The market is range bound!
Nov 19, 2008
The soybean market gapped higher today and appeared to be ready to take out overhead resistance at $9.20. Reasons being cited were the weakness in the dollar and strength in crude. The market however was not able to hold these gains and sold off clear down to the consolidation base that’s been holding the market in check at the $8.95 to $9 range. The biggest bearish reason I’m starting to hear about is the potential bear market influence of reduced feed usage. Some analysts are suggesting significant reduction in poultry and all other livestock meal buyers over the next several months. The potential reduction could be as much as 60 million bushels of beans. Subsequently, the potential for a carryover moving above 300 million is increasing even before you start talking increased acres.
This demand destruction issue plus increased acres is starting to throw a very bearish perspective on beans. Essentially, in my daily trading activity I’m getting much more focused on selling sharp rallies now than buying breaks. If the Jan contract breaks below the $8.75 level, one must anticipate active long liquidation and new selling to enter the market so be advised.
As for the corn market my focus is on trying to sell a bounce in the March contract between now and early Dec. Anything above $4.10 should be used to scale up sale. My focus would be to liquidate these hedges towards the end of December at the price level where the Dec 08 contract goes off the board.
Overall, I continue to expect a market that is range bound. This pattern I expect to persist until we have a clear confirmation of a bottom in the energy and equity markets and a clear top in the dollar. My expectation is it’s going to take longer than we are currently expecting.
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