Blue Line Express (Morning Grains)
Oct 25, 2017
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If you missed yesterdays closing grain commentary, you can watch the 3 minute clip below.
Session Close: December corn futures finished yesterday’s session in the green by 1 ¾ cents, trading in a 3 ½ cent range. Funds were estimated buyers of 8,000 contracts on the day.
Fundamentals: Slow harvest in some key areas has led to short covering which is lending support to the market as we enter the mid-way point of this week’s trade. The slow harvest could start to pick up steam if weather cooperates and provides an opportunity to producers. We saw in Mondays harvest update from the USDA that soybean harvest is essentially back on pace and in some cases close to done. As producers finish beans, attention will turn to the back half of corn harvest. Outside of the US weather, market participants will also want to keep a close eye on weather in South America as they continue to plant. Weather has been looking more favorable for Brazil which could potentially keep a lid on a significant short covering rally from the funds; who have added to their shorts for ten weeks straight.
Technicals: On the technical side of things, the market looks stable and that is it. The bulls managed to hold off contract lows at the start of the week and that helped to encourage funds to cover a portion of their position, buying an estimated 23,000 contracts over the last two sessions. The short covering has resurrected the market back to the top end of the range. Key technical resistance today comes in at 353 ½, this will be an important level to watch on a closing basis. This represents the 50-day moving average, an indicator that we have not seen the market close above since July. If the bulls can achieve that today, we could see additional buying come in and press prices towards 360-362. This pocket represents a key Fibonacci retracement level derived from the July highs and September lows, it also represents the September highs
Resistance: 350-353 ¾**, 360-362***, 372-375**
Support: 342 ½-344 ¼**, 334-335 ½***
Session Close: November soybeans were the laggard for the second straight day, finishing the day 7 ¼ cents lower while trading in a 10 ¼ cent range. Funds were estimated sellers of 7,000 contracts.
Fundamentals: The rapid increase in harvest activity over the last week has put some pressure on the soybean market yesterday. Weather over the next 7-10 days seem to be open which should provide an opportunity for producers to get a little closer to completing harvest. Weather in South America also looks friendly for the time being, this will be something to keep an eye on over the coming months as they finish planting and the crop gets into the developmental stages. There is not much new news other than that. We do have export sales out tomorrow morning (per usual), this will be something to keep an eye on. Exports have been strong recently, and the bulls will want to see that trend continue.
Technicals: The market broke down below our key support pocket from 975 ¼-977 in the afternoon, but managed to stage a rally into the close to finish the day within the support pocket. Yesterdays close above support has invited some buyers into the market in the overnight and early morning session; we will want to see how the floor opens for more confirmation (volume confirms price). If the market can continue to close above support, we would not be surprised to see funds extend their net long position and press prices towards 993 ½. A break below opens the door for long liquidation down to 960 ½-966. This pocket contains the 50-day moving average, 100 day moving average, trendline support from the august lows, and a key Fibonacci retracement level. The bulls will remain in control until this pocket is violated.
Resistance: 993 ½**, 999 ½-1003 ¼**, 1014****
Support: 975 ¼-977***, 960 ½-966**, 960 ½-962****, 939 ¾**
Session Close: December wheat futures closed 2 ½ cents higher on the session, trading in a 5 ¾ cent range on the day. Funds were estimated buyers of 1,500 contracts.
Fundamentals: There is not much to report on the fundamental side of the wheat market. Weather will be watched closely as producers continue to get winter wheat in the ground. The forecast over the next week to week and a half look favorable could accelerate the last ¼ of planting. Mondays report showed we are 75% planted which was in line with expectations. Kansas and Oklahoma were the big laggards; Kansas -19% behind the five-year average and Oklahoma 13% behind the five-year average. Export sales have been relatively weak recently, that will be watched closely tomorrow morning.
Technicals: The market has managed to close higher for the second straight day, the longest winning streak in over a month! The inability to break down below technical support and contract lows on Monday led to short covering which has elevated the market back near the top end of the range. 440 ½ is the line in the sand today, this represents the 50-day moving average. Although it is a simple indicator, it has been significant with the market failing to trade above it since July. Until the bulls achieve a conviction close above, the bears will remain in control. A failure to breakout will likely lead to extended pressure and a retest of the 422 ½.
Resistance:440 ½-442 ¾***, 462 ¾**, 478-479****
Support: 422 ½****, 415 ¼**, 399-402 ¾****
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