Corn futures picked up where they left off last week by starting Tuesday on a strong note. However, profit taking developed on Wednesday from news of China buying 500,000 tons of Australian feed grade wheat. Rebalancing by the index funds is now complete with their long position being reduced 155 MB to 2.130 BB. Last week, the longs of the trend following funds fell 35 MB to 1.545 BB. Traders interpret the reduction as creating a healthier tone for the market. However, be advised that bullish sentiment is at 92 percent. A reading in excess of 90 percent means that sentiment has reached the status of a speculative bubble. In other developments, export inspections were less than expected at 20.5 MB. Currently, they are running 30 percent below the pace needed to reach USDA’s projection of 1.950 BB.
March corn traded to 666.25 on Wednesday, January 19th and reversed lower. However, prices turned up from 627.5 on Thursday. Previous comments mentioned that the market was on track for a move higher to 660 or 680 with a potential top on January 21st. Right now, the technical oscillators indicate that 666.25 is a short-term peak. If this is the situation unfolding, support is at 627.5 followed by 620. Once the pullback is over, look for a final thrust to 680-690, which could be a major top that wraps up the advance from the low made last June at 356.75. This could occur during at the end of January or the first week of Feburary. Meanwhile, a break below 595 suggests that the party is over for the bulls. Next week, the odds are 60 percent that March futures will be lower.
Argentina received needed rainfall over the weekend, which helped reduce stress to their crop. This caused prices to back off on Tuesday with the market struggling during Wednesday’s session. Meanwhile, China has canceled two cargoes of U.S. soybeans because of poor margins. Usually, at this time of the year their interest turns toward the South American crop. Export inspections were in line with estimates at 43.1 MB and above the average needed to reach USDA’s projection of 1.590 BB. In other developments, the rebalancing by the index funds resulted in trimming 40 MB from their long position putting it at 940 MB. The longs of the trend following funds stands at 710 MB. Combined the funds are long 50 percent of U.S. soybean production.
March soybeans met resistance at the high made last week at 1432.5. Prices attempted to break through it on Wednesday but fell short at 1431.75. When the attempt failed, there was a sell-off to 1383.5 on Thursday. Right now, the technical oscillators favor 1432.5 being a short-term top. If this is the case, support is likely on a pullback to 1355 if 1383.5 cannot hold. Once the setback is over, the market will be in a position for a rally to 1460 or 1495, which has the potential of wrapping up the advance from the low made last June at 906.75. Cycle analysis points to this happening during the same period as corn. Meanwhile, if there is a close below 1355, all bets are off for a new high. Next week, the odds are 70 percent that March futures will be lower.
Wheat rebounded on Tuesday and Wednesday because of additional flooding reported in Australia and sales announced to Algeria and Turkey. Concerns continue to mount regarding a shortfall in Australia’s production, along with the potential of their crop being downgraded to feed quality. Export inspections were 21.6 MB and below the average needed to reach USDA’s projection of 1.3 BB. Currently, the pace is running 18 percent under the level necessary to achieve their target. In other developments, the index funds have reduced their long position by 45 MB to 1.025 because of the recent rebalancing. Meanwhile, the trend following funds are long a token 5.0 MB.
March wheat rebounded to 808 on Wednesday and backed off. Support is likely at 780 followed by last week’s low of 758.25. Cycle analysis points to the market trading sideways until the end of January. Currently, the market needs fresh bullish input in order for it to trade past 825. However, in the event it is exceeded, look for a rally to the high made last August at 864.25. Next week, the odds are 78 percent that March futures will be lower.
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