BrokersEDGE Futures Trading newsletter 12-18-17 Grains, wheat, Corn and Soybean Futures

CORN (March)

Last Weeks Close: March corn futures finished the week down 4 ¾ cents, trading in a 6 ½ cent range. Fridays Commitment of Traders report showed that funds piled back into their short position, selling 43,859 contracts which puts their net short at 198,920 contracts.

Fundamentals: We had great ethanol numbers on Wednesday and a good export sales read on Thursday but this only kept the market from falling out of bed. Overall exports are weaker, and the bulls need to see above expectation reads. If we see some of these weekly data points come in on the low end of expectations that could ignite another leg lower. Weather in South America has been less concerning than some were expecting/hoping for as rains work their way into forecasts. Planting estimates earlier in the week had Argentina pegged at 45% complete, this lags the average pace but is not worrisome at this point. Brazilian corn planting is said to be 45.3% complete which is nearly 6% ahead of last year’s pace.

Technicals: March corn futures are moderately firmer this morning on a light volume trade. From the technical standpoint, we have been trending sideways to lower for the last four months. It is always tempting to pick a bottom, but we are remaining patient as tops and bottoms are a process not a point. If picking a bottom is your kind of thing then we suggest having an exit strategy ahead of time, and no, hope is not a strategy. If we see this market break and close below 345 it would open the doors to a run towards 335. On a shorter-term basis, we are very open minded and interested in shorter term trades a nickel on either side of 350 (ex: buy 345 on first test, sell 355 on first test; looking to take out 5-6 cents while risking 2 ½).

Bias: Neutral

Resistance: 355-357 ½ ****, 369 ¼-370 ½***, 375****

Support: 345-348**, 334-335 ½***, 323-325 ¼**


SOYBEANS (January)

Last Weeks Close: January soybeans finished the week down 22 ¼ cents, trading in a range of 25 cents. Fridays Commitment of Traders report showed that funds were in long liquidation mode (duh). Funds sold 42,430 contracts which puts their net long position at just 12,455.

Fundametnals: Rains in South America have worked their way into the forecasts which has evaporated some of the La Nina weather premium. Export sales data this week was on the low end of expectations, we have been hammering on the fact that the grain market needs to see a trend of beats to get this market going. Within expectations for corn, beans, and wheat just doesn’t get the job done. Yesterday’s NOPA (National Oilseed Processors Association) showed crush at 163.546 million bushels; this was a record for the month, above trade expectations of 163.191, and 2% above last year’s number for the same time. Soybean oil stocks were at 1.326 billion pounds, this was above expectations of 1.269 and up 8% from October. Informa updated their estimates for the US crop; they have yields at 49.7 bushels per acre and total production at 4.45 billion bushels.

Techncials: Soybeans were on a stop hunt overnight with prices trading down to 963 ½ on very light volume. We are waiting for the floor open before reading too much in to the overnight price action. We’ve had a bullish tilt to the market tough we have been rangebound for the better part of the last three and a half months. The sharp decline and shift in fund position is certainly not favorable to our bias but that’s where risk management comes into play; when the market goes against your bias. With that said, this is the bottom end of the range and our last line of significant support. 967-968 ¼ must hold on a closing basis to prevent prices from really rolling over. If the market closes below this pocket, we don’t see a much significant support for another 40 cents. The risk reward here to the buy side is very favorable in our minds; it is the bottom end of the range and the market is near oversold conditions.

Bias: Bullish

Resistance: 976-978 ¾***, 984 ¾-989**, 999-1004**

Support: 967-968 ¼****, 947 ½**, 929 ¼**, 915 ¼****


WHEAT (March)

Last weeks Close: March wheat finished the week up ½ of a cent, trading in a range of 8 ¼ cents. Fridays Commitment of Traders report showed funds were heavy sellers, adding 43,033 contracts to their position, putting them net short 165,412 contracts; the second largest on record.

Fundamentals: Export sales this week came in better than expectations which is a step in the right direction but far from bullish. The market needs to see a trend of better than expected exports to encourage short covering from funds. Bearish fundamentals will be hard to reverse at this time with ample global supplies and dismal demand keeping a lid on things. We were saying that the only buying we have been recommending is short covering due to the lack of bullish fundamentals.

Technicals: Wheat is the early morning leader in the grain complex as there appears to be some modest short covering taking place. We have had a bearish bias in the market for several months now and that is why we have only been recommending buying to cover shorts, not new long positions. There is nothing worse than having a bearish bias and being caught long. Trading is very much a mental art and being caught on the opposing side of your bias leads to more mind games (telling yourself you were right while your account says otherwise). We believe that having a bias and trading that bias is a very important component to being successful in the markets. First technical resistance comes in at 424 ¼ but the more significant levels are closer to the 440 level.

Bias: Bearish

Resistance: 424 ¼**, 430 ½-433 ½**, 443-445¾ ****

Support: 399-402 ¾****, 392-394**, 381-383 ¾***


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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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