December corn corrected 38% of its rally from its July 27th low at 375 up to the Aug 5th 10 month hig at 4.39. a 64 cent rally. We broke to our recent low at 415 1/4 and 4.15 1/2. That is a good 38% retracement. Will it hold or will we collapse down to 4.07. Exports have been awesome. The funds are still long 320K contracts. If we can settle above 4.40 CZ, they will pile on and add to their longs, squeezing the commercials. Correspondingly, if we break below the 4.00 level, that should result in a flush lower on liquidation. It wouldn’t be the first time the spec funds got it wrong. Going into the June Acreage report, they were short 250K. After that report they blew out of their shorts and got long.
Press me, and I am still bullish corn. Exports are so strong, the trend is higher. Sitting through 30 cent corrections, however, can give a trader ulcers. That’s why it is important to stay disciplined. Get long, put in a sell stop. Honor that sell stop. If the market rallies, move your stop up and guarantee you protect your profit.
Soybeans, are interesting as well. New crop SX suffered through a 62% retracement from the 10 month high posted at 10.49 on Aug 5th and then again on Aug 16th at 1048 1/2. that rally started on July 2th with a low at 961 1/2. 87.5 cents. 995 was the 62% retracement of that move. Yesterday’s low at 993 1/2 and Tuesday’s low at 993 3/4 held. We should see a bounce higher now, as we head toward the end of the month.
Bottom line, we have to get a rally and settlement above 10.50 in SX to get really bullish.
In the wheat, we have had a pullback for the second time to the 50% retracement of its large 3.85 cent rally from harvest lows (WZ-chicago). I like owning wheat, but on my own terms. When the WSJ and CNBC start squawking about high prices again, that’s a profit taking opportunity.
If we can continue to have higher prices for a protracted time, that will be the best news for the bulls. Higher prices beget higher prices. That is, until they don’t. 🙂
For the Dow Cash, I think its vulnerable to a little bit more of a pullback. Economic news continues to be disappointing. We have support at 9775 area going back to our May and June lows. If the bears get a hold of this and start a choke hold we can easily go down to our July 2nd 13 month low at 9614.
I tend to want to fade popular emotions however. As we go into the Election cycle, we will have the Republicans attacking the economy on a nightly basis in an effort to blame the incumbents. Identical to how the Dems beat the drum of panic and negativity for 2 years prior to the last Presidential election. In general, I’d stand aside, or be looking for panic lows to buy as a fade.
Finally the crude oil position could have played out. We have a potential double bottom here at 70.76 and 70.35, with yesterday’s low at 70.76. 70.35 was our low in may, which is a 1 year low. This actually could be time to step to the sidelines or start building a small long position.
Good Trading.