Daily Grain Market Update (6.15.18)
Jun 15, 2018
Yesterday’s Close: December corn futures finished yesterday’s session down 11 ¾ cents, trading in a range of 11 ½ cents (gap lower). Funds were estimated sellers of 30,000 contracts on the day.
Fundamentals: The market has officially erased all its gains for the year as funds continue to liquidate their long position on the back of favorable growing conditions and global trade concerns. Just two weeks ago, the weekly Commitment of Traders report showed funds long roughly 180,000 futures, we estimate that that has shrank to a dismal 14,000 contracts. To pin this nearly 50 cent drop on a fundamental catalyst would be a fools errand, this is forced liquidation or panic/margin call selling, what we refer to as the “get me out” orders and it has fed on itself. If you think the market cannot go lower because it’s oversold, pull up a chart of June/July 2016.
Technicals: The chart has been and remains a technical graveyard with prices cutting through should be support levels like a warm knife through butter. Prices are now testing the bottom end of the range from November, December, and January, below this pocket is the August 2016 lows of 376 ¼ (contract lows). The RSI (relative strength index is at 28.5, the third lowest reading ever for the December 18 contract. A short covering rally is likely but trying to catch this falling knife has been proved to be a costly mistake.
Resistance: 387 ¾**, 397 ½-399 ¼****, 404 ½-405 ½***
Support: 376 ¼-379 ¼****, 360 ½-364 ¼**
Yesterday’s Close: November soybean futures finished yesterday’s session down 9 ¾ cents, trading in a range of 13 ½ cents. Funds were estimated sellers of 7,000 contracts on the day.
Fundamentals: The anticipation of retaliatory soybean tariffs from China to the tune of 25% has led to two straight weeks of long liquidation from the funds. Throw in some ideal growing conditions and you have yourself a perfect storm. Two weeks ago, funds held a stable net long position of over 100,000 contracts, we now estimate them to be net short 5,000 contracts after yesterday’s session. We expect to hear news from the White House today on trade but may not hear from China until the markets are closed, this could keep the pressure on prices today and make for a very interesting open come Sunday night.
Technicals: The two-week selloff in soybeans has put prices at their lowest level for this time of year since 2007. The technical damage has far exceeded any expectations, this will likely keep volatility around as we head into option expiration next week. The RSI or relative strength index is currently at 20.84, the lowest level for the November 2018 contract. At some point we will get a sharp relief rally but so the only thing picking bottoms has yielded is stinky fingers. A lot of technicals are out the window now that this has turned into an emotional trade.
Resistance: 946 ½-950***, 967 ½-974****, 983 ¾-989 ¼**
Support: 935-939 ½***, 921 ¾-923 ½****
Yesterday’s Close: July wheat futures finished the session down 15 ¼ cents, trading in a range of 18 ¾ cents. Funds were estimated sellers of 6,000 contracts for the day.
Fundamentals: Wheat had been doing a good job holding its own against corn and beans but has fallen victim to spill over pressure over the last two sessions and again this morning. Export sales yesterday morning came in at 302,349 metric tons, this was within the range of expectations from 150,000-450,000 metric tons. Winter wheat harvest continues to roll on and that has not offered enough of a bullish catalyst to help support the market. Looking abroad, potential yield damaging heat in the Black Sea region and Australia is the silver lining for bulls.
Technicals: A head and shoulders formation that we have been keeping an eye on is starting to play out. The market has broken below the technically and psychologically significant $5.00 handle which leaves the door open for a run towards 477 ¾-482 ¾, this pocket represents a key retracement from the 13 month range and the 200 day moving average. A break and close below here opens the door to 460.
Resistance: 502 ¾-508 ¼***, 523***, 537-538 ½***
Support: 477 ¾-482 ¾***, 459-462****
Sign up for a free trial of 1 or all 5 of our daily Blue Line Express commodity reports!
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.