Morning Comments - Full Report - Acting like a tired bull
Mar 21, 2014
Fundamentals – The wheat market appeared to have provided us with the first indication of exhaustion yesterday as after pressing into the highest levels traded since last summer in the spot futures, prices turned back down to post a lower close. While this was not a slap in the face kind of reversal, any time you fail from a new high, we need to sit up and take notice.
Part of the reasoning for the reversal yesterday stemmed from stories that Brazil could be shifting over to the Black sea to obtain their wheat needs. This advance has moved the US into an uncompetitive situation for many. Granted, part of the advance has been a reaction to the Russian/Ukraine/Crimea situation and to a large extent that appears to no longer be a headline topic. The west has issued sanctions against Russia, which I am sure has Putin terrified but seeing that for now at least, they are not making any additional "incursions" to protect Russian speaking citizens and there have been few disruptions in grain business activity, markets are feeling a little less anxious.
Potential rains in the south and west and anticipation of the March 31st report will probably set the tone for much of next week.
Technical – May wheat reached up and pushed through the October 23rd reaction high by just 1 cent yesterday and then turned lower for the close. While technically not a "hook" or "key" reversal, it is another sign of exhaustion and we are moving extremely close to rolling the intermediate daily indicators into a sell. If that happens it will be the first time since they turned higher back at the beginning of February and the first time that we will have turned lower from an overbought position since October. I have cycle dates head on the 25th and the 31st and there is a possibility that we could chop sideways through that period.
Fundamentals – As a whole, the corn market appears to be pushed and pulled by the other markets and continues to chop within same range it has for the past couple weeks now. It would appear that we are at a point in time where corn is in between much meaningful news. CIF values have been backing down with the river situation improving and farmers have been willing sellers on this advance, so there is product in the pipeline. Argentine farmers are making headway with harvest but are only estimated to be 15% complete at this point. That said, they should be presenting increasing competition in the weeks ahead. While there is some concern about the lateness of the onset of spring it is too early to build much excitement and of course, the USDA reports are still over a week away. All told, we have not had much that has been able to push values much higher or lower.
I continue to feel that this market is a bit top heavy at this point in time and should be in line for a correction lower. That said, there is more than enough risk and uncertainly ahead of us and I do not believe we have seen the last of the bull for this year.
Technical – With the break yesterday and pressure overnight May corn pressed down against key support but so far this morning we have been able to hold and bounce away from the danger zone. The lowest point that we have traded over the past two weeks was 4.73 ¼ but it would appear that the line in the sand is really the 4.75 ½ /4.76 ½ level. A close below that point should confirm a reaction high. My short-term oscillator is struggling but still close to the oversold zone which could offer room for a little bounce next week but intermediate indicators point lower. I continue to believe we have room to retrace down into the 4.60 to 4.50 zone into early April. I have cycle dates lining up for the 24th and the 27th.
Fundamentals – While the bean market still held minor gains in the front months yesterday, we had surrendered the big strength and this in face of positive export sales again. While the bulls may not be ready to completely give up the ship here, with China continuing to try and sell beans back into the market and their domestic markets headed south, it is becoming increasingly difficult to defend the story. Add to this, increasing supplies from South America and it makes one wonder how we have held this well.
Granted, there remain a number of questions on the domestic front in regard to the amount of beans we actually have but it will take time to find adequate answers. Some could come via the Grain Stocks report on the 31st but I suspect the week that we post a negative sales figure, bulls will be running for the exits.
Technical – While we still lack a confirmation, the action and lineup in the bean market yesterday has all the makings of a peak. May futures failed just 3 ½ cents shy of the early March high and while we did not close lower, we have seen pretty decent pressure overnight into the morning trade. The daily oscillator is rolling over and a close back below 14.00 should turn the tide back out. If correct, we should see prices track lower at least into the 31st and possibly the 11th of April.
Soybean Oil – May bean oil reached into lower lows yesterday and pushed below the 41-cent level before bouncing. Prices are back under pressure again this morning and we could be set for a push right down to a 61.8% retracement of 40.16. Short-term we are oversold and on top of a minor cycle dates which could present an opportunity for a bounce into the 31st.
Soybean Meal – May meal pushed to within a dollar of the February 27th reaction high and did hold gains for the close, but are under pressure this morning. With this selling, we have posted the first lower low in the past seven sessions and have the daily oscillator turning down. Closes below 459 should confirm the turn and open the door for a swing down through the end of the month.
Cotton – The cotton market has just zigged and zagged this week and as a whole, we have remained above last Friday’s close but that said, we have failed to push into higher highs. Short-term indicators are reaching the oversold zone and could set us for another push higher next week. Cycle dates ahead on the 26th and then the 7th of April.
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