Is The Mugging In Grains Over?–11-15-10


Grain futures were literally mugged last Friday on concerns that China will raise interest rates in an effort to cool their economy.  However, prices recovered today erasing much of their losses as the sell-off was thought overdone.  Keep in mind that the funds are holding a record long position in soybeans and a near record position in corn suggesting that sharp prices are to be expected.  Meanwhile, there are renewed tensions in Europe regarding the sovereign debt crisis and the ability of Ireland to pay its debt.  In addition, leaders of the G-20 are exasperated with the QE2 stimulus package implemented by the Federal Reserve.  These unknowns will continue to foster a volatile environment in commodities.   


December corn held Friday’s low of 534 and rebounded to 567 today.  So far, the pullback resembles a correction.  We could remain in a congestive pattern 2-4 more days, possibly up to 9 days.  Right now, the structure of the weekly chart shows the potential still exists for a rally past 6.05.  Resistance is expected on a rebound to 570.  Meanwhile, a close beyond 578 is needed to turn the short-term trend higher.  In this event, prices could work higher until late this month or early December and top at 626-632.  For this to unfold, we need to hold 534. 

 Cash sales should currently be at the 60 percent level. 

Soybeans: Recommendation Pending

March soybeans fell to 1260 today, a decline of 6.9 percent from 1354.5.  This was short of support at 1255.  Prices rebounded and rallied to 1314.5 in the pit session.  Right now, a close past 1318 is needed to turn the short-term trend higher.  Meanwhile, the structure of the longer-term weekly chart shows that the potential for prices rising past last week’s high of 1354.5 still exists. 

 Right now, Friday’s sell-off turned the trend indicators down and if there is a close below 1275, sales should be increased from 45 percent to 60 percent.    


December wheat has held last week’s low at 661.25, although a setback to the bottom of the trading range made in October at 643.5 seems likely.  Longer term, the market is still in a correction from the August high of 868.  Based upon a recommendation made last week, new crop sales should be at the 30 percent level.  Meanwhile, old crop sales should be at the 70 percent mark.

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