The grain sector mostly retreated following this week’s USDA reports Oliver Sloup.
Corn (ZCH)
Fundamentals: Corn futures broke lower yesterday after failing to find a bullish fundamental catalyst in this week’s USDA report. Export sales this morning came in at 873,500 metric tons, 60% better than last week and 28% better than the four-week average. This needs to become the new norm for the bulls to stage a rally.
Technicals: The market broke and closed below technical support yesterday, we have defined that as $3.73-$3.75, this will be first resistance for the remainder of the week. If the bulls fail to regain ground above here, we could see a retest.
Soybeans (ZSH)
Fundamentals: January soybeans retreated yesterday once the floor opened. In yesterday’s report we talked about the recent rally being relief and the bull camp needing to see friendly news to feed the rally. The USDA report fell flat and that has prompted shorts to get back in at better prices. Export sales this morning came in at 1,050,100 metric tons, 54% better than last week but 17% lower than the four-week average. Dec. 15 tariffs are fast approaching, but we see the deadline being Friday. If these are kicked down the road, we would expect to see it done before the weekend, that way the outside markets will rally and there will be good press over the weekend. If we stick with the tariffs, it makes more sense to announce that over the weekend where the market will have more time to digest information.
Technicals: As noted earlier in the week, we believe the recent rally was primarily relief and the bears remain in the driver’s seat, looking at the last two months. Yesterday, the market retreated towards the low end of our pivot pocket.
Chicago Wheat (ZWH)
Fundamentals: Chicago wheat futures broke lower yesterday while the KC wheat contract managed to hold ground. We continue to weary of Chicago wheat in the mid-$5 range and would rather be sellers on rallies. If you want to be long wheat, we think Kansas City is a better option. Export sales this morning came in at 502,700 metric tons, 33% above the four-week average.
Technicals: The market worked lower yesterday, coming into our support pocket, $5.15 ¼-$5.18 ¾. This is a MUST hold area for the bull camp, a failure here would likely lead to accelerated selling.
Kansas City Wheat (March)
Technicals: Kansas City wheat futures managed to hold their own yesterday, an encouraging sign for the bull camp. The market is trying to work back above technical resistance.
Cotton (March)
Fundamentals: Export sales came in at 277,100 RB, 69% better than last week and 9% higher than the four-week average.
Technicals: The market has been forming a bit of a wedge, forming higher lows and lower highs over the last four sessions, this typically leads to a bigger directional move.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Sign up for a complimentary two-week trial of 1 or all 4 of our daily Blue Line Express commodity reports!
