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Last Weeks Close: March corn futures finished Fridays trade just 1 ½ cents lower, trading in a range of 4 ½ cents on the day. Funds were estimated sellers of 13,000 contracts (larger volume due to USDA report). For the week March corn futures finished the week down 4 cents, trading in a range of 6 cents. Fridays Commitment of Trader’s report showed funds have a net short position of 222,516 futures and options. Keep in mind that the CoT data is compiled, and funds have likely exceeded their previous record short of 230,556 futures and options.
Fundamentals: Last week’s USDA report had a bearish tilt to it but managed to stabilize relatively well. Quarterly stocks came in at 12.516 billion bushels and ending stocks at 2.437 billion bushels, both of which were above the average estimate. Yield and total production was also increased. The market has found stable ground in the Monday night/Tuesday morning trade as weekend rains were disappointing in parts of Brazil and Argentina.
Technicals: March corn futures made new lows following the release of Fridays USDA report but managed to close above technical support which we have outlined as 345-346 ½ for some time now. Some of that momentum has carried over into the early trade here Tuesday morning. Though we have been range bound for the better part of the last 5 months, the bears have the edge as lower highs and lower lows have been the trend. If we see a break and close below 345, we would expect to see a continuation towards 334-335 ¼. The only silver lining for the bulls is that the funds could spark a rally from short covering. If you’ve been banking on this for a while you’ve been disappointed. The funds previous record short position was reduced by 70k contracts and the market only rallied roughly 4 cents off of contract lows. If funds start reducing, it doesn’t mean the flip. The trend is your friend, and right now that is sideways. We continue to feel that there is opportunity 2-5 cents on either side of 350 until we get a breakout or breakdown; not the most exciting trade but you have to take advantage of the market you have not the one you want. First technical resistance comes in at 353, this represents the 50-day moving average. A very simple indicator but one we have not closed above since July.
Resistance: 353-355***, 359 ¼-359 ½***, 367-369 ¼****
Support: 345-346 ½**, 334-335 ¼***, 323-325 ¼**
Last Weeks Close: March soybean futures finished Fridays session up 13 ½ cents, trading in a range of 18 ¼ cents; funds were estimated buyers of 11,000 contracts on the session. For the week, March soybean futures finished the week down 7 ¼ cents, trading in a range of 27 cents. Fridays Commitment of Traders report showed that funds have a net short position of 92,835 futures and options, this is their 5th largest short position on record and the most since June when we bottomed. Keep in mind that the CoT data is compiled through Tuesday.
Fundamentals: Last week’s USDA report was moderately friendly with quarterly stocks coming in at 3.157 billion bushels, this vs the average analyst estimate of 3.181 billion bushels. Ending stocks came in at 470 million bushels, this vs the average analyst estimates of 472 million bushels. Production and yields were also lowered slightly. Some of the strength in the overnight and early morning trade is coming from follow through USDA buying along with disappointing weather in South America over the long weekend. Drier conditions persist in areas of Argentina and Brazil. If rain makes its way back into the forecast, expect that premium to come out of the market.
Technicals: The chart has been ugly, there’s no way to sugar coat that, but we have continued to suggest there is value at these levels. We know that funds have a rather large net short position, it often seems funds don’t hold that large of a short position in beans as opposed to corn and wheat. We recommended using cheap call options last week and to start looking at futures from 950-952 ¼. Fridays report could be the spark that gets the market going in the right direction. If we see a close back above 971 ¼, we expect to see additional momentum press prices towards our next resistance pocket from 986-986 ½. This very narrow pocket contains the 50 and 100 day moving average, along with the 50% Fibonacci retracement (middle of the range) from the June lows to the July highs. If the market fails to hold Fridays rally in the first half of the week, we expect to see 937. So often market participants only plan for an exit if the market goes their way, you must also prepare an exit for if they don’t.
Resistance: 971 ¾**, 979**, 986-988 ¼***, 999-1004**
Support: 950-952 ¼***, 937 ½***, 922 ¼****
Last Weeks Close: March wheat futures closed 13 ¼ cents lower on Friday, trading in a range of 17 ¼ cents. Funds were estimated to have been sellers of 10,500 contracts on the day. Expanded ranges and increased volumes were on the back of the USDA report. For the week, wheat finished down 10 ½ cents, trading in a range of 17 ¼ cents. Fridays Commitment of Traders report showed funds short 129,000 contracts, this was an increase of 1,000 contracts; keep in mind that this data is compiled through Tuesday and is likely much larger now.
Fundamentals: Wheat futures took a hit on Friday and are continuing their slide in the early morning trade as Fridays USDA report confirms the continued bearish bias from traders. Quarterly stocks came in at 1.874 billion bushels, above the average analyst estimate of 1.849 billion bushels. Ending stocks came in at .989 billion bushels, above the average analyst estimate of .959 billion bushels. Winter wheat seedlings came in at 32.608 million acres, vs estimates of 31.107 million acres. Ample global supplies and dismal demand continues to be the story that is keeping a lid on any significant rally.
Technicals: Wheat futures failed to get above our first resistance pocket this week from 434-437 ½. The bearish report opened the door to our three star support that comes in from 416 ½-420 ¾. A close below here opens the door to contract lows at 410 ½ and a possible test to the $3 handle. If the bulls are able to hold support, perhaps we consolidate; but this is a market we have been very adamant about selling on rallies. We continue to believe that is the case until we get a new fundamental catalyst to change the technical backdrop.
Resistance: 425 ¼**, 435-437 ½**, 443-448 ¼ ***
Support: 416 ½-420 ¾***, 410 ½**, 399-402 ¾****
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