The Ted Spread
Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.
Another Key Reversal in November Soybeans
Aug 23, 2012
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS 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.
Grains were lower today as the November soybeans posted a third key reversal in a little over a month. A key reversal happens when a market sets new contract highs (new record highs in the case of soybeans) and then proceeds to close below the previous days low. Corn did not post a key reversal as it did not set new contract highs today, but ended down 20 cents. This means that now both corn and soybeans have put in 3 key reversals since the July 11th USDA report. Key reversals certainly are not a silver bullet that tells us that the high is in a market, rather a red flag warning of the possibility of change coming soon. And, as in the case of corn and now soybeans, 3 key reversals will be a big warning sign for the technical traders who may continue to follow the trend but will be very nervous on any weakness.
Some of the lower trade today can be tied to better then expected yield findings from the Pro Farmer crop tour. I really get the feeling that a majority of the market was expecting Pro Farmer to find sharply lower yields then the current USDA estimate. This has been the case in some areas such as South Dakota, but most of the numbers seem to be coming in along the lines of the USDA's guess. If Pro Farmer gives us a final yield near or above the USDA tomorrow then it becomes hard to justify the bull cry of lower yields yet to come from the USDA. Especially since historically Pro Farmer is generally the more friendly of the two.
When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=tseifrie
The US Dollar was lower today on continued fuzzy feelings from Europe. I'm not sure we would say that the issues in the Euro Zone are behind them, but for now the chart of the US Dollar looks to be rolling over to the downside. This may become a bigger supporting factor for the grains down the road.
Even with the bearish price action today I still feel that the breakout to new highs in soybeans and new high close in corn earlier this week could be suggesting another leg higher for the grains. It is difficult to say how long or high this might go, but the bottom line is that we could be getting ready to add more premium to some already good prices. We could also see markets put their highs in and roll over in the next two-three weeks so producers need to take a long look at prices above $8.00 in corn and $17.00 in soybeans. Patience may be a virtue for now, but waiting to long could have its consequences as demand should not be as difficult to ration in a questionable global economy - as the USDA has been hinting toward by lowering demand more then expected on the last two monthly reports.
Knowing that the technical traders will be nervous longs, the possibility that we will have a vacuum of new bullish fodder over the next few weeks, and the potential for producers to hedge at what are currently great prices - I have to be concerned that when this mature bull turns it may be violent.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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 options / options-futures 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/
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?rid=Seifried
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION