Waiting for Confirmation on Chinese Grain Purchases

Grains markets experience “Buy the rumor, sell he fact,” action as we wait on confirmation of Chinese grain purchases, reports Oliver Sloup.

Corn (ZCH)

Fundamentals: March corn futures rallied hard on Friday, erasing all of Thursday’s losses and then some. Rumors that China secured multiple cargoes of U.S. corn helped offer support, but there hasn’t been confirmation on that yet. We believe technicals and money-flow are leading catalysts near term. Option expiration on Friday could keep the market pinned near term. Friday’s Commitment of Traders (COT) report showed that funds bought 6,367 contracts through Jan. 14, trimming their net short position to 79,140 contracts.

Technicals: The market was technically sound last week, testing and holding the top and bottom ends of resistance and support which we defined as $3.90 ½ to $3.92 and $3.77 to $3.81. In our Weekend Ag Update, we talked about reducing longs and even looking to the short side on Friday, against technical resistance. 383-385 is the near-term target. We believe that Friday’s option expiration will keep us range-bound this week, barring any groundbreaking news.

Bias: Neutral
Previous Session Bias: Neutral/Bullish
Resistance: 390 ½-392***, 407 ¾-411 ¾****
Pivot: 383-385
Support: 375-377 ¾***, 365-365 ¾****

Soybeans (ZSH)

Fundamentals: Last week’s signing of Phase One was a classic buy the rumor, sell the news response. The substance in the trade deal remains suspect in our eyes. China has stated several times that imports will be based on market conditions, i.e.: supply/demand and price (same as before). Soybeans are working back towards the low end of the range in the early morning trade as the life-threatening Coronavirus spreads in China. Friday’s COT report showed funds bought 6,036 contracts through Jan. 14, putting them net long 3,185 contracts.

Technicals: The market tested and held our technical support pocket perfectly last week, a pocket that we had defined as $9.20 to $9.22 ¾. In our weekend report we talked about this being a spot to reduce short exposure. If you want to be on the long side, try to remain patient for a dip down to 912-916. This pocket represents the gap from Dec. 12 and 13.

Bias: Neutral/Bearish
Previous Session Bias: Bearish/Neutral
Resistance: 950 ½-955***, 968 ½-970****
Pivot: 933 ¾-937 ¼
Support: 920-922 ¾***, 912-916****

Chicago Wheat (ZWH)

Fundamentals: Chicago wheat futures managed to rally back on Friday as funds defend their net long position. Friday’s COT report showed funds have a net long position of 29,787 contracts. Funds are net long 7,935 Kansas City wheat contracts.

Technicals: Wheat has been resilient, and the chart remains constructive, but we are still leaning on the short side, from a risk/reward perspective; $5.75 to $5.78 ¾ continues to be a resistance pocket we like selling into but keeping a tight leash on it above that pocket.

Bias: Bearish/Neutral
Previous Session Bias: Bearish/Neutral
Resistance: 575-578 ¾***, 585**
Support: 554 ½-557 ¼***, 536 ¼-538 ¾***

Kansas City Wheat (March)

Technicals: Kansas City wheat futures rallied back on Friday but are struggling to find follow through in the early morning trade. We have had a bullish tilt in our bias for the better part of the last $1 rally, but we are starting to ratchet that optimism back; $4.98 to $5.00 is first resistance, if the bulls cannot achieve consecutive closes above here, we could see the market retreat towards $4.70, an area where we would look to be buyers again.

Bias: Neutral
Previous Session Bias: Neutral/Bullish
Resistance: 498-500**, 509 ¾-513***
Pivot: 488 ½-490 ½
Support: 470-471 ¾****, 453 ¾-458 ¾***

Cotton (March)
Technicals: Cotton futures are starting to feel jittery at these levels and are threatening to breakdown below our pivot pocket near 70.50. If the bulls fail to defend this level this week, we could see a further retracement. First meaningful support below the 70 handle is 66.93-67.13.

Bias: Neutral
Previous Session Bias: Neutral
Resistance: 72.34-72.80****
Pivot: 70.50
Support: 66.93-67.13***, 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!Please sign up at Blue Line Futures to have our research emailed to you each morning.