China unexpectedly raised their lending rate for the first time in three years by one-quarter point. This caused the dollar to soar, the Dow lose nearly 200 points, and gold to tank nearly $40 today. As a result, there was a sharp knee-jerk reaction lower the grains. Traders fear that China’s action may cool their torrid pace of imports. Keep in mind that the funds are holding near record long positions in corn and soybeans and may decide to lighten their load. If your recall, last week’s comments mentioned that the sentiment index showed that 98 percent of traders were bullish gold and only 3 percent bullish the dollar. These extreme readings gave a heads up regarding the over exuberance of the gold bugs and dollar bears.
Corn: Sales Recommendation
December corn fell to 542.75 today, which is near the target for the pullback which we mentioned in last week’s blog. We are in day four of the decline, which we’ve been predicting for the last several weeks, should last at least five more days. Once it is complete, the market will be in a position for a move into the low to mid 6’s. Meanwhile, this has the potential of being a major top.
Based upon the recomendation made yesterday because of the downturn in the trend indicators, sales should be at the 60 percent mark.
Soybeans: Sales Recommendation Pending
March soybeans fell to 1185.25 this morning in day two of the pullback from 1222.25. Prices rebounded but closed down for the day The short-term pattern shows the market having the potential of working higher before it tops. However, a close below today’s low jeopardizes the chance of it happening and will turn the trend indicators down. In this event, sales should be brought to the 60 percent level.
December wheat fell to 668.25 today because of the rally in the dollar and weakness in corn and soybeans. In addition, the forecast for rain developing in the Plains later this week added to the negative tone. Prices have backed off more than expected recently, and may work lower to test the low made earlier this month.
Right now, old crop sales should be at the 70 percent level.