Late last night I posted a comment where I thought the beans might fall out of bed today, and test the 985 level. We did exactly that, and have now bounced 8 cents off that low and are currently at 993 1/2, down 7 1/2 cents on the day. Just last week we were at 1070, so we have broken almost a buck. I still like the 975 support as a place to step in and get long, but you have to have tight stops below to protect against a real flush down to the 955 area.
A lot of traders are banking on Jan fund buying. If for some reason, that buying doesn’t show up, there could be a world of pain for speculative longs caught the wrong way.
The major factor influencing these grains continues to be the dollar index. Today we have seen another fresh 3 month high at 78.45 in the cash dollar. This may be a case where conventional wisdom rewards traders. Now everyone and their brothers is touting a bounce in the dollar to the 81 level. That fact alone should give skeptical traders pause. When was the last time people made good profits following the herd? So for that reason, I’d be a cautious bull with this dollar. For the trade to really work, we have to have a correction to squeeze out weak longs. If we get a good break, I think that will be the best strategy.
Corn is holding up better, again, as it is benefiting from the spread trade. We continue to have corn being bought against new short selling in the beans and wheat. At some point, that spread is going to push to far, however, and as a trader you will be able to benefit from those spreads being wound out the other way. For now, though, I would stay away from trying to fade that spread.
Why?
For two reasons, 1) we still may have issues when we find out how damaged the corn crop was due to this years delayed harvest, which could set us up for a spike in corn, no matter what the dollar is doing. The second 2) is the fact that if South America really does have perfect growing weather and a record crop, the fundamentals will push down demand for our US beans. If the two of these factors combine, you could have a much bigger move in the long corn/short bean spread.
For the day so far Jan beans opened at 1003, posted a low high at 1005, fell to a fresh low at 985 /!2 and is currently at 992, -7 cents for the day.
March corn opened at 400, posted a high at 402, fell to a low at 393 1/2 and is currently sitting at 395, -5 cents.
March wheat opened at 521, posted a high at 523, fell to a low at 516 1/2 and is now at 517 1/2, – 2 cents.
In the metals, both gold and silver are lower on the day, with the pressure from the dollar’s new high.
Feb gold opened at 1092.70, posted an early high at 1098.20 and then melted to a low at 1075.20, down 17.5, currently at 1078.50. On the charts, we are back to our
October support base area, between 1070 and 1040. Time will tell if this is going to be our resting place for a while, or if we have further work to do below the 1050 level. I am sure 1050 will be a big level to attract trade, mostly because its a nice round number that investors, both bull and bear, will direct focus.
Feb Silver opened at 17.075 posted an early high at 17.13 before falling to 16.845.
Feb silver is currently sitting on its low, 16.845, down 18.4 For now, it looks like gold will lead the way.
Crude oil is also lower with the higher dollar today, crude oil is also lower.
Feb crude is -8.4 at 72.88. The high for the day is 74.02 and the low is 72.72.
There is support for crude at the 69, and again at the 66/67 level on the daily charts.
Good Trading
