Yesterday’s Close: December corn futures finished yesterday’s session down 13 cents, trading in a range of 15 ½ cents. Funds were estimated sellers of 47,000 contracts on the day.
Fundamentals: Yesterday’s USDA report showed a bin busting yield number of 181.3, well above what many analysts were suggesting and well above last year’s record of 176.6. Illinois is staring down an average yield of 214bpa, Iowa is looking at 206, and Nebraska at 198. Total production is pegged at 14.827 billion bushels, analysts were expecting 14.529. Ending stocks came in at 1.774 billion bushels, bigger than what the trade was expecting. Yesterday’s weekly ethanol report came in at 1.020 million barrels per day, down sharply from the 1.087 we saw in the previous week.
Technicals: Well we finally got the new news which gave us new direction (other than sideways). The breakdown below the recent range opened the door for that accelerated selling pressure we were looking for, taking us down to our 4-star support pocket which we have had defined as 349-352 ¼. If we see the market close below this pocket it will put prices in uncharted territory which makes finding the next support a little more difficult. Using the continuous chart, we see the next meaningful support pocket coming in from 336 ¼-338 ¾. If the bulls can defend the double bottom near 350 to wrap up the week, perhaps we could see that encourage some short covering. If the market cannot breakdown on a bearish report that could be looked at as a silver lining.
Yesterday’s Close: November soybean futures finished yesterday’s session up 9 cents, trading in a range of 23 ¾ cents. Funds were estimated buyers of 9,000 contracts on the day.
Fundamentals: Yesterday’s USDA report pegged the U.S. soybean yield at 52.8 bushels per acre, production came in at 4.693 billion bushels. Ending stocks came in at 395 million bushels. This was a relatively neutral report in our mind. We touched on this briefly in yesterday’s Grain Express; the market had been overwhelmingly bearish the previous two days which set the bar extremely low, this type of price action makes a bearish report neutral and a neutral report friendly. Also helping support prices was the headlines that basically said: The U.S. and China may resume talks sometime. We would not be surprised to see a set date in the next 1-2 weeks for those talks, the release of that would provide another pop. From the risk reward perspective, we don’t mind giving the long side a shot here for the very near term.
Technicals: The market broke down below technical support yesterday but reclaimed that lost ground to finish the day in positive territory, forming what is extremely close to a triple bottom. If the market can see continued strength to round out the week and close above 850-853, we would expect to see a meaningful round of short covering. A failure to round out the week on a positive note will keep the funds comfortable with their short position into the weekend. As mentioned in the fundamental section, we actually like giving the long side a chance here.
Yesterday’s Close: December wheat futures finished yesterday’s session down 11 ½ cents, trading in a range of 29 cents. Funds were estimated sellers of 11,000 contracts on the day.
Fundamentals: Ending stocks came in at 935 million bushels, slightly below the average analyst estimate of 941 million bushels. Wheat experienced some spill over pressure from the corn market as funds looked to hit the exits in their net long wheat position. We would imagine that will be a lot closer to neutral right now.
Technicals: Despite being over a dollar off of last months highs, the market is not yet in oversold territory. Our target of 499-501 ¼ has been achieved and we have been working with clients to reduce/flatten short exposure here. For those who want to be long, we like working orders from 490-497. The market is not yet in oversold conditions but a move towards this next pocket would take us there, that coupled with technical support in July offers a good/risk reward opportunity.
Resistance: 518 ½-523 ½**, 540 ¾-541 ¾****
Support: 499-501 ¼**, 490***, 468 ¼****
LEV8: 2.30 at 111.60, trading in a range of 2.425
LEZ8: 1.775 at 115.70, trading in a range of 2.00
GFV8: 2.55 at 155.00, trading in a range of 2.85
GFX8: 2.375 at 154.80, trading in a range of 2.675
Cattle Commentary: In yesterday’s Livestock Roundup we said: “The market is starting to form a wedge, posting higher lows and lower highs, this typically leads to a bigger directional move. Whether that be a breakout, or a breakdown has yet to be determined, but it is likely we will see a bigger move within the next week. A breakout of the wedge takes us to 111.45-111.525.”. The breakout of the wedge is exactly what we got today, thanks to positive developments on the trade front and ideas that cash would firm up this week. Today’s Fed Cattle Exchange had no sales, but bids of 108.00 and 108.25 were passed on.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 204.79 / 197.27
Change from prior day: / (1.28) / (1.04)
Choice/Select spread: / 7.52
Live Cattle (October)
October live cattle broke out of the wedge and achieved our target which we outlined in yesterday’s report as 111.45-111.525. Volume was strong which could lead to some follow through in the early morning trade. The next line in the sand comes in from 112.15-112.50, this would be the highest price point since March. Recognizing that this is the top end of a multi-month range, bullish traders should consider reducing long exposure. For bearish traders, this is a good risk/reward point to dip another toe in the water with a relatively tight leash. If the bulls cannot hold follow through momentum tomorrow, expect long liquidation for the remainder of the week.
October feeder cattle broke out of our resistance pocket from 153.30-153.45, this opened the door for a run at our next pocket which we have had defined as 155.375-156.00. This pocket represents the highs from July and contract highs. A move above here puts us in uncharted territory, the next psychological barrier would be 160. If the bulls fail to feed off of today’s momentum in tomorrows session we could see some long liquidation and profit taking, take us into the weekend. Previous resistance now becomes first support, that comes in from 153.30-153.45.
October lean hogs continue to trade erratically as the market tries to find some sort of equilibrium. October futures finished the session up 1.20 at 55.675, trading in a range of 2.40. Deferreds managed to hold ground with October, December and February finished up 1.225 and 1.075 respectively. Not much has changed on our front. We continue to hunker down and establish a longer-term position using a combination of futures and options, this gives us the ability to sit through the inraday/intraweek volatility and helps us avoid trading on emotion.
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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.