This report was sent to subscribers on 8/11/12 7:10 p.m. Chicago time to be used for trading on 8/13/12.
After the close recap on 8/13/12: My pivot acted as resistance and was 8.12 1/2, .01 1/4 from the actual high, and my support was 7.81 1/4, .04 3/4 from the actual low.
All charts and numbers for 8/13/12 have already been sent to subscribers at 3:30 pm.
8.49 new All Time High
-----------8.12 ½ Pivot
5 day chart.... Up from last week same day
Daily chart ... Up
Weekly chart ... Up
Monthly chart .... Up 5.88 is the 200 DMA
ATR 26 Balanced 41%
For 8/13/12: Good support at 7.71, daily numbers resist.
New all time high and closed lower bodes well for another down day to follow on Monday.
In my daily December corn numbers on Friday my resistance was .01 (notice the pivot was the EXACT high in open outcry later in the session) from the actual high; my support was .02 from the actual low.
Grains: I made it clear I was bearish and said the reasons why, and I cautioned you about the "blow off top" we witnessed on Friday with the report sparking a rally to $.01 from my resistance number, and then producing a more than a limit move from there closing sharply lower. This bodes well for another down day to follow on Monday.
You had the bulls reacting strongly to the report, and then profit taking and bear selling fed on it. The bulls look around and said the report was bullish, but they should know what we know and that is you do not make money from guessing the report right, you make money by participating in the market correctly. When emotions run high we are calm as we watch to see if the market can get close enough to the resistance number to get filled on our working order, and then wait and see if we do not get stopped out. The people who make predictions about the report mostly could not trade their way out of a paper bag, and like 99 out of 100 people who try to trade successfully, do not. When they blame anything but themselves for the outcome of their trades, they have no chance to be successful.
So what changed 15 minutes after the report? Nothing, only the price!
New subscribers can now see why I always say "I do not care about the report itself; I care how the market reacts to it". I am a trader and I keep my eye on price only, the fundamentalist keeps more of an eye on the fundamentals. Producers should also keep their eye on price and relate that to income, and the job of a farm manager who hedges for the farm should always be on income, and does not risk too much on their idea that grains will go higher. Having our strategy allows as much upside as you want and the gamble, but after the market rallies beyond your call spreads and put spreads, your task is to lock in as much as you can no matter if the market comes down or goes up afterward.
I look at the carryout, because that is what is left from all the supply and demand, and on Friday they took away both corn production and more of the usage that increased the carryover by 76 million bushels (MB). There is good support in December corn at $7.71, but the normal $.95 correction will bring it near the gap of $7.40 ¼. I would want to be a buyer if we get down there, the market should have until harvest for prices to remain firm. I prefer to continue to sell rallies rather than buy breaks up at these price levels.
Put options are still cheap but will get expensive. Call options are still expensive and will get cheap unless we continue higher. Unchanged on Monday will equate to lower call option values. I told you as I do every report, the option winner will not win and the loser gets killed, all you need to do is look at option settlements and you will see that was exactly true once again. Only a near limit move will alter that statement.
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Weather will affect soybeans, but will do little for corn now. Soybeans can hurt or help corn prices this week. I would look and trade them independently though. I would trade corn with a bearish bias today and only take the sell signals and use the supports for places to take profits only and risk $.06 in corn, and trade soybeans without bias and risk $.08 in using a stop to protect any idea.
Grains: All numbers except August soybean resistance were spot on. It is certainly a surprise that soybeans and corn closed so high a price going into a report that has a good chance to trade limit up or down. We started the week wetter and cooler and soybeans lost value, but by Thursday it clawed its way back to fill the gap left from Friday. September corn could not take out the high made on July 20th which is bearish although December keeps making a new high due to the spread between the two months.
Many producers were taking profits this week knowing the report could take away profits on a limit move in minutes. All kept some upside open, some more than others, but knowing they are getting a crop and the desire to take some income off the table and into their pocket is also the prudent thing to do, and by doing so they also get more courage to seek higher prices.
I care more on how the markets react to a report rather than the report itself. I know you have a plan what you will do next no matter if we go higher or lower to improve your position, and by knowing what you are doing is an advantage in itself. When people think they know what the market will do is one thing, but not knowing how to trade is the big problem, not knowing what they are doing. They know what the market will do, but they could not trade successfully. I never know what the market will do, but I always know what I am doing and why. Yes, on many a chart setup I know what the odds that favor what the market will do next, but more important is how I participate risking little and wait for the right setup that matches my trade ideas. Have you ever heard someone say "I was right the market but lost money because..." I like to say I made money for all the wrong reasons when my thoughts were wrong but my trade idea and strategy was right.
The market opens at 7:20am Chicago time, and the report comes out at 7:30am. I will be at my desk at 7am. I will send my take on the report as soon as possible. I want to day trade the market and prefer to trade at the extremes without bias risking $.06 in corn and $.08 in soybeans using a stop to protect any idea.
Grains: Spot on grain numbers except November soybeans were only accurate. Today is the last day before the report to adjust your position to reflect your thoughts. This report can produce an extreme movement, but once the market stabilizes in a day or two, all eyes should be back to the weather for soybeans the next 3 weeks. Corn yields is done now whatever it may be, but soybean yields are still being made, and with hot dry they go higher, wet cool will see much lower prices.
Guesses for corn are 1.8 billion bushels apart, impossible for me to be sucked into guessing because I do not bet money without getting some sort of "odds", so I just wait for a chart level and number I want to risk some money betting that it will hold, and the reward should be greater than the risk. My producers all have at least 20 BPA or more guesstimate on their own farms, how is even the USDA know what is on 95 million acres right now?
As far as options go, outright calls and puts are a bad bet, "the winner will not win and the loser will get killed" on report day. The market will need to move in your favor just to retain its value, a big move to make something. Spreads are the best ways to trade a report, because you are selling a wasting asset against the one you buy which takes care of some of the premium decay.
Bulls look to be posturing before the report but December corn is unable to make a new 2012 high tonight so far, so close but yet so far. Even if it gets through $8.20 ½, September corn 2012 and all time high is $8.28 ¾ and unless it makes a new high the market is a sell. I look at the spot month, not the more speculative December contract that is benefitting from the "spreads". It is hard to believe the corn bulls are going into this report near contract highs, the risk seems too great. Maybe they will cause panic to the sellers and they will "panic" before or after the report and cause a "blow off top", this is a perfect setup for that at record prices.
My bias is bearish for one reason only, the price is historically high and the risk is more to the downside. Yields have probably been "baked" into the price equation, and if realized might be considered bearish because what could take it higher next?
I prefer to day trade this market and not have a position, and if I did have an overnight position it would only be a known risk strategy. I continue to prefer the sell signals at resistance, but day trade the market without bias risking $.06 in corn and $.08 in soybeans using a stop to protect any idea.
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The markets now covered daily are Soybeans, Corn, and S&P's.
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