No Chart Damage, Yet

January 7, 2009 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Grain futures saw hefty pressure yesterday... ...but avoided doing any technical chart damage. Spillover pressure today would begin to violate short-term uptrend lines. It really shouldn't come as too much of a surprise the grain markets were lower yesterday given the strong rallies off November and December lows. As the stock market weakened and crude oil turned sharply lower, it only added to profit-taking pressure.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 5 to 6 cents lower. Futures saw spillover pressure in overnight trade from yesterday's losses. Futures extended early losses to finish near or just off session lows for the day, closing mostly around 10 cents lower. March corn posted an inside day of trade on the charts, respecting support at the previous day's low. Futures didn't do any technical chart damage, but spillover pressure today could violate short-term uptrending support.

Soybeans: 6 to 9 cents lower. Futures were weaker overnight on spillover from yesterday's loses. Futures posted sharp losses yesterday and finished near session lows. Bears controlled price action amid widespread selling in the commodity world and active profit-taking pressure. Funds, who were buyers the first two days this week, were sellers today. March soybean futures closed back below $10 after pushing above that level for the first time since Oct. 9 Tuesday. The contract did, however, hold above Tuesday's low at $9.76 3/4, which is initial support.

Wheat: 9 to 13 cents lower. Futures were lower overnight on spillover from yesterday's losses. Futures closed sharply lower at all three exchanges yesterday. Wheat opened lower than expected and extended losses throughout the session amid pressure from a widespread commodity selloff. March Chicago wheat futures narrowly avoided posting a bearish reversal yesterday. Despite the poor close, the contract remains in the uptrend from the Dec. 5 low.

Cash cattle expectations: Trade expected on Friday. The sharp losses in cattle futures Wednesday throw this week's cash cattle trade into flux. Some are still expecting steady to firmer cash cattle bids. But there is growing talk that packers may reduce slaughter runs instead of bidding up for cash cattle supplies, especially if cattle futures are lower again today.

Futures call: Weaker. Futures are called to open lower based on spillover from yesterday's sharp losses, but short-covering is possible if traders view losses as overdone. A combination of technical and fundamental factors led to yesterday's sharp losses. Early pressure came on general commodity profit-taking pressure, with losses extended as sell stops were triggered and as the stock market extended losses, as well.

Cash hog expectations: Steady to firmer. Cash sources suggest packers will keep cash hog bids steady to firmer across the Midwest today as many are still buying hogs for Saturday's slaughter run. Those packers that have this week's supply secured are looking to buy hogs for early next week. But a $1.13 decline in the average pork cutout value tightens packer margins and may cause some packers to back off on cash hog bids.

Futures call: Mixed. Futures are called to open mixed, but it's anybody's guess where the market will open today after yesterday's choppy session. The fact futures came off session lows late yesterday suggests the possibility for short-covering, but nearbys are holding a large premium to the cash index. Key near-term support for February hogs extends from Monday's low at $62.35 to the bottom of the Jan. 2 gap at $60.95. Tuesday's high of $64.90 is near-term resistance.

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