The word was out that the index funds were coming for the corn and beans at the first of the year. The only problem with that scenario was a little item called the ending 2009 crop report. The American farmer, even with vomitoxin, and 1/2 BB bushels unharvested under the snow produced a record 13.1BB crop. The speculators who came in long were screaming “Where’s Beeks” today, as March Corn fell the limit of 30 cents shortly after the opening and stayed locke limit all day, finally ending the day with over 90,000 in the offer pool. CH already opened up tonight as of this writing, another ten cents down. Now we have to see if the 380 level holds,as we have been in this trading range between 380 and 425 for about 3 1/2 months. It will probably take a few more days of digestion to figure out exactly where the price levels will be in corn, as we rotate down in search of decent support.
The Jan Soybeans led us down before this number, posting its high on Monday the 4th, and really never looking back. March soybeans should test the 960 level on the charts this week, most likely tomorrow. There is good support at 960, 920 and then 900. The beans look surprisingly OK on the charts, and we will have to see how those levels hold before really changing opinion. On the weekly charts, beans look cautiously bullish, since the March 09 lows below 820. While yesterday’s gap lower is negative, I have yet to see a gap like that which isn’t eventually filled. Bottom line, we have more pressure coming on these prices with a big Brazilian crop, but for now, I wouldn’t be running bearish quite yet. Is there a possibility we have another 50 cents to go down in beans? Yes, but I’d hold off buying my 600 puts just yet.
In the wheat, it had probably the most neutral numbers, with spring wheat plantings lower, off-set by large world ending stocks. We will have to see how the winter wheat comes through these temps, as it will be harvested in the spring, after being planted this fall. For now on the charts, we must see if the 515 to 505 band of support holds. Our rally from Sept at 460 up to the recent highs trading above 6 bucks in November still looks impressive on the charts. As odd as it may seem, today’s sell off may have been necessary to punish the longs into puking. If enough longs bail, it could be the technical house cleaning necessary for the rally up to re generate momentum. Until the 505 level is severely violated, the intermediate term trend is still neutral to cautiously bullish, while the short term trend is bearish.
One thing is for sure, we look to be getting back to some volatile trade. That should at least give plenty of opportunity for agile traders to catch some good moves, as long as they keep their stops tight when they are wrong.
On a final note, I am going to make a prediction now that at some point in the next 3 to 6 weeks, these large gap lower formations on the daily charts will be back filled. Nature hates a vacuum, and once the support levels are finally reached over the next week or so, at some point, we will have reason for a bullish short covering or a bullish story which will eventually result in filling these gaps. I may be wrong, that’s a given, but my feeling is that in these volatile markets, one or two limit down days just create upside targets for short-covering rallies.
Good Trading
