term trades when the chart allows.      

July Soybeans for 7/1/10:

Grains: Spot on grain numbers except corn resistance was breached on the open and acted as support.

The report was a game changer for corn.  Today's 1.4 mil acre lower than expected corn area forecast vs. trade expectations is the 2nd largest downside surprise in 20 years exceeded only by the 1.6 mil lower than expected corn area reported in 1997. Corn acreage has only gained 4 times in the last 20 years from this June report until the Final report; on the other hand it rarely declines in acreage by more than .5 million acres as was seen last year. One of 1/3 of the last 17 years soybeans advanced as it did so in 2008 when it advanced 1.2 million acres. Last year it was unchanged. We will not get another clue as to what acreage was really planted until the next estimate in October.

Trade estimates for corn stocks was off 303 million bushels which was the biggest overestimation since 1996 when they overestimated by 270 million bushels, when December corn rallied for a day, corrected lower, then surged to $3.90 before the July crop report. NASS stock updates are more reliable later in the marketing year than production forecasts at the end of harvest.

Corn stocks are adequate but there is really not much room for a shortfall in production this year from the USDA 163.5 bushels per acre (BPA). If we got a 4.2 BPA decline, that would cause corn stocks to be below 1 billion bushels, instead of the 2+ we were looking at before the report. If US corn stocks would fall to 1.345 billion bushels, which would be the lowest since 06/07 when corn rallied to over $5.50 in the summer of '06.     

The way I look at this is the same way as always, no matter what the report said, it is being digested over the next 2 days, and by then it has already been fully priced into the market, and then we turn to the important July 4th weekend. I guarantee all traders will be watching the weather Monday night to see what the weather did over the weekend, and more importantly will be the forecast for the next 2 weeks and then beyond. This holiday is always an active period when we return, and the market is capable of being volatile or even chaotic. That is all the more reason to have a plan and a strategy that allows you to trade without emotion, and I try to take advantage of that by using my chart and daily numbers to risk a small amount at support or resistance levels to get a good reward and take profits. I am not trying to buy the low of the move and sell the exact high; I try to take pieces out of the market instead.   

I think we will see good support in corn at support levels, and if the PRC comes back into the corn market we could test $4 December corn. If we see that maybe November soybeans can get back to $9.45, and beyond that would have a shot at $9.80 even though I think that would take adverse weather to occur. You must remember there are fundamentals that could come into play such as the government realizing that corn stocks might not be what they thought they would be so maybe they will not go after 15% blend ethanol which would take away from corn demand and usage. We could get a meltdown in worldwide equities which would also be bearish, so realize that supply demand is not the only factors in price discovery.  

Bottom line for me: I want to trade the market using the numbers without bias today.

July Soybeans for 6/30/10:

Grains: Spot on to accurate grain numbers. It was no surprise to see the grains under pressure seeing how the equities, and crude oil (and most commodities) were selling off before the grain open, as well as the dollar flexing its muscle. Weather forecasts could not be better right now for most of the grain belt. It was a surprise to see the losses by the end of the day. It seems like there was more exiting of bulls from the grain story that were not content to see how wrong they might be after the report today. Look at commodities in general (CRB Index), the bulls are underwater in 2010.

Whatever the report says, I trade strictly by my charts and numbers, and what I "think" never handcuffs me to a bias that if wrong will lose more than a trade I have no bias for. I am saying that the chart is always the main reasons I take a trade, set a risk where I know I am wrong, and have a goal that if reached (support or resistance) I take a profit.

The fundamental trader is usually a longer term trader, so they must have a plan that manages risk and time. Does not matter if one day your trade thought is more than correct, if you go bankrupt first. Even worse than that are the traders who go broke on one trade idea like being long corn or short gold this year. If corn keeps going down or gold keeps going higher, traders will profit greatly when right (no problem) but the trader on the wrong side can only stay with their position until the money runs out.  I knew this when I bought my first membership decades ago. What I have found out since then is this is common with traders who have an ego and cannot except being wrong, who enjoy mental masochism, or "need" to make a certain amount of money. When you have made hundreds of thousands of trades you get used to making losing trades, and being wrong what you think. What is unimaginable to me is to put myself in the position of "what I think" on a given trade idea to ride the losing side until I am "busted". Those who go broke on one trade idea will always start when they explain what happened with the words "I did not think" (the unimaginable) the market could or would do what it did. As I have always insisted in this service, no matter how much money you have to trade with you must have a plan and strategy, have a money management plan that on any trade idea you have a defined risk reward (yes, I know that sometimes markets open through your exit price and causes more loss or profit), and avoid being emotional at any cost.

I think you have seen the highs already for our annual "summer rally". Weather is too good and if we continue to get rain in July like in June we should get a good yield. If we get any kind of a rally out of this report, I would not hesitate to get short at resistance levels. I think farmers will sell on any rally in the next 4 weeks. Unless the USDA really changes the picture, I will continue to be bearish, want to sell any resistance level, and look to buy at a support level to take profits, reload my trade gun, and look to sell again. I do not want to take the buy signals. Subscribers who have been with me since June 2009 know well that this has been my "mantra" and "battle cry". I have not only remained bearish fundamentally, I have remained faithful to not fight the chart when at near term support and play the "sell side" when opportunity knocks at strong resistance levels.   

 I will email you the report as soon as I can and should have it done by 9a.m. Chicago time. 

Results for 6/29/10 were:

Soybeans: My resistance was .04 3/4 from the actual high; my support was .01 1/4 from the actual low.

Corn:    My resistance was .01 3/4 from the actual high; my support was .03 from the actual low. 

Crude Oil: My resistance was .11 from the actual high; my support was .04 from the actual low.

S&P:    My resistance was 3.50 from the actual high; my support was 19.75 from the actual low. 

Gold:     My resistance was 4.20 from the actual high; my support was 2.40 from the actual low. 

Euro:    My resistance was .06 from the actual high; my support was .20 from the actual low. 

Bonds: My resistance was 8 from the actual high; my support was 9 from the actual low. 

Nat. Gas: My resistance was .064 from the actual high; my support was .067 from the actual low.   

Cattle:  My resistance was .37 from the actual high; my support was .30 from the actual low. 

July Soybeans for 6/29/10:

In my daily numbers on Monday; my resistance was .04 3/4 from the actual high; my pivot acted as support and was .02 from the actual low.

Grains: Spot on corn numbers, and accurate soybean numbers. Soybeans are holding up going into the report, and it looks like the corn bears were able to take some profits after they pressed the market below the bracket line from 9/8/09 and got the sell stops below that low. Weak corn longs are out by now, and bottom pickers are well aware of the risk going into the report, so I think they will appear after the report no matter bullish or bearish.

NASS confirmed that June 15th was the cutoff date for acreage survey, so until the October report will we have a better idea of how much area was planted to corn and soybeans (and everything else). I look at the crop progress report today and I see that soybean planting increased 4% to 97% which is average for this time and leaves only 2.4 million acres unplanted. Soybean and corn ratings only decreased 2% which to me is bearish because we are still above normal and the next 2 weeks weather should increase the ratings.

I expect prices to hold these support levels going into the report, and so I have no desire to go home short but in no way would I be long. I have seen enough reports in many markets to tell you I am more concerned with the way a market reacts to a report than the report itself. I do not mean the first hour, but that day and maybe a day or two after. Charts and numbers do not read the reports or understand the fundamentals; at best the fundamentals are reflected in my bias while I formulate my numbers. They do tell me where past support and resistance has been, and trend lines as well as gaps do provide me with locations inside the bigger picture (of bracket lines). I trade charts and numbers looking for locations where I can know my risk is small to be proven wrong, and if my numbers hold my reward will be worth more than the risk. The risk is never significant to where emotions can be triggered, and the winners are taken in stride. The name of the game is to not be right the fundamentals, but instead you are rewarded when right the direction and price. I would rather be right the market for all the wrong reasons, than right the fundamentals and lose money.  

July Soybeans for 6/28/10:

Grains: Spot on corn numbers, and soybean support was off 1/4 cent from the low and the resistance was off 5 cents. Soybeans are still near their highs of the last 6 weeks while corn is trading near their lows. Soybeans are balanced while corn is extremely oversold.

I have covered all the fundamentals that I feel are relevant and nothing has changed. I am not going to be like all the others who feel they must report "something" and chatter of fundamentals or news of the day that by the time they write it is history and already in the market. Even with option expiration on Friday, the trade floor was very quiet. Thursday night trade was no trade at all, with little volume or range. This could be because the market does not want to assume more risk before the report, and with open interest coming down almost daily, reflects the bulls taking risk off the table.

If we were near $3.55 in July corn or $9.40 in November soybeans I would think about going short into the report, but when corn is near the bracket line support I have no desire to do so. July soybeans are near resistance levels but still above their long term uptrend line, so at this time that market could go either way from here. November soybeans (new crop) have a more bearish chart and I would be more willing to be short. My position if we are at these prices would be to not have a position going into the report, but would rather want to trade it after the report comes out and I see what is there. Not having a position IS a position. (You can be long, short, or "flat" which means no position at all. Fully hedged producers are "flat" even though they have a short position in their "hedge account". Bottom Line: this report is a coin toss up or down, and if I had to guess bull or bear, I continue to call it "bear".

Want to know what I think for tomorrow and going forward?

The 9 markets now covered daily are Soybeans, Corn, Crude oil, S&P, Euro FX, 30 yr TBond, Gold, and  Natural Gas and Cattle

My numbers usually are sent at least 12 hours (via your email) in advance of the next day open outcry session. Subscribers use them as best suited to their own needs and sometimes that involves the overnight trade.

If I have the exact numbers for the actual high and low of the day 12 hours in advance, the question has always been, how do I trade it? That is what I best describe in my numbers explanation. Any intuitiveness or nuances I trade, I would keep a journal to see if it is worthwhile overriding my plan. I rarely go against my explanation.

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           May Your Next Trade Be The Best                          

                     Howard Tyllas            

  

Disclaimer:     No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve risk. In no event should the content of this be construed as an express or implied promise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.

 

 

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