Weekend Ag Update (Grains & Livestock 9.16.18)
Sep 16, 2018
Last Week’s Close: December corn futures finished Friday’s session up 1 cent, narrowly trimming the losses for the week to 16 cents. Futures traded in a range of 20 ¼ cent range f or the week. Friday’s Commitment of Traders report showed that funds sold 3,353 futures through September 11th, expanding their net short position to 83,892 futures.
Quick Take: We finally got new news on the wires last week and it was exactly what the bear camp needed to continue sitting comfortably with their net short position. We have been bearish on the market but are turning our bias to neutral for the time being. With the USDA report behind us, our attention will turn back to money flow and technical. 350 is an obvious battle ground area for the bulls and the bears going into next weeks trade. The bulls need to see relief off of this psychologically significant level to encourage a round of short covering. Check out tomorrow mornings Grain Express for the full technical breakdown.
Chart Structure: Bearish
Last Week’s Close: November soybean futures finished Friday’s session down 2 ¾ cents, extending losses for the week to 14 ½ cents. Futures traded in a 30-cent range on the week. Friday’s Commitment of Traders report showed funds sold 9,096 futures through September 11th, expanding their net short position to 78,895.
Quick Take: The bears continue to be in clear control, but there may be light at the end of the tunnel and an opportunity for the bull camp in the very near term. The market was pricing in an ultra-bearish USDA report on Tuesday and Wednesday morning, what we got was more of a neutral report. In this situation, we view a neutral report as being friendly to the market. The ace in the hole continues to be trade with China. Last week we saw headlines from D.C. that we want to continue negotiations with China, sure this isn’t ground breaking news but it’s a step in the right direction. We would not be surprised to see a headline with dates of a meeting to follow, this will inevitably provide a short covering pop. A near term opportunity for the bull camp and a longer-term opportunity for the bears to sell into. From the risk/reward stance, we like giving the buy-side a chance hears. This is not a trade to get married to, as the longer term technicals/fundamentals will keep a lid on any significant rally. Check out tomorrow morning’s Grain Express for the full technical breakdown.
Chart Structure: Bearish
Last Week’s Close: December wheat futures finished Friday’s session up 14 ¾ cents, trimming losses for the week to just 1 ¼ cents. Futures traded in a 37 ½ cent range for the week. Friday’s Commitment of Traders report showed funds sold 24,422 futures through September 11th, trimming their net long position to just 11,575.
Quick Take: Being bearish on wheat over the last month is something we have been very clear on. With wheat prices retreating over a dollar in that time frame we shifted our tone and actually turned our bias to Bullish Thursday. In our weekly “2 Minute Drill” on Thursday we said: Shorts, this is where you cover. If you want to be long this market, this is where you buy. We noted significant support from 490-497 presenting a great opportunity for a short-term relief rally. We got that relief Friday; how far can it extend is TBD. Check out tomorrow morning’s Grain Express for the full technical breakdown.
Chart Structure: Bearish
Last Week’s Close: October live cattle finished Friday’s session limit up (3.00), extending gains for the week to 3.75. Futures traded in a 4.675 range for the week. Friday’s Commitment of Traders report showed funds sold 4,209 futures through September 11th, trimming their net long position to 54,110 futures.
Quick Take: In last Tuesday’s Livestock Roundup we stated: “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.”. That bigger move came the next day and it was a breakout to the upside. This move was a technical breakout on big volume, confirming the move. The anticipation of higher cash helped spark the technical breakout, we saw that higher cash come in Friday afternoon with reports of 111. The bulls are in the driver’s seat as we look to establish a new trading range.
Chart Structure: Bullish
Last Week’s Close: October feeder cattle finished Friday’s session up 3.575, extending gains for the week to 6.075. Futures traded in a 8.00 range for the week. Friday’s Commitment of Traders report showed funds bought 996 futures through September 11th, putting them net long 55 contracts.
Quick Take: October feeder cattle are officially in uncharted territory, posting new contract highs in a breakout move Friday. This move higher puts the RSI in overbought territory for the first time in this contracts life, that’s not to say we cannot see a continuation higher. Previous resistance now becomes first support, that comes in from 155.375-156.00. The bulls are in clear control until we start seeing consecutive closes back below this pocket.
Chart Structure: Bullish
Last Week’s Close: October lean hogs finished Friday’s session up .60, extending gains for the week to .65. Futures traded in a 3.225 range for the week, presenting opportunities for both the bulls and the bears. Friday’s Commitment of Traders report showed funds bought 5,078 futures, extending their net long position to 18,158.
Quick Take: We have been relatively neutral on front month futures, equating the technical levels to a blindfolded dart player. We have been working with clients to establish a longer-term long position in the deffereds, going out to December and beyond. We like being long futures but have been using call options as well. Options are a great way to get good exposure with limited risk, giving you the ability to sit through the intraday/weekly swings. Long futures with put options would be another strategy to consider if you like the long side. We have seen 18 cases of swine fever and we only expect this to expand, a bigger outbreak would likely lead to a breakout in prices. Contact us to discuss strategies in more detail.
Chart Structure: Neutral
If you have any questions or would like to discuss the markets in more depth, please do not hesitate to call or email.
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