Christopher Walken has a funny skit on Saturday Night Live where they re-create the studio recording of Blue Oyster Cult’s “Don’t Fear the Reaper” late 70’s classic. In it, his famous line is “I need more Cowbell, go ahead and really explore the space”.
Well today as the Dollar index posted a new 2 month high, that’s exactly what these grains did. They explored the space and the depths of the recent one month trading range, with a bungee jump ride down to new lows.
In any event, my last post was pretty accurate as to where the SF would find support.
SF Tested the 1020 level, set off the stops below and spiked down to 1017, and then head faked its way back to settle at 1024. 53 cents from yesterday’s highs to today’s lows. I still argue that the large trading funds with computer algorithms are written to eventually stop out every one. Yesterday they stopped out those who were bearish above the 1067 level, and today they took the opportunity to go get all the weak longs by JUST taking out the lows enough to stop out every one, with a 4 cent move below the previous major low at 1021.
If you had been a buyer at 1021, and had your stops set too tight, the programs got you too. You can thank program trading for that. You got your fill instantaneously, but you also have gotten less and less liquidity, especially during a holiday week like this.
For the day we ended -34 cents lower in SF at 1024, close to the 1025 strike price.
We saw similar bloodletting in the Wheat. This morning I looked at the charts and called support at the 510 level in WH. The low was 514 1/2, with a bounce into the close at 520. The WH posted it high of the trading day on the opening at 529, for a 25 cent trading range. A 30+ cent move from yesterday’s high above 542 down to today’s low at 514 1/2. Once again, the programs have gone and cleared out all of the shorts one day, followed by all of the longs the next day.
In the Corn, despite the bullish export numbers, we had similar action. CH I had thought this morning would find support at the 390 level. The low was 393 1/2. CH posted a high on the opening at 404 3/4, had an 11 cent melt-down to its lows and then bounced only 2 cents into the close to settle at 395 1/2 down 14 3/4 cents.
Honestly, it looked like today’s lows might be worth stepping in and getting long against. Of course, judicious use of sell stops below the market must be used by traders to avoid the down drafts such as today.
All in all, I still think its a crappy time of the year to trade. For all my years trading, December was usually one of my worst months, and a lot of other traders feel similarly. The thin ness in the markets opens the doors for large funds to really push the prices around.
Tomorrow’s trade will most likely see a small range, with a bounce higher or unchanged. Christmas break starts for 90 percent of all the school kids, and with one week left in the year, your best bet is to watch, but not participate.
