Weather concerns and Chinese demand is making the grain sector more relevant as we head into planting season reports Oliver Sloup of BlueLineFutures.com.
Corn (CK)
Yesterday’s Close: May corn futures finished yesterday’s session up 5.25¢, trading in a range of 6.5¢.
Fundamentals: Yesterday’s session was a silver lining for the bulls with several comparing the price action to what we saw after the March 31, 2016 USDA report. For those of you that don’t recall, we sold off 16.5¢ on the report to make new contract lows, then rallied as much as 54.75¢ in the following three weeks. Comparisons can be useful but should be taken with a grain of salt, especially with the agricultural markets that have varying fundamentals every year. Export inspections yesterday morning came in at 1,259,267 metric tons, above the top end of expectations. It is that time of year where market participants start to focus in on intermediate term weather forecasts, trying to interpret how that may affect the crop and development. We will start getting weekly crop progress data from the USDA next week, those reports are released on Monday’s after the close.
Technicals: The positive price action was encouraging for bulls, but the technical damage from Friday is far from repaired. In a market environment that has increased volatility, it is not just about one good session, it is about consecutive sessions. We often say the bottom is a process not a point, yesterday’s price action may have been the beginning of the process, but for now is just considered relief. Consecutive closes above previous contract lows of $3.61 is what the bulls need to see in the first half of the week. If they can achieve this, perhaps we make a run back to Friday’s breakdown point from $3.67¾ to $3.70½.
Bias: Neutral
Resistance: 367 ¾-370 ½***, 380 ¼-383 ½***
Pivot: 361
Support: 356**, 350***
Soybeans (SK)
Yesterday’s Close: Soybeans finished yesterday’s session 12.5¢ higher, trading in a range of 15.25¢.
Fundamentals: Export inspections came in at 730,806 metric tons, within the range of expectations. The big boost for beans yesterday was on the back of the USDA announcing a sale of 828,000 metric tons of soybeans to China. The bull camp needs to see this trend continue and avoid cancelations on these sales. Trade rhetoric has died down again as hope for a quick fix continues to dwindle. We have stated before and continue to believe that China has some leverage with the United States going into an election cycle, President Trump may bend to make a deal to garner additional support from Midwest voters.
Technicals: The market is pressing up against that psychologically significant $9 handle, but the more meaningful technicals come in from $9.03 to $9.08¼. This pocket represents the 50% retracement from the contract lows (September) to the recent highs (December). It also represents the 200-day moving average and trendline resistance that goes back to February. Without additional positive news, this may be a tough barrier to chew through for the bulls.
Bias: Neutral
Resistance: 903-908 ¼***, 914 ¾-917***
Support: 887 ¾-891***, 880-883**, 870-873 ½***
Wheat (WK)
Yesterday’s Close: May wheat futures finished yesterday’s session up 3.5¢, trading in a range of 12.25¢.
Fundamentals: Export inspections yesterday morning came in at 418,424 metric tons, within the range of expectations. Crop progress that was released after the close showed winter wheat at 56% good/excellent, 1% above expectations. 35% of the crop was rated fair, with 9% rated poor/very poor.
Technicals: The chart is rounding out a bit after failing to get out above resistance over the last week and a half. The market is treading near our support pocket which comes in from $4.50 to $4.52½. A break and close below here could open the door for a retest of contract lows at $4.27. On the resistance side of things, there really isn’t much of significance until 475-478.
Bias: Neutral
Resistance: 475-478****, 497 ½-504 ½****
Support: 450-452 ½***, 434 ¼-441 ¾**
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
