This report was sent to subscribers on 9/18/10 5:30 p.m. Chicago time to be used for trading on 9/20/10. Everything is done by Howard Tyllas, no program or black box.
After the close recap on 9/20/10: My resistance was 10.99 3/4, .00 1/4 from the actual high, and my pivot acted as support and was 10.72, .03 3/4 from the actual low
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Grain numbers for 9/21/10 have already been sent to subscribers at 2:00pm.
10.99 ¾ Resistance --------------10.72 Pivot 10.54 ¼ Support Trend 5 day chart... Up from last week same day Daily chart .... Up Weekly chart ... Sideways Monthly chart Sideways $9.61 is the 200 DMA ATR 18 ¾ Extremely Overbought 93%
10.99 ¾ Resistance
10.54 ¼ Support
5 day chart... Up from last week same day
Daily chart .... Up
Weekly chart ... Sideways
Monthly chart Sideways $9.61 is the 200 DMA
ATR 18 ¾ Extremely Overbought 93%
Bracket line from 12/1/09 high is support now, uptrend line at $10.22 is key support. $11.78 1/2 was the front month high when the bracket line was made and acts as resistance as well as the top channel I just added. Monthly chart gives me the next resistance at $11.14 1/4. I added the uptrend line from the low of July which will provide key support, and will be in play sometime in the future.
November Soybeans for 9/20/10:
In my daily soybean numbers on Friday; my resistance was 11 1/4 from the actual high; my support was .03 ¼ from the actual low.
Grains: Spot on grain supports, and resistances were blown away. Funds bought 40,000 corn contracts and 7,000 soybeans it was estimated on Friday. Market continues to go up and will continue as long as the funds are willing to add to their positions. At some point in time the producers will sell crops to put income in their hands, and that is the only factor I can see to stop the advance until crops coming in can show what yields are. The yields will propel prices higher, or will shut the door in the bulls faces. For now the charts are bullish, momentum is totally in control of the bulls, and the market is climbing higher until sellers such as funds taking some profits off the table or producers selling stops it.
The fact that cash is not keeping up with futures is a divergence created by speculative buying in the futures markets. This is what happened in 2008, and eventually the markets should come in line, no matter if cash comes up to the futures, the futures come down to the cash, or a combination of both.
Soybean yields have been coming in big, but with corn making new highs, soybeans are compelled to go higher too, because there is a relation in feeding corn or soybean meal, and the fight for acreage between the two.
As I said on Thursday night when corn was sitting just above $5, the bulls smell bear blood, and by the time the night session ended the volume was almost 70,000 contracts! By the time the day session ended it was over 215,000 contracts electronically alone. The commitment of traders (COT) report for the week ending 9/14/10 showed they added only 10,000 contracts to 412,000, less than I had thought. Since Tuesday they bought around 60,000 contracts so it will be interesting to see what their position shows this week. They left their soybean position unchanged at 137,000 contracts, but nearly a record.
In 2008 crude oil went to $147, the stock market was on a 5 year rally, and the delayed plantings had the market thinking we would need to ration supplies. But the actual planted acres came in more than expected, weather improved greatly, and thoughts production and carryout would be adequate sent prices over the waterfall's edge. Of course when the equities market plunged that was the kiss of death for risk taking and commodity ownership.
Last week the bulls had cries of an early frost in the PRC and Canada, new all time highs in gold, equities rallying, $ weakness, and bull charts in their favor. Bulls continue to press yields under 160 bushels per acre and talk by many of 158. Ethanol still at profitable levels, and the market moving higher is the natural way to price in the perceived shortfall in production to ration usage through higher prices. Funds can also be in the mood to buy even more contracts even at these position record levels and high prices.
I am keeping in mind that October grain options (based on December contracts) expire this Friday and might want to sit on the $5 mark on Friday. If farmers come out and sell, and or funds take pause in their buying, we could see a shakeout correction. I think this should happen before the September 30th report, and it could be from a higher level near $5.42 when it happens. If that report adds on 100 to 150 million more bushels to stocks than what is expected, that could trigger massive exiting from long positions. Look at my comments about the Quarterly stocks report in my commentary on (9/17/10) USDA is forecasting a 2010/11 soybean carryout of 350 million bushels based on a record 44.7 yield. If it came in at 43 BPA we would have stocks of 230 million compared to the 2007/08 of 215 million.
Those are the statistics I am looking at for price direction, my charts are what I look at for price discovery. My resistance numbers are from weekly and monthly charts and I use them for places to take profits if long, and or a place to go short if looking to do so. My task as a trader is to make money, and with grains having fundamentals that are for me impossible to pin down at this time, leaves me in day trader mode which is the easier time frame to predict what the market will do and what prices will provide support and resistance. The higher we go the more I want to trade from the short side, but remember if I am wrong (meaning the numbers do not hold) I only lose $.04 in corn and $.06 in soybeans. My strategy to sell corn and soybeans with a known risk and no margin is losing money, and I will hold until the report on the 30th proves to exit this losing trade, or keep it. The losses in being wrong this strategy loses less as I get more wrong (market going higher) but since my strategy cost between $.10 and $.20 total, the loss is not much more than a day trade, and I still have until expiration to be right or exit for whatever it is worth when I no longer think so.
Producers have a much more complex situation than a futures trader when it comes to profits (or losses). They have a basis to deal with, adjustment to production size, and input costs forecasting next year's crop. But when it comes to selling no matter what, it is against the "CBOT board" price. This is what we all do, buy or sell the CBOT, and we try and risk a certain amount to make a certain amount. On any given day we have another chance to adjust our position accordingly, or manage a trade we have to protect profits or limit losses. Before option trading a producer would sell the futures and were done with it, and waited for the basis to improve before lifting the futures (buying back) and selling the "cash". With options there is a much better way because you can literally reflect your thinking in an exact option strategy that completely reflects what you think and want to do, and there is nothing else I know of that comes close to that. Does it have a cost? Yes, but the costs are completely known, and the costs give you the protection you want and the chance to make more money if the price goes up.
My producers for the most part have gotten back their crops and have... Subscribe Now!
The reality of what they, you, or I do is that at the time we do things, that is what we actually think at the time, and looking back and saying what we should have done is not reality. Everyone knows who to bet after the race is over, so thinking you knew something other than what you bet speaks for itself.
I am not surprised at grains rallying to these levels or above, but I did not think it would happen until after the 30th report and production is coming in smaller than expected. At some point of time a producer or speculator must sell, and when they do they should be happy with the price they locked in. If you are not happy because they go higher, and when they go below where you sold you are happy, then you have personal issues. You make a decision based upon risk reward, and producers make the same decisions but it is their income, their livelihood at stake, not just another trade idea that does not affect their income used to finance a speculative trading account.
The good news is that my producers are faced with windfall profits from their original hedge. It is one thing to achieve higher prices, it is another task to keep the profits obtained from it. Ask the producers who did nothing in 2008 and watched the market rally to unheard of windfall profits, and then watched them go below the cost of production and did nothing. This mindset of trying to sell the high of the year or more than what the farm next door gets is disaster because that is not what a speculator or producer should be focused on. In the feat of trying to sell for a high price, you are gambling that the price will not go down. If it does you will lose money.
The reason that my producers who were bullish (or bearish) could withstand the drawdown was because they had protection when it went to $3.44 on June 30th. Yes, less than 3 months ago we were there, do you know where they will be 3 months from now? I do not know right now. Now they are getting the money they were going after. They and even the bears who hedged are now finding themselves not hedged above $4.60 and are now faced with how to keep it. Just like any un-hedged crop, looking at prices and locking them in are 2 different things. I have always been in the camp of giving up a % of my profits to insure what I have made and continue to have the right to make more in doing so. My job as a trader is not to get every penny, but to have a plan and strategy to take out what I can. It is what I make or lose that is important, not what I did not make and left on the table.
Bullish speculators or producers are faced with the task of locking in profits and allowing for further gains without losing what they have already gained. I did this before there was options by reducing my position as the market went my way, so if they went back to where I started, I had locked in good profits along the way, and have a much smaller position than what I started with. Options came along and I found ways to remain in my position and even add on if I wanted, but pay a % of what I made for "protection". (I have traded options since their inception in Chicago 20+ years ago as a member trading in the pits for my own account)
Producers should ... Subscribe now!
Volatility is going up as is normal as the market goes higher (because now there is more room down to zero) and the market can and will do anything. My numbers give me a good idea where support and resistance is, and I use them to day trade my ideas as well as entering or exiting longer term trade ideas. I want to risk $.05 in corn and $.08 in soybeans on any day trade idea.
November Soybeans for 9/17/10:
Results for 9/16/10 were:
Soybeans: My resistance was .03 from the actual high; my support was .01 ¼ from the actual low.
Corn: My resistance was .02 ½ from the actual high; my support was .03 ½ from the actual low.
Crude Oil: My resistance was .14 from the actual high; my support was .15 from the actual low.
S&P: My resistance was 3.00 from the actual high; my support was 4.75 from the actual low.
Gold: My resistance was $3.00 from the actual high; my support was $2.90 from the actual low.
Euro: My resistance was .02 from the actual high; my support was .19 from the actual low.
Bonds: My resistance was 9 from the actual high; my support was 8 from the actual low.
Cattle: My resistance was .17 from the actual high; my support was .12 from the actual low.
Grains: Spot on numbers. This is getting good. Keeps going up and all my producers and I have no clue as to why the funds are allocating unheard of money at the corn market, and as I have said so many times before the funds will present opportunities at price levels that would not be reached without their participation. No matter if corn turns in the fundamentals needed to go higher or not as the crop comes in, they are giving producers and speculative short sellers an opportunity NOW to take advantage of. The fact their bet is for higher prices will prove to be justified if production is down, if not and yields are bigger you would never have seen these price levels if a bigger yield was known at this time. It could be buy the rumor sell the fact by the time we really start bringing it in about 3 weeks from now, but it could be from a much higher level than we are at now. This is the opportunity I am talking about. This also is another expression of mine when I say "I do not care what the reason is that gets a market to a price level, I want to exploit it".
My producers are happy.... Subscribe now! When you are making money and you have no concrete reason why the market is rallying to price levels that were not thought possible, that is my kind of trade strategy. I knew from the first day I put on a badge that 99 out of 100 traders that watched the impossible happen, they went broke. When options came to the trading floor and I learned strategies that I could be wrong the market and still make money, which is what I want to do. So like now when the corn market is rallying past almost all of my producers and I thought could be reached, they make a windfall profit not the house of pain. I have always said in this service what my approach is and that wants to make trades that get the odds like what a casino does, and not be the player and try to beat the odds.
Tonight the door was opened and the shorts have entered the "house of pain" since corn has hurdled the $5 mark. It sure looks like the funds are content to add to their position buying 4,000 contracts on Thursday. Market has been in extremely overbought conditions for most of the last 2 weeks and that tells me what you already know, relentless buying. Chart looks great above $5 and my next target for the bulls is $5.42. I would think profit taking of some kind will take place between $5 and $5.42 before the September 30th quarterly Grain Stocks report. June corn stocks reportedly fell a jaw dropping 288 million bushels (MB), but 3 months earlier on the March report corn stocks exceeded market guesstimates by 198 MB. I cannot wait to see the January 2011 report (highly important) because the January 2010 report pegged 2009 production 330 MB more than the trade estimates. Implications of feed usage with the dueling reports are another story. I just wanted to remind you why I am confused and have no idea what the actual fundamentals will come in at.
Bottom line for me is I do not mind being right for all the wrong reasons, I just want to make money. I can only be in day trader mode for now using the same risk stops. I prefer to take the sell signals. Long term known risk (put) option strategies are underwater, and for now look to remain that way. I do not mind when trades do not work, I have parameters that make it just another trade that did not work, but the risk of not having a plan that allows for the possibility of a significant drawdown, then you open the door and one day you will let a trade lose more money than you were willing to make if you were right. A loss of more than thought possible can happen (except known risk option strategies) because of an event causing a gap and loss of more than your stop price on the opening. On the other hand you can be right the market and willing to take a profit but the market opened at a much better price than your exit order because of a gap open and make more than expected.
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Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve risk. In no event should the content of this be construed as an express or implied promise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
Cattle lower off COF/CORN; Hogs Higher, New contract high Feb
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