This report was sent to subscribers on 7/5/11 3:50 p.m. Chicago time to be used for trading on 7/6/11.
After the close recap on 7/6/11: My pivot acted as resistance and was 13.36, .00 3/4 from the actual high, and my support was 13.22, .00 3/4 from the actual low.
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All charts and numbers for 7/7/11 have already been sent to subscribers at 5:00 pm.
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13.06 ¼ FG
5 day chart... Up from last week same day
Daily chart .... Down
Weekly chart ... Up
Monthly chart Up $13.30 ½ is the 200 DMA
ATR 25 ½ Balanced 68%
For 7/6/11: I still say "Downtrend line is support now (as it was on Friday). The low in March supports, uptrend line resists". Downtrend line at $13.80 is major.
In my daily soybean numbers on Tuesday; my resistance was .06 ¼ from the actual high; my pivot acted as support and was .02 from the actual low.
Grains: Spot on soybean numbers, spot on corn resistance and accurate support number. We got the up day I was looking for and I would like to see more corrective action as do all my producers. The feature on Tuesday was July corn. There was a squeeze in play it looks like to me, and the longs are sticking it to the bears. The "raider" kind of funds are out there to exploit the market anyway they can, short term or long term, and if nothing else exploit the "odds" in like fashion to mine. Except this game is for the "big boys" not someone like myself. They can hold their long position and accept delivery while the shorts are speculating and do not have the product or the warehouse receipts top deliver, so they must buy their shorts back at any cost. Yes, they can go get the cash and get it to a certified warehouse, but good luck trying to save money trying to do so. That is not what the speculator is knowledgeable about. The funds will lose some money on what they might have to take delivery of and dump for a loss. But what they make on squeezing the shorts on a few thousand or more contracts makes it highly profitable. The more the shorts waited for a pull back, the more the market went against them. Speculators this far into the month are usually "short" because they do not have to worry about catching delivery, and the funds know that too.
The speculator unless knowledgeable of the cash market game, have no business to be in the reality of the here and now, make or take delivery, with professionals who know how to profit in that environment. The commercials could have and should be the ones that are bidding up the contract. My feeling is that when the July/December (CN/CZ) spread traded at $.05 when corn was limit down on report day, it looked more than the right thing to do, but by the end of the day that spread was trading $.35. That was a warning to the bears that the market would put in a bottom. In my first paragraph in 7/5 comments I said the spread could trade more than the outright contract months and it did. The spread traded from $.35 to $.75 on Tuesday. This is also a warning to the commercials that the PRC could once again defer taking corn until the new crop, and this spread as well the market could collapse. I have seen many a squeeze in my day, and this is another one of them. I called the floor late in the day to ask a corn spreader that I respect for an opinion, and he said he had no clue and that is why he has no trades in "July" on his cards.
My producers, who were taking heat below $6.30 with their old crop coverage running out quickly, were happy to see the market come back today, and give them an opportunity to buy some protection of $.30 on some of their outstanding contracts. They all have locked in $7.50 or higher where their hedges were turned into futures.
The bottom line in my thoughts is this; there is no reason fundamentally, technically, or weather wise to see us rally more than for a correction, and as long as weather stays benign I see us eroding into the harvest. I can see leaving in a weather premium for soybeans August weather, and the balance sheet is more favorable to rally soybeans if there is a problem with yield potential. Crop report today was bearish and encourages a possible upward revision to yield on the 12th report, let's see what next Monday's crop conditions look like.
I want to trade the numbers without bias but prefer to take sells at resistance, and risk $.06 in corn and $.08 in soybeans on any trade idea using a stop to protect.
Grains: Spot on soybean support and accurate resistance, spot on corn resistance and accurate support numbers. Funds continue to liquidate selling 15,000 corn contracts on Friday. Friday's action was easy for me to anticipate, and with my comments explaining what I think is common sense and logic applied to charting, you do not press areas that are likely to hold up even if it is only for a few days. These charts need more bars (days) to confirm the low just made will act like a springboard in search of resistance. Friday's action was either the result of short covering profit taking before the long weekend, or because of the strength in soybeans, maybe both. Thinking short covering would happen after a break second only to 2008 and now at chart support levels, was easy, but the friendly soybean report would be outweighed should corn continue lower. Spreading between soybeans and corn as well as the activity in the old/new crop corn is volatile now and can move as much as either contract month alone.
I will be watching the next 2 crop condition reports before the report on the 12th for clues the USDA will revise their yield production higher. Last week ratings dropped and throw caution to my possible "bumper crop" given favorable weather which you know is unpredictable so is only my "guess" and is no better or worse than anyone else. In 2003 they raised the July 12th yield by 3 BPA. Each BPA projects production/carryover by 85 million bushels. Last 2 reports the USDA has estimated the corn yield to be 158.7 which was down from its February forecast of 161.7. Last year's disappointing yield of 152.8 had something to do with lowering the yield this year due to another wet late start. If we did get a 161.7 yield that would raise the carryout to 1.1 billion bushels, but if yield is more like last year at 153, we would be looking at only 400 million bushels, and the really tight stocks would need to be rationed through higher prices. If we had perfect weather and an "Indian Summer" we could produce another record crop with a yield of 170 BPA and that would leave us with a carryover over 1.8 billion bushels that could easily bring us back to $4.50 corn. This leaves us with quite a range of possibilities that must be considered, and you will not utter the words "unbelievable" if either outcome is realized. This is the reason I say that nothing is bigger than Mother Nature, and she is unpredictable. Common sense and logic also tells me to not bet on shortfall crops, since it seems like one way or the other we produce a crop, and shortfalls are not as common as good crop production.
The other fundamental that is second to production is the funds as you well know. CFTC commitment of traders report on 6/28 showed the funds had liquidated another 50,200 contracts, and the rest of the week they were estimated to have sold another 44,000 that may have dropped their position under 180,000 now.
As I have just said last week, markets tend to move in the middle of a recent range before a report, and the next report is on the 12th, so that might help support the market from here. Thursday's report said there is 350 million bushels more in stocks, and 1.5 million more acres is planted shattered the bull's story. PRC corn growing conditions are favorable now. Soybean planted acreage fell 1.3 million acres below expectations but could not overcome the weakness in corn. Stocks were up 23 million bushels from expectations. Corn was so much more profitable to plant than soybeans that farmers did everything to get it into the ground, and if they were not delayed we could have seen more acres gained to corn and lost from soybeans.
July soybeans left a $.01 gap from Thursday's close at $13.06 ¼ which is friendly. Uptrend line near $13.40 acts as resistance now, but the bulls will need to close over $13.50 to turn the chart bullish and set to test the downtrend line at $13.81. $12.90 should support well if it was retested, but the gap at $12.78 which is also the 2011 low is major support. July beans closed $1.05 ¼ lower on Friday since 2011 started. November closed $.04 higher than the start of the year. Thursday low is solid support at $12.86, and then the gap and low of the year at $12.38. It also needs to get above Thursday's high to change the chart picture bullish.
July corn posted a "double bottom" at $6.15 on Thursday in classic chart form. This is another example of why I base my trade ideas and use my charts for entries and exits not only for a day trade, but long term ideas. In May the market tested the gap and could not fill it, and it produced a rally of $1.61 to a new all time high. Now we tested the low of March near the 2011 low in January, and bounced $53 ¾ so far. It is not coincidence that we double bottomed, but it is always unclear how long the bounce will last, I take it 1 day at a time for more clues. I want to see a higher low and higher high than Friday but I need a higher close too. This would be friendly for Tuesday. Make no mistake, we broke $1.84 ¾ in 3 weeks from a record high and that has caused damage to the chart that tells me that July would do well if it could retest the uptrend line at $7.05 which would also be 50% correction back from the recent low to its high. The gap low in January at $6.08 ½ is major support. December corn posted a huge gap on Friday and did well to close near the high end of the day's range. It would do well to fill the gap left from the report day at $6.20 ½, $6.50 is above there.
UNLESS there is a change in weather patterns, there is no reason for corn to stage more than a recovery rally before the next leg down. Make sure you get ... Subscribe now! I think the fall low will depend on the final corn yield and how much China is willing to buy in relation to our supplies. I am bearish corn and want to sell any rally at a chart resistance. I would trade the numbers without bias on Monday night/Tuesday open outcry but prefer to sell resistance, and risk $.06 in corn and $.08 in soybeans. ... Subscribe now! Most new crop soybean hedges on my book are from $13.80 to $14. The lowest are at $13 from the start of the year when my producers hedging began.
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