Weekend Update (Grains & Livestock 7.22.18)
Jul 22, 2018
We will be on RFD-TV tomorrow at 9:45am cst, be sure to tune in!
Corn: December corn futures finished Friday’s session up 3 ½ cents, extending gains for the week to 16 ½ cents. Friday’s Commitment of Traders report showed that funds sold 25,021 futures from July 10th-July 17th, expanding their net short position to 165,965.
Quick Take: We have always been big believers that the bottom is a process and not a point. We started to see that process develop which led us to change our bias from neutral to bullish in Tuesday morning’s report. Though we believe there is more upside potential here, we were active in helping clients who got long, tighten things up into the weekend. See tomorrow’s Grain Express for the complete technical outlook.
Soybeans: November soybean futures finished Friday’s session up 3 ¾ cents, extending gains for the week to 31 ½ cents. Friday’s Commitment of Traders report showed that funds sold 8,556 futures from July 10th-July 17th, increasing their net short position to 72,009.
Quick Take: As with corn, we shifted our bias from neutral to bullish in Tuesday morning’s report as our indicators started to shift. Prior to last week, soybeans hadn’t closed in positive territory for two consecutive sessions since the end of May; last week we saw 5 consecutive positive closes. We remain optimistic on prices but understand there is lot of technical damage to repair so we are tempering the expectations. There was a headline at 5am Friday morning from President Trump, stating that he is “ready to go” with the extra $500 billion in tariffs on China. The market sold off 10 cents in a short period, but regained ground to hold positive territory through the session. The fact that the market was able to shrug that off is a positive sign. See tomorrow’s Grain Express for the complete technical outlook.
Wheat: September wheat futures finished Friday’s session up 12 ½ cents, extending gains for the week to 18 ½ cents. Friday’sCommitment of Traders report showed that funds bought 1,832 futures contracts from July 10th-July 17th, putting them in positive territory by 566 contracts.
Quick Take: The wheat market has been technically sound, relative to corn and beans. Prices remain in the years range which makes it easier to define, support, resistance, and risk. We remain bearish the market but cautioned in Tuesday mornings report that another test of resistance could open the door for a rally towards 516 ¼, a level we would feel much more comfortable selling against. See tomorrow’s Grain Express for the complete technical outlook.
Live Cattle: August live cattle futures finished Friday’s session near unchanged, finishing the week up 4.25. Friday’s Commitment of Traders report showed funds bought 779 futures from July 10th-17th, a slight increase of their net long position which now stands at 33,956 futures.
Quick Take: Friday’s Cattle on Feed report couldn’t have come in more in line. On-Feed: 104%, Placed: 101%, Marketed: 101%. There were reports of 113 cash trade late Friday. In last weekend’s update, we gave the nod to the bulls and that proved to be the right call. Though they remain in technical control, the market is due for a pull back off of technical resistance. We have worked with clients in reducing long exposure in August and putting some short exposure on in December.
Feeder Cattle: August feeder cattle finished Friday’s session down 1.00, shrinking gains for the week to 2.725. Friday’s Commitment of Traders report showed funds sold 1,059 contracts from July 10th-17th, putting their net long position down to just 929 futures.
Quick Take: The chart continues to look constructive as we approach the 156 target we mentioned in last weekend’s report. If you have been able to be long, this market for some time, 155 is 156, be proactive, not greedy. The RSI isn’t in “overbought” territory, but it is near the high end of its range. A failure to advance above resistance could lead to long liquidation back towards 150, a level holding more than just psychological significance.
Lean Hogs: August lean hogs finished Friday’s session down .80 cents, expanding losses for the week to 3.75. Friday’s Commitment of Traders report showed funds bought 1,230 futures from July 10th-17th, shrinking their net short position to 5,750.
Quick Take: We have been very adamant over the past two weeks about sitting on the sidelines. There is no need to be a hero and try to catch the falling knife, there are plenty of other opportunities out there. If you want to play to the long side, consider using call options where your risk is defined to the premium paid.
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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