Grains Pull Off Highs in a Big Way
Jul 24, 2012
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
I have gotten a lot of calls today asking if that the high in grains or is this just a correction in a bull market? That is a very hard question to answer. We have not gotten a full-coverage, soaking rain to turn the drought situation around. However some things have changed in the markets. With a US Dollar looking to break out, poor China economic data, and weather concerns becoming less of a topic of focus we certainly have our reasons to retreat from highs. The question really needs to be - has enough changed to end this enthusiastic bull run?
Most likely what we are seeing in the grains is not a reversal of trend, at least not yet. We could be in the beginning of a toping formation but with the amount of energy spent in this rally I would think that it is highly unlikely that we would give up the gun so easily. We could see this high volatility continue, and we could still see new highs. However, with what we have done in the last two days it now becomes much more likely then last week that we could be in the beginning to middle stages of a topping formation. From a technical perspective, two key reversals in soybeans in 3 weeks is a big red flag.
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It is not imposable for me to build a case for highs being in at this time. During this rally everyone has been concerned with the supply side of the balance sheet. There has been little talk of demand, however we need to be thinking about what these high prices mean for demand and who can turn a profit at $8.00 corn and $17.00 soybeans? I'm not sure if that can be sustained for long periods of time with a higher US dollar, crude oil under $100 and 118 fat cattle.
My advice today has been not to sell in a panic, but look for a bounce back toward highs and if the grains fail to make new highs then look to take advantage of these prices. This might not be a top, but it is a stark reminder of what happens when the market turns.
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With high volatility in a weather market, option strategies may be a good tool for hedgers and specs alike.
December Corn Daily chart:
November Soybeans Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $7.70 and new crop soybeans above $16.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent.
Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs.
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
Please check out my Blog at: http://tedseifriedfutures.com/
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