Pent up buying hit across the grains today. I hope for the sake of the bulls that this wasn’t the whole wad of business from the funds. If it is, this January could look suspiciously like Jan 09,when we made our highs early in January and then hit the skids for the rest of the first quarter. Does any one else remember that action last year? Just a caveat that while the charts look like they are basing, and perhaps are even starting to turn bullish on an intermediate term, anything can happen. The fact remains that the funds are the tail that wags the dog. If the funds don’t want to play, the market could turn bearish very quickly. And we have seen volatility like never before. Right now, I’d say I’d be cautiously bullish, but being long with judicious sell stops below to protect the risk of an unexpected wash out.
That caveat being said, the charts looked bullish after today’s action. Granted we made new highs in beans and corn on the opening, fell apart sharply through the lunch-time break and then rallied late in the day. March corn posted a new six month high today at 425. However, we were unable to settle above that mark. A nice settlement above 427 would open that door for a test of the old 480 highs. Bulls be on the look out for that move.
Wheat, the commodity with the least bullish fundamentals, had the most bullish chart action today, with a gap higher opening. WH posted its low on the open rallied strongly and never had the afternoon swoon that hit corn and beans. WH posted a 1 month high at 561, with the next resistance level of 575-580 looming as a target above.
March beans opened up 18 cents higher at 10.67 posted a high at 10.74 3/4, sucked in the new longs and then proceeded to melt like an icecrem cone on the fourth of July. It finally stopped bleeding at 1050, before flipping into chop mode with an 8 cent rally into the close to settle at 1058 3/4. New crop soybeans… they slice, they dice, like the Ginsu knife!
Ok, so what does it mean? Well, the outside markets were all sharply higher as well. Crude oil raced up above the 81 dollar level, gold and silver continued their rally, and the stock market opened higher and stayed bid all day long. So it would have been better to see the grains settle sharply higher as well. However, overall, the action supported a cautiously bullish outlook. But I mean very cautious. We have seen this before, where anticipated fund re balancing never showed up. If the funds are done, and don’t come to extend new longs, the grains could be looking at def con 4 over the next week. Nothing breaks harder than a market the funds have turned their backs on.
We all know what it means if the funds have more bullets, but as a farmer or a hedger, you have to be careful if someone pulls the rug out of these higher prices.
Tomorrow is Tuesday. There is always potential for turn-around Tuesday. After the gap open in the wheat today, I would not be surprised to see an attempt to run and fill it. Staying power on the downside remains to be seen. Again, it depends on how hungry the funds are to own more beans and corn.
Good Trading
