Buying has come into the Ag sector based on the Phase One US-China trade deal, reports Oliver Sloup.
Corn (ZCH)
Fundamentals: March corn futures rallied hard in the back half of last week, which has carried over into early morning momentum. Much of the relief has come on the back of broad-based buying in the grain sector based on the announced U.S.-China Phase One trade deal, yet to be signed and implemented. This news has sparked a round of short covering from funds. Friday’s Commitment of Traders (COT) report showed funds sold 29,664 contracts through Dec. 10, expanding their net short position to 114,801. The positive developments coupled with the funds short position prompted us to move our bias on Friday from neutral, to neutral/bullish.
Technicals: The market finished Friday’s trade right at technical resistance, we had defined that as $3.81 ¼-$3.82 ¾. If the bulls can achieve consecutive closes above here, it could spark additional short covering and take us closer to the psychologically significant $4.00 handle.
Bias: Neutral/Bullish
Previous Session Bias: Neutral
Resistance: 381 ¼-382 ¾***, 391 ½-396****
Pivot: 381 ¼-382 ¾
Support: 373-375**, 365-365 ¾****
Soybeans (ZSF)
Fundamentals: Soybeans skyrocketed higher on Friday but closed well off of the highs as details around the Phase One trade deal led to confusion. The market is trading against those highs in the early morning trade as some of the details have been ironed out over the weekend. The United States has agreed to cancel the Dec.15 tariff hike deadline and reduce current tariffs, China has agreed to buy 40-50 billion in U.S. ag products over the course of two-years (this was originally reported as just 2020). Friday’s COT report showed funds sold 13,509 contracts through Dec.10, expanding their net short position to 112,528 contracts.
Technicals: For soybeans, $9.09 ½ to $9.13 is our pivot pocket. If the bulls can defend this pocket, we could see an extension towards $9.30 ¼. This pocket represents a key retracement and a gap from Nov. 8. A failure to maintain this strength could lead to a retracement lower to fill the gap, that comes in from $8.97 ¾ to $9.01 ½.
Bias: Neutral
Previous Session Bias: Neutral
Resistance: 928 ½-930 ¼****
Pivot: 909 ½-913
Support: 897 ¾-901 ½****, 878-880***, 865-869 ½****
Chicago Wheat (ZWH)
Technicals: The market is marching higher in the early morning trade, thanks in part to broad-based buying in the grain sector. The market looks poised to retest the Nov. 29 highs at $5.46. If the bulls can chew through this resistance, we could see an extension towards the double top highs in June of $5.73 ½.
Bias: Neutral
Previous Session Bias: Neutral/Bearish
Resistance: 544-546 ½****, 572 ¼-573 ½***
Pivot: 533
Support: 525 ¾-529 ¼****, 515 ¼-518 ¾***
Kansas City Wheat (March)
Technicals: Kansas City wheat futures are working higher, alongside the broader grain complex. Friday, we talked about reducing against our resistance pocket, $4.49 ½ to $4.51 ¼; though we are still optimistic we believe it is a good place to reduce long exposure. The next resistance comes in at $4.59 ¾, this represents the 200-day moving average.
Bias: Neutral/Bullish
Previous Session Bias: Neutral/Bullish
Resistance: 449 ½-451 ¼***, 465 ¼****
Support: 428 ¾-432 ¾***, 422 ¾-423**
Cotton (March)
Technicals: Cotton futures worked higher in the back half of last week but failed to find meaningful follow through on Friday, despite the positive trade developments. The market is hovering near our pivot pocket this morning, the bulls will want to defend this on a closing basis to encourage another leg higher, that comes in from 66.88-67.13.
Bias: Neutral
Previous Session Bias: Neutral
Resistance: 67.80**, 69.07-69.20***
Pivot: 66.88-67.13
Support: 65.98-66.14***, 62.81-63.73***
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!
