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Friday Night - February 27th
Soybeans - Another trend day higher even as reports of
improved weather in Brazil surfaced. Throughout the day we made
new highs and we still have no reason to sell anything. We
day traded again today with the market giving solid buy signals after we
opened lower and found absolutely no sellers.
Corn - We are long here and want to add on breaks.
Is there ever going to be one? Yep, and when it does, we will be
hard pressed to pull the trigger. Just wait and see how hard it's
going to be to catch this one where the risk of entry is low.
Rice - Sucker surge yesterday and today??? If so,
I'm one of them. It won't be the first time either.
Yesterday's high was our signal to jump right back into this one using
July options if possible and futures if needed. When the market
opened unchanged with 532 contracts delivered, I told myself, "get the
heck back long because this isn't right." We should have opened 5
to 8 lower and moved down to support, instead we opened unchanged and
sat there for 15 minutes and then we sold off 6 cents when the grains
opened a little lower. Once they turned up there was nothing for
the rice to but work higher and then it exploded to up 35 cents on the
day and didn't finish that badly either.
We took a lot of profit out of this market yesterday and today got
back in as yesterday's highs were being taken out. Near term, this
market could do anything but long term, there is little doubt, it is
going higher. We want to buy more calls on breaks and next week is
going to be very interesting.
Thursday Night - February 26th
Soybeans - There is no sell signal here yet and the
action today is not conclusive but it is suspect. The sell signal
we put on the site last night was in March not May. The stop for
May is now just below today's low at $9.10. Tomorrow's deliveries
will be watched closely but as for me, I will continue to day trade.
Right now, my guess is it will be from the short side tomorrow.
Corn - Long term this is my horse. I'll buy
breaks and maybe we will get one here soon if beans can give up a
little.
Rice - Sucker surge today?? More than likely.
Today's action is negative to the market. We sold off hard early
then rallied and everyone who had missed the run up came running in to
buy the break. We then went up on the day with a 32 cent rally only to
turn and head lower into the close with a KEY REVERSAL down on
heavy volume. This
sets up a correction that would coincide with a sell off in beans if it
occurs.
We took a lot off the table today exiting almost 80% of our position
in calls and selling calls against the rest of the position when the
market settled back to unchanged after making new highs for the move.
We also exited futures as well when the market paused after going up on
the day. Right now it looks like stepping aside is the right
thing but let's remember, this market is still long term bullish.
Corrections should be bought and we will not be out of the market that
long. We will be re-entering in July options when we do. Remember, we got out of long positions and did not short the
market. I might be dumb but I'm not stupid.
One more point. Since the break in rice started back in
January, we have sold off over $1.30 and now rallied back to within 20
cents of contract highs. During that time, the USDA has raised
carry-over by 2 million cwts so it only makes sense for the market to
pause here against the highs to see if the USDA will start to lower that
carry over number or increase it. Yes, I said increase it.
It is still along way into November when they have to put out the
carryover number which we have already pointed out will be lower than 13
million cwts.
Dow - Sell signal is up to 10510 but we need a close
under there to indicate a correction.
Gold - Yes we are back short gold @ $3.97. Stop
is at $410.
Dollar - Looks like a bottom. We got buy signals
on the close today. We are trading the FOREX and bought the dollar
by selling the EURO/Dollar contract.
Wednesday Night - February 25th
Soybeans - As I pointed out yesterday, markets do not
usually make two trend days in a row and today the market consolidated.
The lack of sellers on the break remains friendly so tomorrow's place
for a stop to exit longs moves up to today's close plus a little cushion
or $9.15. Not much else to say but that there is no sign of a top
on the chart or in the technicals we use. Risk remains to seller
and we continue to day trade.
Corn - Buy breaks. The risk remains to the seller
here but a hard correction in Soybeans could bring hefty selling here as
well. We will buy a major break as long term we remain bullish.
Rice - I said last night I thought we would correct
today but if we didn't, there is something going on. I think there
is something going on. Brazil. Costa Rice or Iraq may be in for US
rice and if its Brazil or Iraq it will be a huge surprise. As we
have been saying for months, "this market has been advertising something
it doesn't have to sell."
Tuesday - February 24th (Forgot to change the date earlier)
Soybeans - Dang, I love this market!!! Last night
we pointed out the market was set up for a down day and that's what we
got...on the open anyway. After that, there was nothing for sale
and then market finished sharply higher. What a great day trade we
got as the market moved from down 9 cents to up on the day and that was
the signal to buy and hold on for a run. The news is not that
friendly but the sellers wanted no part of this day and that makes for
more exciting trades ahead. By the way, want to see a trend day?
Go to the chart and ask for a 30 minute view. THIS WAS A TREND
DAY!!! Tomorrow will probably NOT be a trend day.
Odds favor some consolidation. Also, news that rains may come into
Brazil's driest areas later this week will trim some of the bulls sails.
I'll wait for a major correction before doing anything else but day
trading.
Corn - This one remains the weak sister but I don't
think for long. The fundamentals remain very bullish here and any
break will see good buying. In fact, a good break would be
welcomed. We remain long calls here and they are working but ever
so grudgingly. A lot of traders think this one is overbought but
if May can close over $3.00, we may see some hefty gains coming in this
market as buy hedgers will run for protection and corn farmers set on
their hands. Near term we could see a pull back but we will be
buying it. Can you imagine if we see a weather scare coming???
Rice - WOW!!! This is rice for you. Trading
50 minutes before the close at only up 7 cents running higher to up 50
cents (limit up) in just 10 minutes only to sell off 31 cents from the
high to up 19 cents with 15 minutes left in the session and then to go
back to up 39 cents at the closing and finishing 37 1/2 higher. As
we have been saying, you do not want to be short. The problem is
some of you want to be longer and now are looking at catching the
runaway train. Tomorrow the market will tell us a lot. My
guess it won't be higher this time tomorrow night, UNLESS there is major
news about a rice sale or something else we don't know. For
instance, if Thailand and Vietnam are having problems with delivery of
rice to Iraq, the US would be next in line; however, there is no sign of
that yet.
A good lesson can be learned here today. Rice is not know for a
deep book in the pit. That means the sellers and buyers in the
market do not not put in large orders outside of the trading range for
the filling broker to hold. No, they wait for the market to move
and then come in and sell or buy once it has traveled to the limit.
One good signal is always buy the market the first time it goes limit
down or sell the market the first time it goes limit up during a day.
There is good chance the buyers and sellers are on the way. If
it's the second time during the day to hit the limit, don't you dare
take the opposite position. In fact, if it goes back to limit up,
try and buy it, or sell it if it's limit down for a second time the same
day. In any case, have deep pockets but it is amazing how well
this works.
Dow - A close under 10505 tomorrow is a major sell
signal.
Hogs- Closed in middle of range, sell off's should be
bought right now. Market is still set to challenge highs.
Gold - On the higher open today we exited all short
positions and are on the sidelines. Dang, I hate this market!!!
I'm still going to short it at $3.97 if we get it.
Monday Night - February 23rd
Soybeans - Good move higher into 15 year highs on
weather concerns in Brazil but the move today puts the market in a "must
have more bullish news" condition. We day traded from the long
side today as the market setup for a higher move after finding good
support on the early morning break from the open. The market was
able to make new highs for the day but only one time which does not
qualify for a trend day. We may see a correction but I don't see a
top yet so here is the plan. If your in this one, your stop should
be at $8.63 which is a long way below current levels and that is going to
be a tough one to stomach if we get a break that far. If your not
in this one, you need to buy breaks as the risk of entry at this level
is too high. Profit taking signals are at $9.38 for tomorrow which
I doubt will be reached. Even the 60 minute system has a buy
signal down at $8.72. The best place to buy is at $8.92 which
closes the gap and place a stop at $8.84. It is a limited risk
trade and the best one I can see to get long with. You can see now why we are day trading this
one. Tomorrow may give us the chance to trade from the short side
but again, I'll wait for the market to set up the day and then be out
again tomorrow night no matter which way it goes.
Corn - Everything you read talks about the market being
over bought. Well it is but then again it isn't. Percent
bullish is only 69% and we have seen good selling all the way up.
Today we saw a good push at one time during the day but the market
closed in the mid-range and against Friday's highs which you cannot say
about soybeans. The close there is 15 cents higher than the high
of the day (that is where the resistance won on Friday). With this
said, I expect the beans to sell off a some point triggering the corn to
correct and to give us another chance to own the market. Long
term, I like the fundamentals here more than beans especially with
soybeans at this high of price. Even so, a 15 to 20 cent break is
not out of the question here if beans roll over. $2.84 is major
support tomorrow with a short signal at $2.78 in the May. The
re-buy is at $2.90. I like buying half of a new position tomorrow
at $2.90 with the other half at $2.87. I'll stop only the new
position at $2.84 or faster if I can get a good sell signal. Don't
get me wrong, I'm not bearish and I'm not even sure we can get this kind
of a sell off right now. I'm long and want to be longer on breaks,
I'm just trying to get more positions on in corn before the middle of
March.
Rice - A very quiet day with low volume. Going
into the close they couldn't even get March to trade and May was offered
on the close. Even so, the market was higher on the day and keeps
trudging higher. We want to own it on breaks and wouldn't be
surprised to see a correction if the beans correct as well. Long
term, we remain friendly as the world prices show continued strength.
Recently, the Iraqi tender for 70,000 MT of rice was given to Viet
Nam. There has been an uproar from US rice farmers about this as
US money is being paid to buy Viet Nam rice. Actually, it makes
sense since Viet Nam's price is lower so more rice can be bought per
dollar spent. If the US pushed American Rice on the tender, it
would look bad for US policy and that is something the administration
doesn't want right now. In the long term, what needs to happen is
the opening of GSM credits to Iraq. That requires the US to
forgive the current Iraqi debt which will happen this year (I hope). Then,
the credits can roll into Iraq and US rice can be purchased since GSM
will require the purchase of American rice. When that happens,
look for US rice prices to move even higher. Near term, the market
could dip with the grains but the writing is on the wall and any demand
will be met with a "you got to be kidding" sound from the bears in the
market.
Dow - No sign of major selling here today. The
market has tested support and held, we may now look at over head
resistance and see what is there.
Hogs - Today's close is very strong and should setup an
advance to test contract highs.
Thursday Night - February 19th
Soybeans- New highs today on news that Brazil's harvest
is going to be lower according to Brazilian government reports.
This was the news needed to move into 7-year highs and set us up for
$9.00 beans. It was great day trade today and that is how I will
continue to play the game. When we have a down draft, it will be a
good one but it could be a while before it comes along. Major
resistance tomorrow is at $8.88 in the May with support at $8.50 and
then $8.32.
Corn - While beans made new highs, corn got up to major
resistance and stopped. The early morning selling dried up real
fast once beans started higher. In Washington, the outlook forum
said they expect a record yield of 10.4 billion from this next years
crop. That will take record yields and another 3 million acres and
no weather problems. It's a long time until combines roll and
there is no room for problems. It is true we don't lose a crop in
February, but then we don't make one either. I still like this one
long term and there will be a break that we can buy to own more.
It has been years since we have had a setup like this. July at
$3.50? I think the odds are 50-50 which means good odds of $3.25.
Rice - A "V" bottom?? Yep, it looks very likely.
While we could see a down draft here near term to check support, the
fundamentals are what they are. There is no room for mistakes and
my guess is the USDA has made a couple. When the end comes here,
it will be incredibly exciting. We remain long calls and might
roll them up if we can get a chance to do it reasonably. We have
some old $8.20 calls in March that are now in the money. Tomorrow
we have to decide what to do with them by 12:00 noon. If we are
over $8.40 we will hang on for sure, but if we are under $8.30 we will
exit them and look for more in May. If they are between $8.30 and
$8.40, we'll flip a coin. Actually, it will depend on how they
have traded for the day and gotten there.
Long term, the 49 day moving average could become a catalyst for
technical buying. That level is at 8.56 tomorrow and
the market closed at $8.52 1/2 tonight. I'd say we were there.
On our system, support is at $8.42 and then $8.20 and resistance is
at $8.89. Option expiration could add to some of the volatility
tomorrow.
Cotton - We pointed out in our weekly comments that we
were getting warning signals of an end to this push down in Cotton.
The up swing today confirms the down move has been halted. The buy
signal is up at 69.40 tomorrow so the market has some room to rally and
still be firmly in the down trend. A move over 72 cents is a major
buy signal and one I doubt happens for a while.
Wednesday Night - February 18th
Soybeans - The battle continues and I continue to day
trade it. There is not much out there in news but the sell off
today after being higher and against contract highs may again indicate
we are not able to march higher right now. I like this market over
the next few months but a down draft could occur. I know there are a lot of farmers out there bullish but it's not the producer who will
forge the direction in this market, it's the funds and commercials.
Be careful!!!
Corn - We have been cautioning that the market could
see some consolidation here near term but long term it is a buy on
breaks. Today's break of 4 cents was blamed on Wheat but my guess
is that the funds took some money off of the table and commercials could
afford to back up a little. News reports of more flu deaths in
Thailand are not helping either. This could be enough to give us
another break and we will buy it. We recently sold $3.10 calls
against long calls and would love to buy them in on a good break.
Right now we are long the call spread, and outright calls in July.
I look for the March S&D reports to be bullish and want to be on the
long side for them. Near term we may see a correction but longer
term I see this one higher so I say again, buy breaks.
Rice - Today's action is a solid buy signal on the
daily after crossing the gap area in May. The 49 day moving
average is dead ahead and we may see some resistance there but just like
corn, long term this market is going to head higher. On our
shorter term system, it is warning of an impending correction based on
momentum; however, on the way down, this signal flashed for about 5 days
before the bottom came so while I won't be surprised to see a short term
top here (a few days), I won't be surprised if that short term top isn't
a few days away as well.
World Market was up 18 cents yesterday and there are more signs of
higher prices in the world markets. In fact, if you look at the
WASDE reports, the current prices overseas represent a breakout to the
upside which means seller are backing up faster than buyers are coming
after it. This leads to buyers becoming more aggressive over time
and that should mean prices increase at a more rapid rate over the near
term. For the futures, this bode well. We are long calls
outright and want to buy a break here. As we have said before,
rice normally makes a "W" bottom or a slant "W" which right not would
indicate at least a 30 cent pull back; HOWEVER, as I have said before,
this doesn't have to happen. It just usually does. We will
buy a pull back when it happens.
We remain long term bullish and want to buy on breaks that are at
lower risk entry points than today. If the market moves higher the
next few days, we may sell our lower strike calls and buy higher ones
thereby taking some profit off of the table but still in the market in
case it wants to run for awhile longer. $8.75 is major resistance
for the May. If we pop through that level, look out, something has
changed big time.
Thursday Night - February 12th
Soybeans - We had one of those days in the beans as the
day trading system pulled out over 15 cents on the short side in about
10 minutes. The action is without a doubt bearish and the news may
get worse near term. The basis levels across the country are
weakening and it is going to be hard for the beans to mount a
significant rally given soft cash prices. On the 30 minute chart,
we have a
head and shoulders (chart at this link) formation which
is forecasting a move to $7.90 in the next few trading sessions, which
just happens to be right at the lows from January 31st. We
continue to day trade it and will wait for more technical action before
taking a longer term position. The risk is to the buyer right now
on the short term. Also, notice our comments from February 5th,
that low was taken out today and even though the market came back, if we
take out $8.10 tomorrow, we may have an intermediate top on our hands
and there are a lot of Fund longs in this one who will rush to the
exits.
Corn - We commented on the 3rd that the corn/bean
spread should start to narrow. Nothing has changed in our opinion
of that. The question is, how far can corn sell off if beans are
in a short term down draft? $2.75 in March is the first stopping
place and then after that, $2.68. There are minor support zones
but I think any sell off here is a gift. Even so, it could be
awhile before the market can start moving solidly higher. One
thing is for sure, the volatility will remain high in this market making
us look good one day and terrible the next. Long term, I still
like the market; however, we sold out of the money 'Calls' today hoping
we're wrong to do it, but the hook reversal down from Tuesday with a
bullish report, the hook reversal down today and the beans looking
weaker than they have in weeks, makes it a prudent action. Don't
be like 80% of all farmers who don't want to make money, they just want
to be right!!! Of course, none of those 80% read this page!!!
Rice - Good export numbers this morning led to a higher
day early but it could hold up with the other grains getting pounded.
Check this link for our current situation on exports.
Rice Exports
I have added the Long Grain situation tonight. I do expect a
slower market near term as the dust settles but then again, we may not
slow at all given the volatility in the other grains. The buy
signal is now at $8.22 in May down from $8.27 for today. Support
is still at $7.71 and then at $7.51. Today's action was bearish
with a spike and today's high will be resistance on the charts.
Here is the link again to the carryover page I promised.
Carryover
Reliability As shown here, the USDA has had
its trouble with these numbers and if they are off, odds favor they are
too high. Long term we like the market but near term, the risk is
to the buyer. We remain in May calls and want to roll them down if
we can get a break.
Thursday Morning the 12th -
A quick update...Corn should open strong this morning with the export
numbers. Rice has good numbers too. Here is a link to see
where we are right now in the rice export picture.
Rice Exports
Wednesday Night - February 11th
Soybeans - The reversal down yesterday remains in
control and today's close, 8 cents off of the highs and only 4 cents off
of the lows, is not going to change anything. Volatility is going
to remain in this market for a while and maybe several months. I
like day trading it for now.
Corn - The sell signal is down at $2.80 for tomorrow
with the action today bullish. I like to call days like today
trend days as the market made new highs a couple of times during the day
and then closed at the extreme end of its daily range. In this
case, higher. We are poised to go through yesterday's high and
head for $3.00 in the March contract. We are long the July
2.70-3.00 call spread as well as 2.40 and 2.70 calls out right and will
be looking to move them up very soon. By moving up, we take some
profit off the table when risk levels are increasing. Right now
that risk level is at 69% which is not that high so we have room to run
with a small risk on the buyer right now.
Rice - Good move higher today on heavy volume of
spreads. The March/May spreading activity was heavy with 600-700
spreads. Tomorrow we get another sales report which everyone
assumes will be very small. I expect them to be right given the
current river movement. Cash prices have pulled back in the south
waiting for demand. We could see this lull last for several weeks
depending on demand.
Looking at the report from yesterday in more detail, we can figure
out very quickly that we are now in a situation of following the milled
rice market more than rough. The shift of 5.5 million cwt to
milled exports from rough and dropping rough another 2.5 million cwt puts
us in a position of looking to the mills to report sales and rice
shipments. They can delay that kind of news for several weeks and
then report sales right before shipping. This means time delays on
the amount of rice sold. There is nothing wrong with that its just
the way it has always been. For some reason, in this day of
electronic information, the USDA has not sped up the requirement to
report sales faster. Why? No clue but its not because they
can't.
So what is going to happen in the next USDA report and the ones after
that until July? It might be interesting to see how the February
report compared to final numbers last year. This is how the USDA
supply and demand reports came in for long grain rice ending stocks last
year, month by month.
In Million Hundred Weights
Month
2003 Ending Stocks
Feb.
20.9
Mar.
19.4
Apr.
17.6
May
14.6
June
14.6
July
11.8
Isn't this a stellar record . Yep, your eyes are not deceiving
you one bit. Isn't it interesting, that after farmers had sold
70%to 80% of their rice, the ending stocks fell almost 50% in long
grain. Who owned the rice then? Do I need to say??? I
don't know about you but I think this is tragic. If we assume the
USDA is as accurate in this area as they were last year, we will end up
with about 6 million cwt of long grain. Of course, farmers who are
now selling every grain will miss out on the run that would occur if
that happened. You might be interested to know, that the USDA did
come back and raise the ending stocks final number to 15 million cwt, IN
SEPTEMBER WHEN FARMERS WERE TRYING TO SELL THEIR NEW CROP. Yep,
right on time, just when farmers were getting prices for new crop, the
USDA did it again raising the ending stocks by 4 million cwt. At
the same time they raised the new crop carryover by over 5 million cwt.
If I didn't know better, I'd say this was right on schedule for the
millers to buy another crop as low as possible. And yes it's true,
some people say I'm too suspicious. Can't imagine why, can you?
If we look at the last 5 years, the USDA has increased long grain
carryover only 1 time between February and August and that was in 1998.
But if you then look at the final number, it was DOWN 6 million cwt. by
November. (I will put this all in a chart tomorrow and post it
again.) Since 1998, every year the long grain stocks have been
lower by an average of 1.75 million cwt not including last year when
they missed it by 9.1 million cwt. In 1998, the difference was 2
million cwt but was an increase just before they dropped it a whapping 8
million cwt. into the November report. So, if we look at the
numbers and just take a shot at their accuracy, they are off by an
average of well over 2 million cwt. and even more every year.
Bottom line is this, we are not through with this market yet.
I'm not forecasting the USDA will lower carryover below 10 million, I am
just pointing out they don't have a very good record of being very
accurate based on the information they get, gather or just plain make up, but for
some reason, the millers are now in the position of owning most of the
supply of rough rice and on rallies they will be the winners. Ah,
the rice market!!! Truth is, things
have certainly changed since November but only on who owns the crop.
Get ready for a strange conclusion to
this story as it will be the industry versus the industry from here on
out.
The buy signal tomorrow is at $8.27 in the May contract. A move
under $7.91 sets up a test of this move's low at $7.51. $7.56 will
be major support if we have a break tomorrow. In September when we
received a bearish report, the rice market broke 14 cents and then
turned the next day to rally back over the pre-report price. After
that rally, the market broke and made new lows into November. This
market is acting similar so be careful. Long term, the risk is to
the seller in this market. Near term, the risk is to anyone
trading it!!!
(By the way, want to check my math? Here is the link, go
research it for yourself.
Click here. The long grain
S&D report is found from pages 9 -12 depending on the month.)
Cattle - We may get a buy signal here soon. 74.15
in April is the swing point and the risk is growing for the shorts.
We have several other flags signaling a possible low is being put in
place. Now don't buy it yet, but get ready. At 75 cents, we
will take a shot with a close stop. Options are too expensive to
buy unless you buy an option spread.
Dollar - New low today with the advance of the stock
market and Alan's remarks. This should help grains advance if we
can move into new lows and get another down leg going. I have some
work showing a move to 77 on the dollar index. Odds are not that
great for that price but wouldn't that be something.
Tuesday Night - February 10th
Soybeans- The report was a little bearish this morning
but the market rallied right off the bell into new highs. Then
came news of another flock of chickens with the flu and that was it.
The market broke over 33 cents before settling down over 14 cents and 7
cents off of its lows. The sell signal is down at $8.13 and the
top formation is once again a possibility. With all of the flu
talk out there, we could see this market shave some of the long
positions the next week or so. I will continue to day trade it.
Corn - The report this morning was bullish but we need
chickens to keep up the demand. If they keep finding this flu in
the flocks we could see a major sell off in the corn as well. Near
term it will remain very volatile and we will remain long in options.
If the market sells off to $2.75 in the March we will add positions and
risk them to $2.68.
Rice - The report was bearish but the market tried to
hold back the selling at the open. I expected a much weaker open
but the market only opened down 2 to 4 cents. Before the day was
over we were down 17 cents and the market closed on its lows. I
sold futures on the open and also bought March puts basically going flat
in the market. I expect rice to do what it always does and that is
check its support and make a double bottom or a slant "W" bottom.
This makes $7.51 extremely important in the March contract. If
that is taken out, there is nothing till $6.90 in the May. Not
that I think it's going that low, it's just the main level of support.
Look for buyers to continue to back up in the short term so near term I
see risk to the owner of rice. If we get a close over $8.06 in
May, I wouldn't be short if I were you.
Let's Talk...The first thing to point out in the report is that the
USDA is stating the obvious. Rough rice exports will not be as
great since Brazil bought 400,000 MT less than we first thought.
They dropped it from 44 to 36 million cwt. since last month. It is
also obvious that the milled market is much better than certain millers
want to admit as they raised the milled from 53 to 58 million cwt. in
the same time period. Could it be that the millers have not
reported all their milled rice sales and in fact the bottom line of
sales will be adjusted again later. Well that would be a surprise
wouldn't it. The last story line has not been written here
and it will be interesting to see how the USDA can balance the books
when all is said and done. Oh I think they will do it but there
could be another surprise or two before this situation is done.
Tuesday Morning - S&D Report
Rice - YOU HAVE GOT TO BE KIDDING!!!
The government has lowered the rice exports by 3 million Cwt. and
increased carryover by 2.5 million cwt. This is a bearish report
and will send shock waves through the market. It is incredible and
right down unbelievable given the fact we have already exported over 74%
(which now jumps to 77%) of what they said we would do for the whole
year which ends August 1st; however, it is the numbers and believe it or
not, the market will trade them. I expect a lower open; however,
some of this may already be priced in. 10-12 lower.
Beans - The report is a little bearish as they
did not lower the carryover but then we are at pipeline minimums
already. Look for market to open a little lower but could rally if
corn picks up more steam. 2-6 lower.
Corn - Report is bullish and market should open
a little higher. Carryover continues to tighten and could easily
allow corn to trade over $3.00 in the May contract. 2-3 higher.
Wheat - Market should open firm here with
carryover dropped. 2-3 higher.
Monday Night February 9th-
Corn and Beans - There is little reason to comment on
what the market should do from here since the report in the morning will
tell the tale. Today the market showed us its concern for supplies
and if that surfaces tomorrow in the report...prices will rise to new
surface levels for sure.
Rice - The report tomorrow had better be right down
bearish for the market to test the recent lows. I look for the
report to be a non-event for rice. I doubt they change a thing but
if there is a surprise, I'd go for a bullish one.
We will have a special morning update
here after the report....
Thursday Night February 5th-
Corn - So much for the bearish tilt? Could be.
There is a saying that I have on a screen saver. It says,
"Do what the market is doing not what you think it should be doing."
I expected $2.68 to be taken out today and the market to move
toward the $2.60-$2.65 level but the beans came out of the shoot with
huge buying and corn after starting lower turned higher on the day and
closed very strong. The key here is the beans. Their action
the next few days will be critical. As we said last night, corn
needs to move over and close above the $2.78 to negate the current
action. If the market sells back down toward $2.68 we will see the
correction I've been talking about. I'm not sure what the market
will do near term but nothing has changed on my long term view. We
remain long and want to be longer if it will break and let us buy it
lower.
Soybeans - Sales were up this morning but doesn't
explain the move today. The floor called it "Technical" buying.
I call it no selling. This could change everything as the market
went through levels of resistance like they were warm butter and we are
now setting right at major resistance at $8.33. If they can get
over the $8.33 level in March with a close, things have changed and the
market is going to stay strong and work through the current topping
action. If, however, the beans sell back off and take out today's
low, this was "technically wrong" buying today. Yesterday I felt
the tilt was down but tonight, the market says differently. I
continue to day trade with no positions over night. For the
record, we did get a daily buy signal on the close today. It is
confirmed with a move over today's high.
Rice - If anyone was thinking rice was being affected
by the other grains, that idea was dispelled today with beans up 27 and
rice down 10 cents. When will it end? Welcome to the
rice market. Tomorrow night, when we get the Commitment of Traders
report, we are going to get a good idea of who is doing what. It
looks like we have new shorts pushing the market down thinking we are
headed back to $6.50 rice.
This morning sales were 45,000 MT so they were not that strong.
Thing is, we need to average only 32,000 MT per week for the next 25
weeks to hit the USDA projection which holds the 11 million Cwt carry
over for Long Grain rice. So, at the present rate of today's
sales, we will go over by 7 million cwt. dropping the carryover to 4
million CWT. which is impossible. Bottom line, export sales should
be slow and next to nothing ahead or we will break the bank on that 10
million cwt pipeline. Remember, that is the carryover for the end
of July and the mills will not get a new supply of rice until September.
Truth is truth and as I said above, look at what the market is doing and
not what we think it should be doing. The technical condition of
the rice market remains bearish but the fundamentals are bullish.
We have our positions in calls waiting for a turn to roll them
down if conditions warrant. This is a good one now to watch
because it is totally irrational. But....it can stay that way
longer than you or I can be financially solvent. Especially the rice
market which can be so dominated by people who are given rice, and don't
have to buy it..
Someone asked me yesterday if some big co-op was to blame for pushing
the market down like this. Don't know but if I find out they are,
I won't hesitate to let you know but then, I guess you already knew I
would do that
didn't you.
Hogs - We said last night that the market was going to
test support. Well if you call that testing support we need to
talk. The market started out strong and never really looked back.
This sets us up to continue toward 62 in the April contract. We
would move up stops to yesterday's lows on Spec long positions. We
have a good profit here and don't want to let it get away from us.
Wednesday Night February 4th -
Corn - The action today coupled with the chart sets us
up to take out the $2.68 support level. If the beans go with it, I
can see a test of the $2.60 level. I would still sell corn at
$2.68 on a stop. A close under that level will set up a move to
the $2.57-$2.62 level. It takes a move over $2.78 to negate this
action. Even so, right now the market has a definite bearish tilt.
Soybeans - March beans held like a rock today but the
selling finally took us to a mid-session close. We made a new high
just before 1 PM but the market sold off instead of using new highs to
make a run. Tomorrow, I will sell beans at $8.01 3/4 if the market
trades through that level in the first 30 minutes of trade. (As I
write this, the night trade is showing unchanged) Otherwise I'd
sell if we take out the low of the day after 30 minutes has passed.
If we push lower and take out $7.90 over the next couple of days, this
market is going to correct nicely. If your long, be prepared to
buy Puts or cover longs for a few weeks. On the other hand, if we
can take out today's high and work higher toward $8.20, I want to buy
March $8.20 Puts. Yes dear, there is only 16 days left but then
I'm looking for a quick correction so I like the cheap price of an at
the money Put. Right now, I'll be surprised if we can rally to
that level.
Rice - Today the market rallied to take out yesterday's
high, nose dived and took out yesterdays low and then rallied back to
close basically unchanged. The last trade of the day was actually
up 1 cent but it was offered there in the curb trade after the close.
So, the settlement was down 1. Now what? The action after
taking out the low was good but nothing to hang our hats on. It
appears that farmers are selling out of fear right now which is one way
to get farmers to sell. Scare them to death. Even so, here
are the facts. As of January 1st we have already exported almost
71% of what the USDA says we will do for the whole year. That
means that after only 5 months we have sold 71% so, over the next 7
months we need to sell about 890,000 Metric Tons. Of that, Japan,
Central America and Mexico will take between 600,000 and 700,000 MT.
That leaves 190-290,000 MT or so. If the US forgives the debt on
Iraq anytime soon, it will allow them to buy using GSM credits and they
could buy a goodly amount of US rice. I have been told, US rice
would be on the top of the list. If Brazil's harvest is not that
good, and some are saying yields will not be up very much, they will
need to buy about the time we start harvesting. So the bottom line
remains, IF, IF, IF, IF...IF!!!
The fundamentals are tight but there is no demand right now.
The technical action is not supportive and we have no real signs of a
low. The market is oversold and could bounce at anytime; however,
we still have some downside risk as some traders are looking at the
$7.50 gap as the target for March. The key thing here is don't
lose your ability to play the game. When the market bounces back
it will be very aggressive. If cash buyers are waiting for a turn
in the market, we could have some built-up demand that enters the market
to help fire a quick pop. A close back over $8.01 is bullish.
At the same time, that level is resistance on a close only basis.
One more point. Many times this market will finish off a bear
move with new selling pushing the market lower instead of longs selling
the market down in order to get out. Today's floor report said
that there were new shorts being put on in the market today and Refco,
the company we use, was the big seller. Makes you think, doesn't
it!!!
Hogs - The chart turned today. Although there was
no reversal we did have an inside bearish setup. The market was
higher earlier in the day but unable to get through resistance at
yesterday's high. The market moved down and through yesterdays
close and then the low. This is not a major sell signal. Right now
it is nothing more than a correction. This is where the market
goes down and sees where the strong buying is at. The first level
should be 58 cents so we will watch how the market handles that price
area. If it continues lower, be ready, the sell signal goes
through 57.55 tomorrow.
Tuesday Night February 3rd -
Corn and Beans - As we said last night, it will take
some major news and price strength to turn the market strong enough to
go into new highs. A bounce near term should be sold in the beans
and over the next several weeks, I expect the spread on corn and beans
to start to narrow. March beans could rally back to $8.28 near
term but $8.33 remains major resistance. A move below $7.90 will
accelerate a sell off. Corn still could trade to the $2.60-$2.65
window but we are long and will use such a pull back to add to
positions. The chart does look worse tonight than I expected so if
you don't want to take the risk, sell corn on a $2.68 1/2 stop.
There is a chance we could break corn all the way back to close the gap
at $2.57.
Rice - Yesterday, the sell off was blamed on weakness
in the Corn and Soybeans. What's the excuse tonight? Corn
and Beans were both higher today but Rice again closed lower.
World Market Price was up 14 cents but that won't help except for a minor
win to the beaten down bulls. While our computer
system does not show the market that oversold, we are along way from the
current buy signal and that usually acts as a kind of speed break.
We were never this far away from the sell signal on the way up which is
to be expected since markets usually fall faster than they go up.
Even so, the rubber band is as tight as I think it can get. I expect a good bounce in the
next few days and as early as tomorrow.
$7.60 is the next support level if today's low is taken out with the
next level after that at $7.40. If the market does bounce,
remember, this market does not like to make "V" bottoms so we could
rally and then sell right back off to today's low. $8.02 is
resistance tomorrow with a buy signal not till $8.45. Long Term we
need some demand to turn this one around and that could be a few months
away.
If you have read the weekly comments from last Saturday, you will
notice we recommended long futures players to buy some cheap March puts
for some protection near term, if you did that, sell them off if the
market falls to $7.65 and then buy a put with a forty cent lower strike
price. In other words, if you bought the $8.00 put, sell it and
buy the $7.60 put. That way you'll take some money off of the
table since a correction here will take those puts to zero in a hurry.
Monday Night February 2nd - Looks like a long winded
comment tonight
Soybeans - We saw this coming but had hoped for a
bounce to sell more. While there could be some bounces in the
market, they will need to be very strong to turn the chart up. You
should not be long here period. We said last Wednesday night that
markets like this go lower than anyone thinks. That will happen
here. I will use bounces to sell for now. This market could
drop 40-50 cents easily; however, I will be looking for a technical
change in market direction since fundamentals remain easily bullish with
just a minor change anywhere in the world. If your long, your wrong.
Buy puts for protection and then use any bounce to get out of futures.
Corn - Here is the question, how low can corn go
following the soybeans down? If I knew that one, I'd be in the
Bahamas but here is my guess, the long corn short bean spread is going
to work big time near term. Look for corn to head toward $2.65 and
possibly $2.60. The Asian bird flu situation remains an unknown
and most people are going to get out of longs just because of the
uncertainty. With that said, do not be long futures or March
calls. I like July options since they have the real potential
given weather, demand and time. I said the other day I wanted to
cover the $3.00 cap on the 2.70-3.00 July call spread but will I didn't
do it due to the severe negative chart in Soybeans right now. I'll
look again if the market gives a reversal but my guess is I'll get my
chance between $2.60 and $2.65 in the March contract (I'm using signals
from March to trade the July contract) so stay tuned.
Rice - (Make sure you have read the comments from last
Saturday)
Well this has gotten right down ridiculous; however, the light at the
end of this tunnel is not an oncoming freight train. Go back to
last Tuesday night when I wrote these words.
"The market can be irrational longer than you can
be financially solvent. That is unless you are a
co-op!!"
I have been warning readers of this site that the wrong people bought
the break last Thursday and Friday. Here is the comments
from Thursday, "The bad news is that the new buyers may sell the
market later to keep it from going a lot higher. I look for the
market to return to the $830-$8.60 level in the next few weeks but with
the bullets the longs have, you know, the ones who want the market to
stay under $9.00, they are firmly in control." They are about
to be the only ones left in the game and when that happens, there it
will be a real shock for them.
It is hard to say who unloaded today but it appears that
the bears are in total control and the bulls are running for any cover
they can find. This normally occurs at MAJOR lows. This
market is not rational but then it doesn't have to be and we knew this
before we began playing. Here is the bottom line. We need
demand. That demand is not showing up in the cash export business
yet and it might be several weeks before it does. I said weeks ago
that I am not a $10.00 March bull but I sure as heck am not a $7.50
bear. We are advertising to sell something we don't have to sell.
If that demand starts to show up, we are going the other way and fast.
I have friends in this market on both sides, some are
bearish and some our bullish. The bears are hanging on to see just
how far it can go and then they tell me they are covering with both
hands as fast as they can. Our bullish friends have, for the most
part, protected themselves from further decay for at least 30 cents or
so. I used this break today to roll down and roll months. So
now, when the low comes, who in the heck is going to sell it. Oh I
forgot there is one group who will sell it, one more time from the quote
above, "That is unless you are a co-op".
If the lower price bring demand back, the shorts in this
market are screwed and screwed big time. The problem is the word
"IF".
Bottom line...Near term support is $7.75, then $7.60
which I have been saying is the worst case scenario but if it is taken
out, $7.40 is the last level of support. My guess is we
are about to turn around and it will be very fast and violent.
One final point. One has to wonder, if the barge
facilities on the river were allowed to be regular for rice deliveries,
would we be in this situation? Barge prices have dropped but not
near what the inland storage facilities have done. Also, the
increased delivery points would help take away some of the dominance of
certain mills who again have a bias toward keeping prices as low as
possible.
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