Major Shifts in Grain Sector COT Data

11/18/2019 12:05 pm EST

Focus: COMMODITIES

Oliver Sloup

, Blue Line Futures

U.S.-China trade and late harvest is causing large shifts in grain markets CFTC COT data, writes Oliver Sloup.

Corn (ZCZ)

Fundamentals: December corn futures continued to bleed lower on Friday, taking prices to their lowest levels in nearly two-months. Dismal demand has continued to offset production threats in the Midwest, this has kept the funds comfortable in their growing net short position. Friday’s Commitment of Traders (COT) report showed funds sold another 10,816 contracts, extending their net short position to 120,536 contracts. For those of you keeping track, Crop Progress will be out after the close and is expected to show the corn harvest is 78% complete, well behind the five-year average, 92%. December options expire at the end of the week, which means the volume will shift into the March contract.

Technicals: The market continues to trend lower with funds pouncing on the lack of bullish news to spark short covering. As mentioned last week, we want to be friendly this market but there the technical landscape doesn’t warrant it, keeping us bearish to neutral. First support comes in from $3.68 ¼, a break and close below could trigger a meltdown and potential retest of contract lows at $3.52 ¼. On the resistance side, previous support now becomes resistance, we have defined that as $3.77 to $3.81 ¼.

Bias: Bearish/Neutral

Previous Session Bias: Bearish/Neutral

Resistance: 377-381 ½***, 390-392 ¾***, 400-402 ½***

Support: 366-368 ¼***, 350-352 ¼****

Soybeans (ZSF)

Fundamentals: January soybeans broke on Monday and spent the rest of the week consolidating as market participants searched for new news to offer more conviction in the direction of the market. With harvest nearly 90% complete, headlines will largely be on the progress, or lack thereof, on the U.S. and China trade talks. Though we don’t expect anything substantive any time soon, we wouldn’t be surprised to see a date set soon, for another meeting. Friday’s COT report showed funds sold 28,043 contracts, trimming their net long position to 25,460.

Technicals: Last Monday’s trade did a lot of technical damage, tempering our bearish bias and putting us at neutral/bullish. Technical support was tested and held; we had defined that as $9.09 ½-$9.13. A break and close below here would put the bears in the driver’s seat, confirming a bearish head and shoulders, opening the door for a break below the psychologically significant $9.00 handle.

Bias: Neutral/Bullish

Previous Session Bias: Neutral/Bullish

Resistance: 928 ½-930 ¼**, 940-941 ½***

Pivot: 919 ½-922

Support: 909 ½-913****, 894-895 ¾**

Chicago Wheat (ZWZ)

Fundamentals: Chicago wheat futures tried to stage a rally last week but failed to find enough new news to encourage additional buyers to step in. Friday’s COT report showed funds holding a near a net flat position. We will continue to keep an eye on the broader grain complex, if that weakness persists it may be tough for wheat to avoid.

Technicals: The market failed against technical resistance last week, we had defined that as $5.15 ¼. This failure marked lower highs and has taken us to lower lows in the early morning session. Prices are testing our four-star support pocket from $4.96 ¼ to $5.00 ¾. A break and close below here could open the door for a “whoosh” lower.

Bias: Bearish/Neutral

Previous Session Bias: Bearish/Neutral

Resistance: 515 ¼-517 ¼**, 521 ¾-523 ¾***, 535-538 ½****

Support: 496 ¼-500 ¾****, 485 ½-489 ¼***

Kansas City Wheat (December)

Technicals: Prices are coming into our four-star support pocket from $4.15-$4.18 ¾. This pocket represents a key retracement, the 50-day moving average, and trend-line support from the contract lows in September. From the risk/reward perspective, this isn’t a bad spot to buy (if you’re bullish) with a relatively tight leash.

Bias: Bullish/Neutral

Previous Session Bias: Bullish/Neutral

Resistance: 437 ¼-439 ½***, 454-457 ¾****

Pivot: 425-249

Support: 415-418 ¾****, 397-400***, 380*

Cotton (December)

Technicals: December cotton future failed again at the 65.00 handle, which has led to weakness in the early morning trade. The inability and ultimate failure against resistance last month has completely neutralized our bias. If the bulls cannot defend support from 62.91-63.39, we could see the bears seize control.

Bias: Neutral

Previous Session Bias: Neutral/Bullish

Resistance: 65.85-66.05****, 68.35-68.60***

Support: 62.91-63.39****, 59.58-60.79***, 56.59-57.55****

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.comPlease sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

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