All eyes are on developments in Egypt and the Middle East. The issue is who succeeds President Mubarak, and will there be a peaceful transition? If the Muslim Brotherhood gains control, it will be the worst possible scenario for the interests of the U.S., Europe, and Israel. Meanwhile, the grain and commodity markets are taking the situation in stride. Right now, tight corn stocks are of greater concern to traders as evidenced by stronger prices this week. However, this could change quickly depending on how the drama unfolds in the Middle East. Export inspections last week were below estimates at 18.6 MB and are running 32 percent behind the pace needed to reach USDA’s projection of 1.950 BB. In other developments, the trend following funds reduced their long corn position 85 MB to 1.655 BB. The longs of the index funds fell 60 MB to 2.035 BB.
March corn traded to 674.5 on Wednesday, February 2nd, and is in the final stage of the advance from last November’s low at 520.25 and possibly the contract low at 356.75. While a top was due on February 2nd, it appears to be short-term. All we need now is to wind up the rally from 642.25. Long-term targets that have been mentioned in previous comments are 680, 690 or 705. Meanwhile, there is one pattern showing the potential of reaching 715. Currently, there are several cycles of various lengths due to peak during the period of February 7th-11th, which means the market will be ripe for a top. However, there needs to be confirmation. At this time, a decline below 642 breaks the uptrend. Be advised that the long-term trend indicator is at a level not seen since the highs of 2008, 2004 and 1996. Next week, the odds are 60 percent that March futures will be higher.
Growing conditions are improving in Argentina, but the market seems more preoccupied with tight U.S. stocks and ongoing demand from China. Meanwhile, inspections last week were less than expected at 29.6 MB but above the average needed to reach USDA’s projection of 1.590 BB. China took 19.0 MB or 64 percent of the shipments. China is in their weeklong Lunar New Year holiday, which means that business from them will be slow. In other developments, the trend following funds reduced their long position 70 MB to 705 MB, while the longs of the index funds fell 10 MB to 890 MB.
March soybeans traded to 1452.5 on Thursday, February 3rd, which was short of a long-term target at 1460. A top was due on February 2nd, but it appears to be short-term. Meanwhile, a secondary target is at 1495. Right now, we appear to be in the final stage of the advance from the low made last November at 1183 and possibly the contract low at 906.25. Be advised, there are cycles of various lengths that are due to peak during the period of February 8th-11th, which suggests that we should be alert for signs of an important top. At this time, a decline below 1364 is needed to break the uptrend. Like corn, the long-term trend indicator is at a level not seen since the highs of 2008, 2004 and 1996. Next week, the odds are 60 percent that March futures will be higher.
Ongoing concerns regarding the milling quality of wheat in Australia and the cold snap in the Plains is the supportive influence in wheat. Meanwhile, the riots in Egypt are fueling ideas that nations will step up purchases of wheat to quell food inflation. However, inspections last week were disappointing at 21.3 MB with the pace of shipments running 12 percent below the level needed to reach USDA’s projection of 1.3 BB. In other developments, the trend following funds are accumulating a long position that currently stands at 40 MB. The longs of the index funds stand at 1.025 BB.
March wheat traded to 872.75 on Thursday and has an upside target at 890. As it stands now, the wave pattern shows the market may be close to wrapping up the rally from last month’s low at 758.25, and possibly the bottom set in November at 656.25 as well as the contract low at 505. Cycle analysis points to a potential top occurring on February 9th. Right now, a decline below 758 is needed to break the long-term uptrend. Next week, the odds are 80 percent that March futures will be lower.
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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.