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No technical surprises

Published on: 02:48AM Oct 03, 2010

Corn rolled right up to the magnet then was sold hard. Next week may – or may not – be interesting, because the CoT numbers show no change. On the other hand, the cut-off was before the Friday dumping of grain prices, and someone was selling. My guess is the funds will hold on to their positions awaiting development. If the selling is sufficiently intense, they will unload, sending prices down even more. Fund preference would be to wait for a rebound so they can sell into buying, avoiding depressing prices with their selling. The second scenario is more likely, if only because trading speculators, in contrast to funds, will be willing to step in when selling abates, taking the price a bit higher. Ultimately, the traders will not come anywhere near providing the depth the funds need, and their purchases from ten days ago will get squeezed into losses. What then? Can you say "Sell"?

Wheat sent out engraved invitations to leave, should one still be at the bulls’ party, more or less through out the week using especially large type on Tuesday. The big players are moving back towards flat. It will be interesting to see what happens to the March contract between now and expiration. I’d guess anyone brave enough or foolish enough to "buy and hold" will see substantial losses.

Beans are rather in limbo… or perhaps trying to dance under the limbo bar. Technically, beans are no longer in a bull market. What next will depend. A weekly close below $10 basis January should send prices down into the 850-860 area. Lower is possible, but absent a pretty large surprise from our South American friends and competitors, that level should hold. The selling could get short term ugly, since we have two weeks, more or less, worth of longs trapped, approximately 120 million bushels. My remarks in corn apply to beans as well, of course. But the potential carnage in beans is much less because the bet sizes are so much smaller.