Published on: 14:36PM Jul 08, 2008
Today’s full fledge long liquidation break has now taken the market back to some important technical support levels. First, for December corn, $7 is actually 50% retracement of the total June rally, today’s low of $7.02 is close enough for us. Second, the market did however close the June $7.05 to $7.15 gap. With the double top formation, this does give some weight to the bears in that a major high has been made.
What’s next? Friday we have a USDA Supply/Demand report coming out. Expectations are for some acreage adjustments but the big numbers will be in the August report. Overall, I have to believe acres will be reduced but not as much as the bulls want. We will not get the real numbers until the final January report.
So what’s pushing the bulls so hard today? I believe it’s a growing fear that Congress is looking for a scapegoat and it’s called the speculators or more specifically the ETF’s. This issue started to surface a few weeks ago, many thought it was going to be put to bed until after the elections. It however appears Congress wants to get something done faster. While short term it could be bearish, it could actually work to the markets advantage in getting some excess baggage off before the fall time period. As for blocking money from coming into commodities, I believe if there is money to be made the big money will find ways around any government restrictions.
In summary, December corn has achieved my downside targets much quicker than I would have liked. I really wanted to see these levels closer to the end of the month. Since it’s come early, one needs to be careful in how you buy. Right now I would focus on put selling or vertical call strategies rather than net long positions. Until we get to the end of the month I’m not really excited about going net long in a big way for a sit and hold position.
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