While the stock and energy sectors have been most affected by decreased Chinese demand, there are signs it is affecting the Ag markets as well, note Oliver Sloup.
Coronavirus fears created a risk-off (sell first, ask questions later) atmosphere on Friday and that has continued through the weekend and into the Monday morning markets. Nearly 3,000 people are infected with a mortality rate said to be around 3%. Nearly everything is under pressure, safe havens like gold and silver are catching a bid. But the grain complex is lower and likely will remain under pressure until the tone of news developments regarding the virus changes.
Corn (ZCH)
Fundamentals: Corn futures were little changed last week as there was little new news on the wires. Early this week, attention will be on money-flow with the Coronavirus shaking up the global markets. We were looking for a softer open, but this is much more than we were anticipating which may have us tightening up long positions after the floor opens.
Technicals: Last week we talked about option expiration keeping a lid on prices at $3.90, then wanting to get long into this week’s trade. We were position long with clients into the weekend with hopes we would finally be able to breakout above the top end of resistance. The Coronavirus fears and market reaction have obviously thrown a wrench into our near-term thesis.
Bias: Neutral/Bullish
Previous Session Bias: Neutral/Bullish
Resistance: 392-394 ¼***, 407 ¾-411 ¾****
Pivot: 383 ½-384 ¼
Support: 375-377 ¾***, 365-365 ¾****
Soybeans (ZSH)
Fundamentals: Fears of Coronavirus affecting demand and China on holiday this week has put the pressure on beans, breaking prices below the $9.00 handle with conviction. We underestimated the risk-off trade that the Coronavirus has created. These headlines along with money-flow will be the leading catalysts this week.
Techncials: In our weekend update we talked about the market being at an inflection point near $9.00. We liked buying here on the first test, but the weekend headlines didn’t give the bulls a chance to defend support. The next support pocket comes in from $8.82 ¾ to $8.70, this pocket represents the low end of the range from August, September and December.
Bias: Neutral/Bullish
Previous Session Bias: Neutral/Bullish
Resistance: 920-924***, 933 ¾-937 ¼***
Pivot: 899-902 ½
Support: 879-882 ¾****
Chicago Wheat (ZWH)
Fundamentals: Wheat futures are taking it on the chin this morning as the risk-off trade ripples through the broader markets. We have been in the camp that wheat futures are overpriced as it is, so the headline risk could have a bigger impact on wheat. Friday’s Commitment of Traders (COT) report showed funds are net long 41,671 contracts.
Technicals: The market broke into our support pocket on Friday and is breaking lower in the overnight/early morning trade. Our next support pocket comes in from $5.57 ¼ to $5.54 ½. We have been leaning on the short side and view this pocket as an area to reduce short exposure. If you have a bullish bias, you could consider buying here.
Bias: Bearish
Previous Session Bias: Bearish
Resistance: 573 ½-578 ¾***, 598-601 ¾***
Support: 554 ½-557 ¼***, 543-545 ¼**
Kansas City Wheat (March)
Technicals: KC Wheat is taking some heat in the early morning trade. We have been leaning on the bullish side for the better part of the last three to four months but moved our bias to neutral/bearish in the middle of last week, with the near-term objective being a retest to $4.70 to $4.71 ¾. This pocket represents a key retracement and several price points that were meaningful from the middle of December to beginning of January.
Bias: Neutral/Bearish
Previous Session Bias: Neutral/Bearish
Resistance: 498-500**, 509 ¾-513***
Pivot: 488 ½-490 ½
Support: 470-471 ¾****, 453 ¾-458 ¾***
Cotton (March)
Technicals: Volatility has picked up in recent weeks, shaking out weak hands on both sides (buyers and sellers). This increased volatility could be the beginning of a topping pattern. We are giving the bear camp the near-term advantage, so long as they can defend our pivot pocket from 70.00-70.50.
Bias: Neutral
Previous Session Bias: Neutral
Resistance: 72.34-72.80****
Pivot: 70.00-70.50
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.
