We had a very quiet summer trading the grain markets. One early short trade in the wheat did not make this summer’s sell off exceptionally profitable to our trading. Further compounding things was the fact that the slow grind of the summer’s sell-off was simply too orderly to create enough volatility to establish a position pre-reports. The recent harvest rally appears to be changing the action’s stance.
COT Data
The harvests are being completed without issue and this has shown up directly in the Commitment of Traders reports. Corn, wheat, oats and soybeans have all seen persistent commercial selling as these markets have tried to find a bottom. It’s our take that based on the degree of commercial selling; there are still quite a lot of unhedged crops out there. No one questions whether this will be record harvest. The real question is simply, “How big?” We’ve reached the race to the bottom among those who’ve got crops left to sell. The next leg of the sell-off will begin the pricing and acreage strategies for the 2015 growing season.
Trade Set Up
The trade set-up on this soybean chart shows the commercial traders selling more than 45,000 contracts over the last few weeks. The combination of commercial momentum turning negative due to their selling and the market’s recent rally pushing prices up through the overbought level of our short-term market momentum indicator has set us up for a classic Commitment of Traders sell signal. Friday’s reversal generated the swing high. Friday’s reversal also triggered the short sale by reversing below the overbought threshold.
Bottom Line
We’ll take a shot selling soybeans near these levels and use Friday’s high of $10.0875 as our protective stop point. The way this market has been trading, it may good to be on the short side for a while.
