This report was sent to subscribers on 11/16/10 2:50 p.m. Chicago time to be used for trading on 11/17/10. Everything is done by Howard Tyllas, no program or black box.
After the close recap on 11/17/10: My resistance was 12.31 3/4, .00 3/4 from the actual high, and my support was 11.76 1/2, just .01 1/4 from the actual low.
After the close recap on 11/17/10: My resistance was 5.40, .04 from the actual high, and my support was 5.10, just .01 from the actual low
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12.31 ¾ Resistance
--------------12.21 ¼ Pivot
11.76 ½ Support
5 day chart... Down from last week same day
Daily chart .... Up
Weekly chart ... Up
Monthly chart Up $10.10 ½ is the 200 DMA
ATR 39 Extremely Oversold 2%
Bears are in control now and they are looking to test the gap support at $11.45, with the major uptrend line at $11.26 being next. Bulls are in control longer term.
January Soybeans for 11/17/10:
When a gap is filled the market is then a 50/50 chance to move in either direction. Until the gap is filled it acts as resistance if it is above the market (last trade price), support if below the market.
5.46 ¾ 5.40 ------------- 5.25 ½ Pivot 5.10 Key Uptrend Line 4.96 $.00 ½ out of range today Trend 5 day chart........ Down from last week same day Daily chart ...... Up Weekly chart ....... Up Monthly chart .... Up 4.29 is the 200 day ma ATR 21 Extremely Oversold 1%
------------- 5.25 ½ Pivot
5.10 Key Uptrend Line
4.96 $.00 ½ out of range today
5 day chart........ Down from last week same day
Daily chart ...... Up
Weekly chart ....... Up
Monthly chart .... Up 4.29 is the 200 day ma
ATR 21 Extremely Oversold 1%
I continue to say "Bulls in control longer term, but bears are in control now. Gap is support and then the uptrend line at 5.10. Daily numbers resist". I show the new line in red.
December Corn for 11/17/10:
In my daily corn numbers on Tuesday; my pivot acted as resistance and was .01 from the actual high; my support was .02 ¾ from the actual low.
Grains: Spot on corn numbers, and accurate soybean resistance but support was blown away. I said over the weekend "my charts tell me that any rally this market offers to a resistance level, and the closer to last week's high the better, I would be an aggressive seller for the next few weeks. My chart says the high for this year is in, and until that Jan report, the pendulum is swinging back down and I expect we will work our way lower until year end". I also said and highlighted "Corn looks headed to test the uptrend line support at $5.10, and soybeans look headed to the bracket line support I have commented on several times at $12.41".
I sent my grain numbers at 5pm yesterday, and my comments as you know were sent later. I want to sell, but you would have needed to be aggressive and take the pivot sell signal. I no longer think we will see $5.80 and now want to base my resistance at $5.67, and would look for any rally going forward to that level as being a sell, and using a buy stop above risking $.05. More overnight selling propelled CZ to a low of $5.10 ¼, ¼ from my support of $5.10 that has been in my comments. If they do break that, sell stops should be there, including mine if I took the buy signal, which I would have risking .04 on a sell stop, but on a smaller contract size on this contra trend trade. They did already rally up to $5.19 for a successful trade idea, risking .04 to make .08. I would not try this if it gets there a second time because it is less likely to hold the more times it is tested. In open outcry I would try to buy this number the first time tested, but again the second time I would take a pass on the trade idea.
Like I have said, I was amazed we have traded in the shadow of $6 for 5 weeks no matter what the fundamentals story is. I can believe $13 soybeans being sustained for a period of a month or two as long as the tight situation exists, but corn at $6, it just does not compute in my brain after trading these products going on 35 years now. One of my producers who have been with me going on 2 years reminded me what I said about producers and speculators alike and he said, "they are going to understand what your strategy is, that is the easy part, but you are going to find that they cannot shake the mindset they brought to your table". "And you said you have both feet on the ground and you will make them understand through repeated examples and that they will not be able to ignore", and then he said "it is only a matter of time before they slip right back into their old mindset". I can agree with him on half, but the other half have in time truly feel comfortable now with my approach, even relieved from the stress of trading, and in reality masking compulsive gambling no matter if they knew that or not.
It is rewarding to me to see my producers be able to have comfort in the fact they are prepared for this drawdown, in spite of being bullish looking for higher prices, and on different strike prices that they selected and can count on them as futures contracts on expiration. It is a learning process, not of the strategy, but more important the mindset of looking at the glass as 65% full instead of 35% empty, a less exciting day by day net change of equity because of the reduced exposure, and the discipline it takes to execute your plan. Trading is a learning experience as well as hedging, and as with most things with practice you should get better in time. Spec or hedge it is the same, you can and should reflect EXACTLY what you think about the market resulting in the strategy you choose and the strikes you select. You then have the upside or downside you want exactly with the parameters your trade idea or hedge is looking for.
It is important for you to think once again what I have said more times than I have fingers and toes in here, I do not care what brings a market to a price level, I want to exploit it. I do not make money because I guess right the fundamentals even on a report and the market goes my way, it is what the market does AFTER the report is what I am concerned about. Nothing changed since last Tuesday, and in my mind the PRC, $, or any other factor would not have kept this market from doing the purge of unbelievably huge speculative positions. You know for months I have warned of the risk of one day no matter when that day is, the party will be over and they will turn out the lights, think of any market, no matter how long it takes what I said was true.
My parameters using the uptrend lines is the objective of the bear chartist in both markets, and if that goes the low of October is next. Corn is at their uptrend now and if that goes my bracket line will be next at $4.70. Forget the outside markets, at best that will be the excuse market reporters and writers will pin the price action on, but the question is what the funds will do? I know what I am doing, I want to contra trend trade by buying support for a day trade with a minimum position. I want sell rallies at resistance levels.
Grains for 11/16/10:
Grains: Spot on corn support but the resistance was blown away. Soybean numbers were helpful. For me it was apparent that corn was going to be good today because of the gap higher open on Sunday night.
Soybeans were on both sides of settlement on Sunday and did not have the underpinning that the gap provided the corn market. PRC was interested in buying Argentine corn, and the fact they were poking around, underpinned corn. Corn exports here though were good but if the market is looking to add export numbers to the next report, we must step up sales.
Nothing changed and nothing unexpected happened (maybe the PRC corn deal), so my game plan has not changed. I was looking for a sharp quick rally whenever the market stabilized, just did not expect corn would be sharply higher on the open, and not at least try to fill the gap first. Now the gap left from Friday's limit down close is corn's support, as well as the gap just below at $5.28 ¼. I was also impressed with corn being able to get up to Friday's high price.
I want to sell without question if December corn can get to the $5.80 price level and risk .06 on the trade, and I would try a swing trade using a $6.01 buy stop, and if the number holds I would be looking for a retest of the gaps of the last 2 days. I would also try a day trade if the market gets to the $5.67 and sell the first resistance and risk .04 using a buy stop to protect.
The fact that soybeans have the bullish report and fundamentals going for it, for it to struggle like it did is a sign of weakness. I was surprised we got as close to my first resistance as we did, and would like to take a sell if it can get closer. I would risk .08 on that day trade idea. I would also try a swing trade and risk .08 using a buy stop to protect. If the resistance holds I would look for a test of the bracket line support at $12.41.
I am still bullish longer term, but the charts are in bear mode now.
Grains for 11/15/10:
Grains: Spot on corn resistance and accurate support, spot on soybean resistance but support was helpful considering the market opened .01 below the 2nd support number in open outcry. I never buy below my bottom support number because as I have told you before, when support is broken it turns into resistance. Not that I recommend selling below that support, but if I was long I would not even think about it, I would be stopped out.
All you have to do is look across the board and you would clearly see broad based commodity selling. PRC talk of curbing inflation was the straw that broke the camel's back on Friday.
Last week in review: Bulls were disappointed on Tuesday when the corn numbers came in only a little better than they thought. Yes, the numbers were friendly for corn but nothing significant, but really bullish for soybeans. That is what gapped corn and soybeans higher, but as soon as corn got .03 ¾ from the key resistance my chart commentary has been posting daily for weeks, and have commented on many times, they ended the day lower. (They also made a new high for the run but closed lower that day, and that bode well for another down day, and indeed it was lower the next day, as well as closing lower all 5 days last week) This is why I constantly remind you on every report no matter the market, "I am more concerned how the market reacts to the report than the report itself". Charts have NO EMOTIONS and cannot know the fundamentals or read the news, and that is why the charts have been the foundation of my approach and actual trade ideas. In all other markets it is only the charts, and relies little on fundamentals.
Report day soybean fundamentals could not be denied and pinned the market for about a .50 gain that day, but hit their wall at long term resistance that once again appeared after being off the chart for a very long time. On 11/1/10 4th paragraph I noted this resistance of the $13.32 gap, and have warned many times with the last being on 11/10/10 & 11/11/10 that these levels are vulnerable to profit taking liquidation if not outright selling to go short. Soybeans started out the Thursday night electronic session making a new high that looked more like a probe to the upside triggering stops than strong buying, but the PRC triggered fear in the heart of bulls and sparked sell stops and liquidation selling. Making a new high for the run and closing lower not only for the day but for the week on bullish news, bodes very well for another down day on Monday.
The question is, how much of their position are the funds going to liquidate, and how deep the correction will be? Expanded limits itself is enough volatility, let alone the huge positions the funds are holding, and at these levels I am surprised we have been orderly and trading basically sideways in the corn market for 5 weeks. The soybean market that has been climbing a stairway to heaven since 10/4/10 without volatility until last week, I am expecting more of the same volatility this week. Fundamentals remain positive going forward with tight ending soybeans stocks, shrinking corn stocks, but the end users still need coverage and might back off until the market stabilizes at whatever price that ends up to be. Corn looks headed to test the uptrend line support at $5.10, and soybeans look headed to the bracket line support I have commented on several times at $12.41.
This Week: Since the next major news is not until the January report and all markets normally slow down for the Thanksgiving holiday, I think this week will be the last of the volatility. Closing limit down on Friday certainly increases the odds for the first few days of this week for that to happen. I expect that prices will rally sharply after the selling stops, and my chart has already shown you were my support levels are. I will say this, my charts tell me that any rally this market offers to a resistance level, and the closer to last week's high the better, I would be an aggressive seller for the next few weeks. My chart says the high for this year is in, and until that Jan report, the pendulum is swinging back down and I expect we will work our way lower until year end. That is exactly what I see after reviewing the game films in my mind that have accumulated over the decades. The movie title might be different, but the story is the same except for the price level is different, and the fundamental story at the time is different, and the volatility might be higher or lower, but the charts and momentum of the pendulum remains exactly the same.
I want you to note, corn was going down even the day before the report, and every day after, the PRC thing just propelled it. But as noted, the funds were selling this market lately and that if anything is a fundamental that is probably bigger than the market itself until the Jan report.
I DO NOT TRADE FUNDAMENTALS even though I view myself an expert in grain fundamentals and how they affect price. The first decade I could not say that, even though I combed through every fundamental the exchange or the constant news wires (in those days of no computers, that was the internet) that were available to exchange members, and through those years observed how fundamentals really play into opportunities that result from the pendulum swing that my charts were waiting for at support and resistance levels. That as a trader was the reason I said I could care less the reason we got to this price level, I want to exploit it! By that time I already had been using my charts for my everyday trading as a floor trader for over a decade making a living, and learned by watching others who were more concerned with the fundamentals or what the report said than what the charts said. I do not know too many especially floor traders, who are concerned with the fundamentals and not the price. The last price is the only REAL price at that time, and charts tell you the REAL prices that traded everyday in the past. How does the last fundamental or overall picture, discover price in the future?
I have found out dealing with the public for the last 3 years, that mindset is the biggest obstacle a trader and producer have. I do not know if it is a good thing to bombard you with ALL the fundamentals that I do look at, and I do filter out the fundamentals for you that are not in play for me. Maybe I should talk fewer fundamentals and only the most important fundamental or the results of, and talk more about mindset, money management, and the ability to manage risk and time, the 2 hardest things to do without the right mindset. You set the parameters of your own tolerance for risk, your threshold of pain (emotional), and know what percentage of your income will take the emotion out of your trading.
I want to add, on Thursday in the Chicago Tribune huge type on the front business page the headlines read "Commodities spark concern, Cotton prices hit Civil War highs" as well as "Grain costs across the globe are rising". It is almost always the kiss of death of any rally within days of reaching headline newsprint or TV attention within days. I get the paper delivered for that very reason, but since this was a busy week, I first saw this today before recycling in trash bin. This is the same day as Informa coming out with a bearish 2011 corn crop acreage forecast and a bullish soybean acreage number.
Mindset: I cannot stress to you enough to keep a daily journal like a diary, and keep yourself in reality. You are a human being and your mind has tricky ways to fool yourself thinking you are better than what you actually performed (meaning, the fish you caught keeps getting bigger with time). I think this and I think that does you no good unless you execute what your plan is, and the journal will again keep it real for you. Because when you say you will buy here or sell there, and then the day comes where you get the chance to execute your plan and you do nothing, you will be able to see what your problem is, and you will then have the chance to improve or face the fact of your lack of discipline. There is nothing more real than to read your own words back, you talking to you. You can lie to everyone else, and place blame on anything but the person who is really in control of your actions, you.
I knew this and I knew that, means nothing unless you took advantage of it. Knowledge has always been instilled in my brain by my parents every since I can remember anything, and was always told "man as well as nature can strip you of everything material, but it cannot take away what is in your mind". "Knowledge is a very powerful force, but is worthless if you ignore it or do not use it when needed". Knowledge means nothing if you find yourself saying "I should have known better" or "I knew I should have".
Old subscribers have read this many times one way or another from me, but I make it clear, I reinforce these same thoughts year in and out since I started trading and as I write to you I am also talking to myself, and am like a soldier on the 42nd parallel standing diligent with no immediate threat at hand, but watchful and on guard for any sign of trouble. I am on guard for any lack of discipline, or lack of respect for the market and what it can do.
Keep a journal, and exactly write your thoughts, even if it is I do not know. Write what you should do to take advantage of your thoughts if right, and what to do if you are wrong. You might just find out that you are your own worst enemy. When you cannot execute what you are supposed to do, then you are sabotaging yourself, and might be not allowing yourself to succeed in your own plan. Or you are a masochist and enjoy the house of pain and what that brings.
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Since the open of tonight's session as I write now, soybeans have probed about $.17 above and below Friday's settlement price on good volume, while corn gapped higher on the open and tested its low in the first 20 minutes, rallied to new highs tonight up .17 and then pulling back to up less than .07 before creeping back up .11 since then. Outside markets are not at all in play. It looks like there is a chance for a rally to a resistance level that I would take a sell at this week.
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