This report was sent to subscribers on 8/18/10 5:59 p.m. Chicago time to be used for trading on 8/19/10. Everything is done by Howard Tyllas, no program or black box.
After the close recap on 8/19/10: My resistance was10.39, .00 1/4 from the actual high, and my support was 10.11, .04 1/4 from the actual low.
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All charts and numbers for 8/20/10 have already been sent to subscribers at 7:10pm, many were sent before 4pm.
I continue to say "Uptrend line is key support at $10.28, and (last) Thursday's high resists, and then $10.65 1/2 on the weekly chart".
I said "Notice how the uptrend acted as perfect support on Thursday. Remember, the 3rd time at a trend line is the strongest time at the line. In this case it was strong support".
November Soybeans for 8/19/10:
In my daily soybean numbers on Wednesday; my resistance was .02 1/4 from the actual high; my support was .04 from the actual low.
Grains: Spot on grain numbers. My idea for day trading the market is working well when the numbers are spot on; there is something for both bulls and bears. I did think we would see some back and fill on Wednesday which was indeed the case when the markets did pull back to test my first support numbers.
With huge export sales reported so far this week, the market is expecting big numbers Thursday morning on the weekly export sales report that comes out 2 hours before open outcry begins (and after the electronic session closes). If this number is bigger than expected, that would be the catalyst for new buying and a retest of the strong resistance at the gap at $4.47 1/2. If this happened, I would be more interested in where the market closes rather than the news itself. This is 1 of 52 reports and will be used for the "gasoline" to drive the market higher, the car is the market and the drivers buy futures contracts instead of gasoline, and when the buying dries up, so does the movement higher, like when a car runs out of gas. I am more concerned with how the market trades after the report than the report itself. If I was a bull I would want to see a bearish report (less than expected sales) and have the market test support once again and close higher, that I would consider really bullish.
I expect the bulls will make their push to test $4.50 by Friday's close because this is their best opportunity to do so this year. We are at resistance levels so you will not see me buying except for a day trade only, and it would never be more than 1/4 the size I would want to trade if I got a sell signal. Since this is a market of perception and money flow right now, I would trade 1/2 the size of normal on the sell side until after confirmation a "top" is in place. I would risk the same as I have been, and if I lost $.06 I would not think anything except "next trade". No emotion to it. No ego in it. I know selling against a high for the last 20 months and risk $.06 in doing so is a casino bet, when the resistance does not hold I lose $.06, and when it does I am rewarded nicely, one that allows me to build another casino and let in all the players that feel "lucky" and "want to beat the odds".
If you are a bull you need not go short because if they do go higher this time you will be losing money instead of making it, but if you just take profits there, it does not matter if they go up or down, you do not have any risk and so you deserve no gain. People, who can hold their long position and it does go above $4.50, will have earned every penny they made. Look at the chart since January 2009 and you will see how much risk you had just to get another chance to make more than the $4.50, and every 6 months in that time frame we get another look at this price level no matter the fundamentals reason.
The more you read the more you know that the consensus of analysts is like reading a rainbow of colors this year. Whatever you want to read to justify your thoughts of where prices are going based on fundamental outcome; you will be able to find someone who agrees with you. Old subscribers will once again read from me saying "I do not want to be right the fundamentals and wrong the market, I would rather be right the market for all the wrong reasons". I never forget what I learned as a young trader. Being a trader for decades I have always had to manage risk, and be concerned with price and time, not trying to be right fundamentals. In 2008 when crude oil witnessed weekly bearish reports and watched the market climb to unheard of prices of $147. As I was right the bearish fundamentals, if I did not take profits on the pullback from the report, a day or two later the trades would have been losers.
What I have been saying lately is I do not know where we will be next week let alone a month or two from now based on the fundamentals. The task no matter bull or bear is to manage risk and give you the time to be proven right or wrong. Known risk option strategies offer an easy way to do that, a futures trader finds the task more difficult, much more. And if they try and hold onto an idea that is going more against them than what they expected, they find themselves breaking many rules for successful trading, such as becoming emotional and losing more money than they were willing to make if right. I on the other hand use charts for location of where we are compared to the realities of price in the past, and use them to get numbers to trade with. Fundamentals do not prove me right or wrong, but rather the price does that for me. Yes, as long term subscribers know, I can hold an opinion for 6 months or longer, but the charts justify that. Grain charts are in bull mode but at resistance levels. I have outlined how I approach this, it is up to you to form your own plan and strategy, and faced with the task of execution of your plan. You must also have a risk reward with whatever you do, and remain unemotional.
Bottom line: Uncertainty is a bull's friend, the charts are mine. Even though some of my producers need to send margin money, the fact that they are getting or already got the hedges back and able to add money onto their original hedge is a good thing. I just got another new producer who has been with a "big name firm" for years and never heard of a way to own your crop again if the market rallies, only the pain of endless margin calls that in the past made his life more than miserable. With that being said, I hope that grains can follow through to the upside no matter the reason why. If it does great, if not they know the protection they have, and that allows the ability to sit back and see if the market can add money in their pocket and not worry if the market fails.
New Subscribers: Keep in mind that these are day trading numbers. They are equally to be used for swing trading and longer term trading time frames on the day I want to enter or exit my position. The charts are to be used for overall trade location looking for areas of price discovery of support and resistance levels. When the market does go to the charts longer term support or resistance levels such as bracket lines or longer term trend lines, I use my numbers on that day to enter or exit my position. The numbers do not tell you what to do, you are in control of that, but they will give you a framework to try and buy or sell at the best price for that day. For me it gives me a strategy and the best way I have found to discover the best price for entering or exiting my trade ideas.
If I have the exact numbers for the actual high and low of the day 12 hours in advance, the question has always been, how do I trade it? That is what I best describe in my numbers explanation. Any intuitiveness or nuances I trade, I would keep a journal to see if it is worthwhile overriding my plan. I rarely go against my explanation
November Soybeans for 8/18/10:
Grains: Spot on corn numbers, and accurate soybean numbers. Soybean chart remains bullish holding its uptrend line, while corn chart was unable to close above its downtrend line. We are retesting the highs from 2 weeks ago which will prove to be strong until broken. I did say in my comments for Tuesday that the uptrend line at $10.28 would be strong support and it was.
News of the SDS I talked about in my comments for 8/16/10 that I warned could become the "talk", the bulls were playing up on Tuesday with dramatic articles of 50% of Iowa farmland being affected.
Bulls also are expecting huge export numbers on Thursday.
Numbers produced the exact low in corn which was lower on the day, and when everyone is selling, my number was buying. The resistance was also spot on and served as a good place to take profits. If you have been looking for a place to sell to go short longer term, the resistance on the close paid off for those who were patient to wait for a good place to sell. Since the market was above the pivot from the opening bell, if you wanted to sell you really had no choice but to wait for the market to get near the resistance or if the market got below the pivot for 5 minutes and sell at a lower price. At least I and people who use some or all of my approach as best described in my numbers explanation trade it that way.
I want to play it from the short side today and risk $.04 in corn and $.06 in soybeans using a buy stop to protect. Even if they want to go higher, today is not the day and back and fill should be seen. Any follow through to the upside today could spell trouble for the bulls if export numbers on Thursday are not what they expect. This is a demand driven rally (strong sustainable rallies are driven by 1/2 demand and 1/2 tight supplies, but the demand part of the equation is essential) and the market is "thinking" crops are overstated. Think what you want, but NOBODY knows what crop is out there, but they do know the current demand.
Here is a 5 minute bar chart of December corn on 8/17/10. The low of $4.21 1/2 was made within 10 minutes of open outcry which was the low of the day and my exact pivot number. Even though the market was down $.01 1/4, my pivot said to buy because they were above the pivot. If you have time you should look at other markets 5 minute charts to review how well my numbers work, and you will observe patterns that will be helpful.
November Soybeans for 8/17/10:
Spot on numbers Monday. Remember, these numbers were sent out on Friday night, no chance of knowing the weather, exports, rainfall and so on. It does not matter to me. I am trading the chart (and charts cannot read the news or listen to reporter's chatter) and getting my numbers from them. I have an approach that is uses my numbers and charts to provide minimum risk if wrong, and a good reward when right. No matter day or longer term trading.
That is why I laugh when I read people giving trade ideas based upon the fundamentals which are totally unknown. And even if known, will not help you in price discovery of how high or low it can go, and then again the fundamentalists would have to go to a chart for some kind of an idea where that may be. How can I make a trade idea based upon fundamentals that are unknown? I don't try.
As I have just said over the weekend, for me it is easier to day trade right now, and the only long term position I can have when at chart resistance levels, is to sell or stand aside and not buy.
November Soybeans for 8/16/10:
Grains: Spot on corn numbers and accurate soybeans numbers. My idea to trade the numbers without bias is always the right thing to do when the numbers are spot on. August soybeans expired on Friday and were down $.05 on the day.
On the latest commitment of traders report (COT) out weekly, it showed that the funds bought 54.000 of corn and 14,000 contracts of soybeans in the latest week, while Index funds sold 2.000 corn and 14,000 wheat contracts. Index funds did buy 4,540 contracts across all 12 commodities. The CRB index did close 1% lower for the week led by crude oil plunging $5.31 for the week.
Weather will be the key on Sunday night and will be reflected if rain in the eastern Midwest and KS fail to provide a good drink. Market is expecting a huge crop and if this fails to materialize or the thought of a possible shortfall, end users could "pay up" and send the market to test the highs of the year. Tightening stocks amid good demand is the reason a shortfall of any size could send the market into "panic mode", but as long as the crop looks to be a good one, will cap any rally and limit the upside potential. The "what if" that could limit a rally even with a shortfall would be a meltdown in world economies, so nothing is guaranteed on supply demand alone.
Iowa State University and U. of Wisconsin are talking up SDS or sudden death syndrome occurring in soybean fields. Losses can be up to 100% on the acreage with this condition. Keep your eye on this in places like Iowa. This happened in 2008 but they said it had less damage then than this year. Spring and June weather this year set up could be widespread in many areas. This is the first time I am reading that this is a problem, and none of my Iowa producers have even mentioned this to me, so it is a factor that could be in play soon, but not here yet. I certainly would not buy right now because of this, but it is another "what if" in the bull camp.
Crop conditions are expected to come down on Monday's weekly crop progress report, FSU weather will be looked at closely as well as end user buying, export sales, comments from the Pro Farmer Tour which is in full swing this week, and the funds who have small gains at best for this year, and their willingness to sustain or increase their long position.
No denying the feel of the market is we are trading off of demand that seems to be increasing, and more concern that this year's crop production will not be as large as the market anticipates. Perception is what I am talking about, and that does enter into price discovery in the short term.
I have been telling you for some time that for me it is easier to take out of the market money on a daily basis rather than to try and predict direction, even where prices will be up or down in a week from now. I always want to take the path of a casino and getting the odds instead of giving them. I feel I am getting the odds by day trading the market daily than by predicting a direction that I admit is hard to do at this time. If you have been following my ideas of day trading, you can see that it is working well and is painless, rather than holding trades overnight. The $.10's add up and the $.04 and $.06 losses do not jeopardize wiping out profits. I would really like to have an opinion to hold a longer term position, but with the fundamentals being so "unknown" it is impossible for me to do at this time. I can trade technically longer term, but the markets are in bull mode at resistance levels, so if I was long I would have taken profits already and would be waiting to buy again on a pullback to support levels. This would leave me in day trading mode for now anyway.
Soybeans have held their uptrend line but are extremely overbought now and at resistance levels. Corn is holding their downtrend line and is still balanced even though on the high side, and is free to move higher if above that downtrend line, until then it is a sale against that line. I would trade the numbers without bias today and risk the same $.04 and $.06 I have been using for awhile. That seems to be enough room to allow the trade to work, and if not limits the loss if it does not hold. I have a plan, strategy, and approach that try to take advantage of chart set ups and use the fundamentals when possible for direction.
Remember, trading is gambling, and all bets are not created equal.
The only difference in speculating is that it is not a "created wager" like a horse race, game, or casino wagers, but rather one that is there for producers and end users who do nothing by hedging. Speculators take over this risk from them. If the end users and producers do not use the market, THEY are the speculators (or gamblers) but if they hedge, the speculators take the gamble away from them and assume the gamble themselves.
Results for 8/16/10 were:
Soybeans: My resistance was .00 1/2 from the actual high; my support was .00 1/4 from the actual low.
Corn: My resistance was .03 1/2 from the actual high; my support was .00 3/4 from the actual low.
Crude Oil: My resistance was .18 from the actual high; my support was .16 from the actual low.
S&P: My resistance was 1.75 from the actual high; my support was 4.25 from the actual low.
Gold: My resistance was $4.30 from the actual high; my support was $3.10 from the actual low.
Euro: My resistance was .40 from the actual high; my support was .24 from the actual low.
Bonds: My resistance was 13 from the actual high; my support was 7 from the actual low.
Nat. Gas: My resistance was .020 from the actual high; my support was .014 from the actual low.
Cattle: My resistance was .17 from the actual high; my support was .25 from the actual low.
November Soybeans for 8/13/10:
Grains: Spot on grain numbers. High soy oil stocks due to a cut in bio diesel usage by 200 million pounds for 2010/11 were bearish. Soybeans ending stocks held unchanged from the July report at 360 million bushels (MB), while corn stocks slipped from July's 1373 MB to today's report at 1312. The average trade guess was 1307. Last year's August estimate of corn demand was off by 500 MB compared to what the Final report showed in January 2010. It was 600 MB short in 2005/06 compared to the Final report demand. They have underestimated corn demand the last 4 years. My takeaway is the market knows that demand is probably more than what was reported, and the ending stocks figures will probably be going down as time goes on. Only a larger than expected 2010 crop production figure would be the only thing to put a halt to eroding grain stocks (of course a drop off in demand would do the same).
This is a reprint from what I wrote on 7/26/10: Last year the August report projected yields fell short of the Final report that increased by 5.4 BPA in corn and 2.3 BPA in soybeans. August to Final declines rarely decline by more than 5 BPA and most years less than 2 BPA. US soybean yields have declined in 9 of the last 17 years by .5 to 2.5 BPA. On the demand side, USDA August 2009 to July 2010 estimates of 2009/10 corn demand increased a whopping 440 million bushels. 2009/10 US soybean demand increased a hefty 120 million bushels.
Interesting to note, with the 5.4 BPA increase in corn production resulted in a $.25 break in price into September 2009 (about 9%) when the front month traded below $3. November soybeans fell $1.50 in the same period even though they posted numbers 14 million bushels below the average trade guesses, go figure? Another perfect example of why I do not trade fundamentals for price discovery. Sure you are right that the crop was 14 million lower than what the trade thought which is bullish, you were rewarded by losing money. I would rather have been short and make money rather than being right the report and lose money. It also can help you lose more than what you thought was imaginable. How can they break $1.50 on a friendly report? That is why I remind you that markets can and will do the unimaginable, and that is why I always use stops and or known risk strategies. Yes, I sometimes use stops on known risk strategies too. I have seen countless traders go broke on a trade idea. (end of copy from 7/26/10)
World wheat stocks plunged 20 MMT compared to last year, but still up 50 MMT from the 124.4 MMT low in 2007/8. China has 1/3 of the world's wheat in their bins now. Global wheat production plunged 34 MMT, shortfall of 27 MMT in FSU, and the rest in the EU and Canada.
You can read my comments from 7/1/10, and you can also read 7/19/10 and you might find helpful to read again.
Bottom line: I cannot be alone with thinking the USDA does not have it right in some of their projections. This is almost entirely true every year if you walk around the trading floor and talk to other floor traders, but this is one of the high uncertainty years. This leads to perception driving price, and my charts and numbers have always been the only tool I use for price discovery, and where that "perception" might drive the price to for me to take advantage of, no matter to take profits, or to enter a trade idea.
The unknowns are the same, 2010 production, August/September weather, Russian wheat, demand, actual acres that will be harvested, desire for the PRC to increase stocks, upcoming SA weather and planting intentions. These perceptions are the drivers for the bulls because "unknown" usually works in their favor. But like all markets, they will get to a price (maybe the recent highs) that will bring out real sellers and cap the rally. The bulls that came through the door 1 at a time to join the party, but if they hear the word "fire", will try and rush the exit which could be only 1 door, resulting in a lot of dead bulls who could not get out. I trade numbers NOT fundamentals. I have outlined my parameters clearly as to the support and resistance levels, and since this time the report was not a surprise, the chart technical levels remain the same.
Since we are nearing chart resistance levels, I am shy to buy unless for a day trade at these levels. I am comfortable to take the sell signals, but would trade only a smaller than normal contract size at this time of the year with the fundamentals being unknown. Unlike a surplus stocks situation that would give me the comfort knowing that inventory would be quick to dump on the market at the right price and would weigh on any rally, farmers are willing to sit tight unless they know they must make room for this crop. Some I am sorry to say will not fill their bins this year and some know that they need to empty them before they combine.
I want you to note and you can look on a 5 minute bar chart, after the market opened in open outcry sharply higher, the corn market plunged in the first 10 minutes to where? In December corn to $4.12 1/4 and my pivot was there at $4.12 1/2 to provide a buy signal. November soybeans opened just below their pivot and broke down to my support number of $10.11 posting a low of $10.11 1/4 in open outcry. My idea to trade without bias using $.04 and $.06 stops to protect, is another example of my trading approach of entering trades because of my numbers, that provide a minimum risk if the number does not hold, and provides a good reward when it does.
Nothing changed for me. I am not compelled to trade a longer time frame which I feel is a player giving up the "odds" instead of my approach of trying to be a casino and only trade when I feel I am getting the odds. I still feel that the market is providing a "moving target" and I want to only take an arcade "shot at the ducks" rather than go to war (with a bigger position trying to forecast where prices will be in a month or two. I want to continue to day trade using the numbers and taking into consideration where we are located on the chart in doing so. If we close above $4.50 for a couple of days, I would be a willing buyer, but until then I am a willing seller against there.
November Soybeans for 8/12/10:
Grains: Spot on grain numbers. Trading without bias provided sell signals in both markets were a good one. Position adjustments helped choppy trade before the report. No sense me talking about the debate over the next 14 days of the weather forecasts and the implications from them. Today the report comes out and the market will have a better idea of what production, supply on hand, and demand estimates that will equate to what stocks (supply) will be next year. Again I tell you that the August report numbers (as the past few) are only guesstimates and I consider them "moving targets" same as I consider prices at this time of the year, and this year more so than the vast majority. NASS's August crop report underestimated final soybean yields in 4 of the last 6 years, as well as corn 7 times in the last 9 years. They have overestimated final yield in only 6 times in the last 22 years.
That brings me right back to my charts and numbers. I am more interested in how the market reacts to the report than the report itself. Because it is perception, asset allocation, end users and producers who make up the market and whose votes are cast by what their "risk taking" or "needs" are, and are in an auction process that results in a daily price discovery that settles at a price at the end of trade that day. No matter what the bulls or bears "think", that is the reality of price at that point of time. The bulls are buying because they think too cheap, bears sell because they think too expensive, but reality is the last trade price which is NEVER wrong!
I will send out my initial thoughts and the report at 9am. The numbers should cover the day's volatility, but if there is a surprise, the parameters I have commented on recently cover it. I cannot tell you what I want to do today because of the report, but I would trade without bias using the numbers and risk the same as before using a stop to protect.
Results for 8/12/10 were:
Soybeans: My resistance was .03 from the actual high; my support was .00 1/2 from the actual low
Corn: My resistance was .03 3/4 from the actual high; my support was .02 1/2 from the actual low.
Crude Oil: My resistance was .10 from the actual high; my support was .33 from the actual low.
S&P: My resistance was 3.00 from the actual high; my support was .50 from the actual low.
Gold: My resistance was $3.50 from the actual high; my support was $1.40 from the actual low.
Euro: My resistance was .55 from the actual high; my support was .48 from the actual low.
Bonds: My resistance was 8 from the actual high; my support was 16 from the actual low.
Nat. Gas: My resistance was .007 from the actual high; my support was .021 from the actual low.
Cattle: My resistance was .17 from the actual high; my support was .02 from the actual low.
November Soybeans for 8/11/10:
Grains: Spot on numbers! My idea to sell the market was a good one and the stops were never in jeopardy. My support was hit near the close in soybeans and corn came within a penny of it.
Not much to say except that this is the last day and night before the report that comes out at 7:30am Chicago time tomorrow, to adjust your position according to what you think and want to risk going into it.
I think the market bulls were a little concerned at these levels while looking at pretty good weather the next 10 days. Going into the report the 200 day moving average at $4.02 looks like solid support as well as $4.07. The downtrend line at $4.30 is solid resistance and then $4.38 3/4, after that the major resistance remains $4.50. These numbers will be good after the report too, and the bulls want to see the market continue to close over the 200 day moving average in order to maintain control and eventually try and test $4.50.
Today I would trade my numbers without bias and risk the same $.04 in corn and $.06 in soybeans.
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10.49 Double Top
-------------10.31 1/4 Pivot
5 day chart... Up from last week same day
Daily chart .... Up
Weekly chart ... Sideways
Monthly chart Sideways $9.59 1/4 the 200 DMA
ATR 19 1/4 Balanced 52%