Grain Market Update (fundamentals/technicals/bias)
May 14, 2018
Last Week’s Close: July corn futures finished the week down 9 ¼ cents, this after trading in a range of 11 ¼ cents. Friday’s Commitment of Traders report showed that managed money bought 19,871 futures which puts their net long position at 206,147 futures (likely less in real time).
Fundamentals: Last week’s USDA report gave us new news, but the trade will refocus their attention on weather here in the states as planting continues and the crop starts to develop. This afternoon’s planting progress is expected to come in from 55-60% complete, this would be shy of the 5-year average for this time of year which is 63%. The market’s inability to trade higher last week led to long liquidation from funds which also encouraged producers to become more active in selling (hedging). As mentioned in last weeks report, a pullback would be very much welcomed as a buying opportunity for us (see technicals below). China's Vice Minister will be in Washington this week to discuss trade and we will likely get new news on NAFTA by Wednesday.
Technicals: If you’ve been reading our reports over the last week you know that we have been working with clients to reduce long exposure and in some cases go net short. We have gotten the pullback we were looking for and are starting to change course and put our bias back at outright bullish. First technical support this week comes in from 390 ½-394 ½, this pocket represents a key retracement for the years range, along with the 50-day moving average. We feel that this is a pocket were shorts should consider covering and bulls to consider buying. First resistance for the day comes in at 397 ¼, a conviction close back above here could start to invite buyers back in.
Resistance: 397 ¼**, 407-408 ½***, 425 ¾-426 ½**
Support: 390 ½-394 ½***, 379 ½-383 ½****
Last Week’s Close: July soybeans finished the week down 34 ¼ cents, this after trading in a range of 38 cents. Friday’s Commitment of Traders report showed that managed money sold 55,817 futures from May 1st-May 8th; this shrinks their net long position down to 122,465 futures.
Fundamentals: We expect to see the volatility continue this week with potential news surrounding global trade. We are anticipating new news on NAFTA by Wednesday. On top of that, Chinas Vice Minister will be in Washington to discuss trade with the administration. This afternoons planting progress report is expected to show beans 30-32% planted, this would be ahead of the 5-year average pace of 26%. We will continue to keep an eye on the soybean meal market as it will likely have implications on near term price movements for soybean futures. Last week’s USDA report was relatively friendly, but the inability to hold a rally on bullish news is a bearish sign in our book.
Technicals: The chart started breaking down recently which led us to put our bias at outright bearish after the USDA report on Thursday. The market continued to breakdown Friday, closing below key support which we had listed as 1010 ¾. This will bow become first resistance for the week. The pocket from 1010 ¾-1016 represents a key retracement on the years range, the 200-day moving average, and previously important price points. The next line in the sand on the support side is drawn from 988 ¾-994 ¾. This pocket represents a key retracement along with the lows from the original “tariff talk” scare on April 4th. The market has been posting lower highs and lower lows for a month which keeps the bears in control for the time being.
Resistance: 1010 ¾-1016***, 1026 ½-1027 ¾***, 1040-1042 ½**
Support: 988 ¾-994 ¾****, 965 ¼-969 ½***
Last Week’s Close: July wheat futures finished the week down 26 ¾ cents, this after trading in a range of 27 cents for the week. Friday’s Commitment of Traders report showed that managed money were net buyers of 31,525 futures from May 1st-May 8th which puts their net short position at just 18,940 futures (likely larger in real time).
Fundamentals: Since the crop tour earlier in the month, the market has struggled to find additional bullish news which has led to long liquidation and outright selling. Sure, we have a less than impressive crop on our hands, but that is part of the reason we are well of the lows of the year. This afternoons planting progress report is expected to show spring wheat at 50% planted, this would be well behind the 5-year average pace of 75%. If the market cannot find new bullish news, we would expect the pressure to continue in the first half of the week (see technicals below).
Technicals: The market closed in our support pocket to end the week, we had outlined that as 495-500 ¾. If the bulls can find buyers on the floor open perhaps we see the market try and stabilize here, but a failure to get that will likely encourage additional pressure in the market. There is not a lot below this pocket until 477 ½-482 ¾ which is a significant pocket in our mind. This represents a key retracement on the years range, along with the 100 and 200 day moving average. This would be the area for shorts to consider reducing and bulls to start buying for a relief rally at the very least.
Resistance: 502 ¾***, 523-524**, 543 ½-545***
Support: 495-500 ¾**, 477 ½-482 ¾****
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