July Soybeans Daily Numbers & Trade Ideas for 5/17/10
May 17, 2010
This report was sent to subscribers on 5/16/10 6:00 p.m. Chicago time to be used for trading on 5/18/10. Everything is done by Howard Tyllas, no program or black box.
Do yourself a favor and get your numbers after the market is closed to be used for the next session trading. Ask yourself how much would it have been worth to read my comments and get my numbers 14 hours before today's open outcry?
After the close on 5/17/10: My resistance was 9.55, the Exact actual high, and my support was 9.37 1/2, the Exact actual low.
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9.68 near steep downtrend line
9.37 1/2 FG
5 day chart... Down from last week same day
Daily chart …. Sideways
Weekly chart …Sideways
Monthly chart Sideways $9.84 1/4 the 200 DMA
ATR 15 1/2 Oversold 11%
I am using my laptop and the charts I have are in my desktop, so I needed to create new charts. This is how I would draw this (and all charts in this edition) if I was looking at it for the first time.
Notice how the steep downtrend line was perfect resistance on Wednesday, and how well the uptrend line held on Friday
July Soybeans for 5/17/10:
In my daily numbers on Friday; my pivot acted as resistance and was .01 1/2 from the actual high; and my support was .02 from the actual low.
Patience to wait for good locations to enter a trade will reward you by providing minimum loss if wrong, and more profit if right. You might miss trades (some glad you did) and not be as active, but this type of trading makes you a casino, not a player.
Grains: Spot on grains numbers! "I care more about how a market reacts to the news rather than the news itself". So how did it react? Bullish corn report, huge export corn sales to the PRC, slow PRC planting and a new high in China for corn prices, resulted in a loss of $.09 for July corn, $.06 ½ in July soybeans, and July wheat $.33 ½. "Actions speak louder than words". Even though it is hard to sell grains, it is even harder for me to consider buying except to take profits from shorts.
I do not even want to consider reading what the "market reporters" or commission houses have to say because for the most part I think they are a day late and a dollar short. I care what I think, and what I think I have clearly said since last year, "grains will be in deep trouble if we get the crop that, as far as this writing, looks to be a big one". I have been saying for months that the market will trade in a sideways to lower pattern, mostly because of the "what if's" of the growing season, and will erode as we see stable weather. And the market will respond to a threat of adversity, which is not in the cards for now, weather the next two weeks shows improvement. I have been saying that it is easier to take $.10 to $.15 out of corn than wait for the $.30 move. I have always liked a short (sell) long term position, but have advised you to never press bracket line supports and take profits and look to resell on a corrective bounce. Yes, if they break through the bracket line I would miss maybe $.10, but how many times did I cover at support and sell at $.10 or more higher. My approach has nothing to do with the grain markets; I would do the same thing if this was a dog food chart, or any other market that is chartable.
If you want me to think about the fundamentals of outside markets, the bulls find no comfort in my being spot on in the dollar calling for it to be strong for 2010, and with crude oil on the verge of testing $70 now that equities worldwide is pulling back, these factors are not friendly to grains and will help in their price destruction going forward.
Markets are oversold and could see corrective upside action, but I would still not bet on the upside but would rather sell the rallies. I want to keep in mind that 2004 posted a record corn yield with US corn stocks swelling from 0.958 billion bushels on 9/04 to 2.1 billion on 9/05-an 11 year high. I think the bulls have their work cut out trying to rally, and I think we will erode further by the end of May.
Results for 5/14/10 were:
Soybeans: My resistance was .01 1/2 from the actual high; my support was .02 from actual low.
Corn: My resistance was .02 from the actual high; my support was .00 1/2 from the actual low.
Crude Oil: My resistance was 0.13 from the actual high; my support was 0.08 from the actual low.
S&P: My resistance was 1.75 from the actual high; my support was 2.25 from the actual low.
Gold: My resistance was .50 from the actual high; my support was 2.70 from the actual low.
Euro: My resistance was .07 from the actual high; my support was .29 from the actual low.
Bonds: My resistance and my support were never in play with the sharply higher gap open.
Nat. Gas: My resistance was .093 from the actual high; my support was .037 from the actual low.
Cattle: My resistance was .10 actual high; my support was .87 from the actual low.
July Soybeans for 5/14/10:
My wife and I will be leaving today to see our daughter graduate again, this time getting her second Master's degree, and she has already been accepted to a PhD program, we are so proud of her. I will be going for 8 days but I will continue to do my daily numbers service as well as conduct my brokerage business. Only some of my producers have June option contracts on and will need to get out by next Friday and sell cash and make delivery, or roll to the July, September, or December option contract depending on storability and marketing plan.
We are hoping that July corn will be above $3.70 or $3.80 so they can be long their cash corn and not have a sell until $4 or higher. They have protection from there ($3.70 or $3.80) if the market goes down so they will not lose money, but in most cases they have $.20 or $.30 more profit potential than their hedged price. This is what this strategy does, protects to the downside, and gives room for more profits if they can go higher. If the market next Friday settles at let's say $3.88, they can "roll" and now buy a July put spread like the $3.90/350 put spread, and sell a $4.20 or higher call to pay for it. In doing so they will have locked in the now higher price (and profit). (Speculators should not do this without the crop, or realize that the call they sell has unlimited upside potential and will need to be margined like a futures contract. No matter what, it can never be worse that if you sold a futures contract)
Lastly, I will try and do part 1 for Monday on Friday night, and will try and do part 2 on Saturday either in the late afternoon or evening.
Grains: Spot on soybean support and the rest of the grain numbers were accurate. We have covered the fundamentals but I want you to keep in mind, this as with most reports have facts in there that one analyst or another and traders would be skeptical about. That is even more reason that I accepted my mindset of "who cares what the fundamentals are when I find myself sometimes long and then short at 10 different times in the trading day", and would usually go home without a position no matter what I thought the market would do the next day. I was a 95% floor trader and 5% swing trader. Off floor when I went upstairs in 2000 and traded the "screen" I made the adjustment from the floor but was the same as on the floor, 95% and 5%. 2 years ago I traded a fund account using options with a known risk only strategy, and then last year mostly day traded and had some longer term trades, but the bottom line since my first day trading was the approach I use today. Just took a few years to hone until options came along, then I discovered a better way to manage time and risk, and get odds with my option knowledge instead of giving up the odds.
With that being said, I think no different than what I have been saying for quite awhile, I think corn will be trading no more than $.15 up or down from here for the next 4 weeks, and if weather is favorable, eroding prices from there. I really do not care about the fundamentals, I have laid out the directional bias they give me, but I could be wrong or the reported facts and it makes no difference to me, I trace charts and numbers, not fundamentals. Do you really care about the reason you are right, I just care about being right the market, even if it is for all the wrong reasons. Soybeans are having trouble recouping the downtrend lines just $.10 above where we are now. If they can do that, I can see July soybeans getting back to $9.90 at best, and in the near term the long term uptrend line should support near $9.40.
July Soybeans for 5/13/10:
Grains: Spot on corn and accurate soybean numbers. Export sales of 300,000 tonnes of corn to the PRC sent the market higher which it should have; closing closer to the lows was something it should not have. Huge volume overnight of nearly 50,000 contracts (started to get active when EU opened) and with Thursday's action after the sales figure, everyone who wanted to buy already had previously done so and the sales figures was already priced into the market. July corn closed only $.06 1/4 higher for the week on Wednesday, and that is after a friendly USDA report and great sales figures. Remember, I have said countless times and this is another example of "I care more about how the market reacts to the news than the news itself". Yes, if I thought like the bulls I would have reason to be long, but "reason" (fundamentals) is only good for direction at best, and very little to do with price discovery.
Price discovery is 1. The process to discover what the high and low for the day will be, 2. What the bigger picture longer term and wider parameters are, 3. Find chart formations such as trend lines and bracket lines to discover levels of support and resistance, 4. And defines locations for trade entries and exits (no matter to take a profit or loss). Fundamentals will do nothing for me to discover what the price will be today or in the future, my charts is what I rely on totally for that, and it has worked for me since day one 34 years ago.
I have always thought about it that way, and also have thought that the news is just a piece of the puzzle. I look at it this way, in the case of corn this week, if it had not been for the report and sales, corn would have been lower for the week, and if the report was bearish and sales were poor, the market would have plunged. If I was just a fundamentalist I would always be exposed to losses that could get out of control, and I would have little idea when to exit my thoughts especially if nothing changed.
As far as fundamentals, I have laid out my bearish stance. Even the bulls must consider the price outcome if the bearish factors come to be. Failure for May corn to close above the $3.78 level that I have said in my chart comments for weeks is bearish and no surprise to me. I have said for years in this service that "I do not care what brings the market to a chart location; I just want to exploit it". When corn was trading the first 1/2 hour on Wednesday near my long term resistance that if broken would become support, it presented an opportunity to sell risking only a few cents if it did not hold, for a good reward if for a day trade, and we will see if it can offer another 12 cents to the downside for a swing trade.
Soybeans ended their rally exactly at the steep downtrend line on Wednesday. Third time at the line gave it more strength to resist than any other time at the line. Soybeans managed only $.27 1/2 correction from the low last week trying to recover from the $.70 loss since 4/26/10. Bears in grain markets might have to wait another 4 weeks before getting aggressive, at least that is what time I need to see our crop potential and if the PRC is done buying.
July Soybeans for 5/12/10:
Grains: Spot on corn numbers and accurate soybean numbers. The bottom line no matter what the fundamentals in the report said, is already priced into the market now!
Soybean oil stocks went up sharply (200 million pound increase) and pressured soybeans, corn usage was interesting to see them increase with more ethanol and feed use, and less than record global course grain stocks. More downside should be seen for soybeans and corn should be underpinned until PRC and US production is more certain.
I am amazed that so many analysts consider that the USDA is getting ahead of themselves raising corn yields this year to be 163.5 bushels per acre (BPA) versus their February report of 160.5 BPA, and I consider that bearish. At this time I would be surprised if we do not come in at least with a 165 BPA and if Mother Nature cooperates, we could get 170 BPA! When I take the extra 1.5 BPA by 89 million acres, that adds another 135 million bushels, and if their ethanol use and feed is estimated too high as I think, this will add even more. That would put it near a 2 billion bushel carryover. If 170 we would add another 450 million bushels and that would be "game over" (bulls checkmated by the bears).
No matter what the fundamentals of supply and demand are, everything for me goes back to my charts for price discovery, and my numbers to pinpoint the destinations for the day. I thought the markets acted well to the report, but tonight they are content to hover around settlements. For now I want to day trade without bias, but keeping in mind my bearish bias. The parameters I have laid out the last month continue to be in play.
Subscribers of 6 months or longer have seen this 3rd time at the down or uptrend line works a high % of time, and the risks are minimal when it does not hold, and rewards you nicely when right. No matter what market you trade, learn this tool that I have relied on for decades, and my instilling courage to believe in this in you that took me so long to truly believe in. I take these trades every time when possible, and in the long run in my years it has truly been a casino bet for me and not a player, and are the ones most worth taking. See for yourself and if you see this pattern works, start to incorporate it in how you use it to trade with.
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