BrokersEDGE Futures research newsletter 11-20-17 Grains, Corn, Wheat, Soybean futures market

CORN (December)

Last Weeks close: December corn futures traded fractionally lower in last week’s trade thank to Fridays rally where funds were estimated to have been buyers of 19,000 contracts, putting their net for the week at -6,500. Fridays commitment of trader’s report showed funds have a new record short position of 230,556. The previous record was in March of 2016 where that had accumulated 229,176 shorts. Keep in mind that this data is compiled through Tuesday and does not include Fridays short covering rally.

Fundamentals: It is Thanksgiving week here in the states which means that it will not only be a shorter trade week, but likely less active in terms of volume. Harvest progress will be released after the close today for those of you still tracking. Expectations are for the crop to be 92% harvested, this would be an increase of 9% from the previous week but would still lag the five-year average of 96%. South American weather and crop conditions will be a key driver in price action going forward. We do not see any major developments at the moment but will keep you updated. Last week we had talked about option expiration being a potential catalyst for a grind higher and it appears we started to see that in Fridays trade. There are roughly 85,000 open puts from 350 down to 340. Strikes with significant open interest can act as a magnet into expiration.

Technicals: Fridays higher trade led prices back into our key technical resistance pocket from 342 ½-345 ½. Option expiration this week could be the catalyst to help put a floor in the market this week, but the bulls will want to see follow through post option expiration to feel more comfortable as we look to round out 2017. On the support side of things, the market needs to hold 334-335 ½. With options expiring on Friday, we will be rolling out of December futures and into March. A lot of the technical indicators we use remain the same but come in at different prices due to the carry.

Bias: Neural/Bullish

Resistance: 342 ½-345 ½**, 355¼***

Support: 334-335 ½***, 323-325 ¼**


SOYBEANS (January)

Last weeks close: Soybeans saw their biggest rally in a month on Friday with funds being estimated buyers of 13,000 contracts on the session, this put their net for the week at +500 contracts. Fridays rally gave soybeans a net gain of 5 cents on the week.

Fundamentals: It is a holiday week which means we will likely see a lower volume trade as market participants look to extend their shortened week. Harvest progress will be released after the close today for those of you still interested. Harvest is expected to come in at 96% complete, this would be up 3% from last week and 3% shy of the five-year average. With harvest all but done, attention has shifted

towards South American weather and crop development as they look to finish planting. Argentina is said to be a quarter of the way planted, this is an increase of 12% last week.

Technicals: Last week’s price action was getting worrisome for bulls as prices lingered near the last line of support at 968. The inability to breakdown invited buyers into the market and we saw an accelerated move higher after breaking above key resistance at 984 ¾. Previous resistance now becomes support and we see that coming in from 979-984 ¾. This pocket represents the 50, 100, and 200 day moving average as well as the 50% retracement from the June lows to the July highs. On the resistance side of things, 999-1004 ¾ is the pocket the bulls will want to reclaim. We are shifting from neutral to bullish so long as first support can hold. Keep in mind that it is a shortened week and volume is expected to be light; take the trade with a grain of salt knowing that volume confirms price. Also, option expiration is Friday.

Bias: Neutral/bullish

Resistance: 999-1004 ¾**, 1014-1018**

Support: 979-984 ¾**, 968 ¼****, 957-963 ¼****


WHEAT (December)

Last weeks Close: December wheat futures closed 3 ¼ cent lower in last week’s trade. Fridays higher trade was a little bit of window dressing with funds being buyers of an estimated 6,000 contracts on the session, this put their net for the week at -2,500.

Fundamentals: Wheat prices have been drifting lower over the past several months as ample global supply and dismal demand have kept a lid on any attempt of a rally. The bulls need to see a fundamental shift in an order to get the ball rolling in their favor. The likely catalyst would be an consistent increase in exports, but we have yet to see that. Low prices cure low prices, so it is possible we see demand pick up if we continue to slide lower. Crop progress will be released after the close today, winter wheat conditions are expected to come in at 54% good/excellent, this would be unchanged from the previous week but 4% behind last year’s read.

Technicals: Lower highs and lower lows have been the trend over the past few months and we are continuing to play that until the market can achieve a breakout above technical resistance. First resistance comes in from 434 ¼-436 ½, this represents recent highs and the 50-day moving average. Consecutive closes above could encourage short covering, until then rallies are meant to be sold. On the support side of things, a break below 416 ¼-418 opens the door to accelerated selling. Keep in mind that we will be rolling out to March futures by the end of the week.

Bias: Bearish

Resistance: 434 ¼-436 ½**, 443****, 462 ¾**, 478-479****

Support: 416 ¼-418**, 399-402 ¾****, 390-392 ¼**


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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

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