Blue Line Express (Morning Grains)

Published on: 13:12PM Oct 30, 2017

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CORN (December)

Last week’s close: December corn futures managed to close higher on the week, to the tune of a whopping 4 cents.  Those gains came early in the week on moderate short covering after failing to break down below contract lows.  December futures traded in a 12 ¼ cent range on the week.  Fridays commitment of trader’s report showed that funds increased their net short position from 170,684 to 174,394 (futures & options) contracts. This is the shortest they have been for this time of year since 2013; keep in mind that this data is compiled through Tuesday

Fundamentals: Weather has been friendlier (for some parts) recently which should have given many producers an opportunity to get in the fields and get the crop out of the ground, we should see that reflected in today’s crop progress report.  Corn harvest is estimated to be near 52-55% complete, this would be up from 38% last week but still well behind the five-year average pace of 75%.  Last week’s report showed eight states were 20% or more behind the average pace.  Weather will continue to be monitored closely here in the states, but much of that focus will start to shift towards South America.  Brazil and Argentina will be the key areas of interest.

Technicals:  The market traded in a 12 ¼ cent range last week, testing both technical support and technical resistance.  First resistance comes in just above 352 today, this represents the 50-day moving average.  Although it is a simple indicator we see it as significant.  If the bulls can achieve consecutive closes above, we could see the funds start to buy back some of their large short position.  Until that happens, the bears will remain in control.  First technical support comes in from 342 ½-344 ¼, if the bulls cannot defend this support pocket we could see the market take another leg lower down to 334-335 ½. 

Bias: Bearish

Resistance: 352-355 ¼**, 360-362***, 372-375**

Support: 342 ½-344 ¼**, 334-335 ½***


SOYBEANS (January)

Last week’s close: January soybean futures closed 1 ¼ cents lower last week after trading in 12 ¾ cent range.  Keep in mind that we have moved out to the January contract as November options expired Friday and November futures go off the board this week.  Funds went into the week with a “small” net long position, Fridays commitment of traders report that their net long position got a little smaller.  Funds are now net long 49,246 futures and option contracts, this is down 18,922 from the previous week (68,168).

Fundamentals:  We saw a big jump in last week’s crop progress report as producers closed the gap with their lagging harvest pace.  Analysts are projecting this afternoons report to show soybean harvest near 85% complete, this would be up 15% from the previous week and put us right back on pace with the five-year average.  The major laggards were Nebraska and Iowa, behind by 16% and 20% respectively.  Harvest will continue to be monitored here in the states but as with corn, attention will start to turn towards South American planting and crop development.  The market has been searching for a fundamental catalyst for the next technical move but yet to find it. 

Technicals: January soybeans found good support in the back half of last week’s trade from the 200-day moving average and 50% Fibonacci retracement or the middle of the range from the June lows to the July highs.  That comes in from 982-984 ¾ this morning with additional support coming in just below that from 975 ½-976 ¼, this pocket represents the 50 and 100 day moving average.  We still feel beans have the opportunity to work higher over the coming months, so long as technical support is not violated on a closing basis.  First technical resistance comes in from 999 ¼-1004 ¾, this represents recent resistance as well as a key Fibonacci retracement level.  If the bulls can achieve a lose above this resistance pocket, we could see the funds extend their long position and press prices towards 1021 ½. 

Bias: Bullish

Resistance: 999 ¼-1004 ¾**, 1014**, 1021 ¼****

Support:982-984 ¾**,975 ½-976 ¼***, 968 ¼**


WHEAT (December)

Last week’s close: December wheat futures managed to close 1 cent higher on the week despite closing lower in the final three sessions.  The funds have been short the market for the past several months and Fridays commitment of trader’s report showed that they have extended their short position to their second largest in the last 6 years.  Funds are now short 83,965 futures and options contracts, this compares to the 77,692 we saw in the previous week (an increase of 6,273). 

Fundamentals: The market has been under a lot of pressure over the last month on the back of ample global supplies and a lack of export demand.  On the macro scale, the recent rally in the dollar has spilled over in to price pressure for wheat as well.  This afternoons crop progress report is expected to show winter wheat plantings at 85% complete, this would be up 10% from the previous week.  Last week’s laggards to keep an eye on are Kansas and Oklahoma, they were 19% and 13% behind the five-year average respectively.

Technicals: The market has continued to fail against the 50-day moving average, a technical indicator we have not seen the market close above since July.  We continue to feel the bears will remain in control until the bulls can achieve consecutive closes above it to encourage short covering from the funds.  First technical support comes in at the contract lows of 422 ½, as mentioned over the past few weeks, we expect to see this level give way and open the door for another leg lower.  Despite trading lower 16 of the last 22 sessions, the RSI (relative strength index) is only at 40.  Typically, a reading below 30 represents signs of exhaustion on the sell side. 

Bias: Bearish

Resistance:439 ¼-441***, 462 ¾**, 478-479****

Support: 422 ½****, 415 ¼**, 399-402 ¾****