What's Next for Grains?
Dec 04, 2017
Last weeks close: March corn futures finished Fridays session up 3 ½ cents, this after trading in a range of 4 ¾ cents on the day. Fridays Commitment of Traders report showed the funds bought back 13,703 contracts which puts their net short position at 196,763 contracts.
Fundamentals: Corn futures have firmed up over the past few sessions on the back of some concerns with regards to South American weather and the possible affects on production. Brazils cuts in planted acres could bring their corn production from 108.87 million metric tons in 2016/2017 to 90.52 million metric tons. If we see the La Nina weather patterns play out as some are expecting, we could see that offer additional support to the market. We did see a sale of 130,000 metric tons to unknown last week. The market will need to see exports firm in order to provide more support to the market. Corn could be the beneficiary of a higher soybean and wheat trade today.
Technicals: The market has marched higher over the previous three sessions on the inability to see a breakdown below contract lows. Much of the 10-cent rally is likely more short covering than actual new buying into the market. This recent run higher brings the market right back to the 50-day moving average, an indicator we have not seen the market accel above since July. If the bulls can achieve consecutive closes above, it is very possible that we see additional short covering from the funds. The next significant pocket of resistance doesn’t come in until 369 ¼-370 ½. This pocket represents the top end of the range over the last three months as well as the 100-day moving average.
Resistance: 358-360 ¼****, 369 ¼-370 ½***, 375****
Support: 348 ¾-350**, 334-335 ½***, 323-325 ¼**
Last weeks close: January soybean futures closed Fridays session up 8 ¼, this after trading in an 8 ½ cent range on the session. Fridays Commitment of Traders report showed that funds bought 15,826 contracts last week, this puts their net long at 49,889 contracts.
Fundamentals: There were a lot of gaps on the charts last night across the commodity spectrum and soybeans were one of them. Weather concerns in South America is being crowned as the major catalyst in the early morning trade. We have been talking about the potential dry weather in Argentina being a catalyst to support this market. If we see wet weather come back into the market, we could see that encourage some long liquidation from trades who have enjoyed a nice 20 cent rally in less than two sessions. We have also seen good soybean meal demand from china which also offers support.
Technicals: Last weeks inability to break down below the 50 and 100 day moving average as well as 50% retracement on the year invited buyers back into the market. The gap higher led to short stops being triggered and a run towards 1008 ½. Volume confirms price, so the bulls will want to see confirmation on the floor open. If the bulls can achieve a close above 1004 ¾ today, we could see that extend the rally towards 1021 ½ which is the next target. A failure to breakout could bring the market back lower to fill the gap which comes in at 995 ¾.
Resistance: 999-1004 ¾***, 1014**, 1021 ½****
Support:995 ¾**, 981 ½-986 ¼***, 968 ¼****
Last weeks close: Wheat futures closed Friday up 5 ¾ cents, this after trading in a range of 7 cents on the session. Fridays Commitment of Traders report showed funds extended their net short position to 92,806 contracts, an increase of 11,772 contracts.
Fundamentals: The market is trading higher this morning on concerns that heavy rains in Australia could reduce the quality of their crop. If these concerns dissipate, we would not be surprised to see the premium come out of the market. We continue to see less than stellar exports here in the US which will need to change if the bulls want to achieve a bigger move higher. The market has rallied nearly 20 cents from the recent lows, but the bears remain in control.
Technicals: Significant technical resistance comes in from 445-449 ¾, this pocket represents the recent top end of the range, as well as the 50-day moving average. The 50-day moving average is a very simple indicator, but it is one we have not seen the market close above since July. If we do see a technical breakout, we could see additional short covering propel this market higher. The next significant line in the sand doesn’t come in until 468 ¾. A failure to breakout keeps the bears in control as they have been able to mark lower highs and lower lows over the past several months.
Resistance: 445-449 ¾ ****, 452 ¾**, 468 ¾***
Support: 433 ¾**, 422 ½***, 412 ¾**, 399-402 ¾****
If you’d like to know what we are looking at for any of the other commodity markets, please do not hesitate to reach out. Oliver@BlueLineFutures.com
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