02-18-2013 08:23 AM
Off today, but how will the corn market look tonight and tomorrow? Tom White, a CME Group corn pit trader and FutureRoad.net analyst says it's hard to tell whether the market is correcting.
"The market traded from the short side for most of the week as we had nine days of lower closes before a minor rebound on Friday. We tested to within margin of error of the mid-line which we discussed in last week’s review. The market also held at the top of what is called a “pocket”, i.e. the high of the range of the bar which created a recent low (at 687.2). While the rebound on Friday was weak and was unable to sustain, we still must trade minimally below the 678 for the move lower to qualify as anything other than corrective.
After a long weekend, we do not want to try to predict trading bias for Tuesday," he says.
02-18-2013 08:26 AM
As the price in Chicago was going down, our basis was going the other way, so our local cash price did not lose as much as the market. We went from (I think) -6 or -8 basis, to +20.
That tells me, either end users are wanting corn, or else farmers are not selling. Usually, when that happens, the price is due to make a rebound, but anymore I don't want to promise anything the way the markets fluctuate for no reason.
02-18-2013 10:36 AM
Open interest in Corn is in a upside trend. If money starts to flow to the board, corn will jump up. As for the cash prices, the cost of moving corn is holding the price down in the northern corn belt. If the basis in the northern corn belt starts to rise, I believe true shortages are happening.
02-18-2013 10:51 AM
Commodities have been getting killed in 2013, and it seems there haven't been many survivors, especially this month. The PowerShares Multi-Sector Commodity ETF ($DBA) hasn't seen a positive day in the entire month of February, 11 red candles that resemble a waterfall - dropping straight down.
Wheat however is creating an interesting technical setup, with signs of support, positive divergences, and a group of traders breaking from their trend and getting net-long. Like the sector as a whole, wheat topped out last summer and has not participated in the multi-month 'risk on' rally we've seen in equities and junk debt. Looking at last week we can see that price was unable to close below the 61.8% Fibonacci retracement level from the May '12 low to the July '12 high. Even though wheat has not been rising over the last two months, it has been outperforming its overall sector based on the $DBA ETF as we can see with the green line in the third panel of the chart. This line is the relative performance of spot wheat prices compared to $DBA. When the line is rising we know that wheat is going up more or going down less than $DBA.
When looking at momentum we can see that spot wheat prices saw weakness in February as it broke below the previous low in January of $740, but momentum (based on the RSI indicator) created a positive divergence, a good sign for bulls. In the bottom panel of the chart below we have On Balance Volume (OBV); all this indicator does is simply add and subtracts the number of shares traded from each day depending on whether it was a positive or negative day. We can use this data to roughly see if there is more selling vs. buying based on the amount of trading activity happening on weakness (down days) compared to strength (up days). OBV is currently showing us that buyers are stepping in by not making a new low alongside price.
02-18-2013 11:29 AM
We listened to a perspective from a major grain co. in our area that basically said----"Wheat stocks world wide are on the rise even though crops are not improving because China and other buyers are changing their protein source." ------ The comment continued to be the supporting fact for wheat riding the coat tails of corn. And from their perspective corn will be in abundance by fall. --------------------And naturally they recommend a forward contract to protect us.
02-18-2013 12:57 PM
that's a good article....particularly Mr. Thrasher's witty comparison to the grains being like livestock (herd)---if grains only had legs?
physically speaking in Corn , "they" keep recommending fwd sales of '13 to protect against new crop weakness, yes?....yet on balance, farmers are reluctant to do this b/c of what happened last spring with so many "obligating" to 6 bucks before prices rose in Ju/A?
02-18-2013 05:27 PM
But historically, July and August strong up markets are rare.
But we have been breathing rarified air for a while now and the world supply has very little room for error.
I am not sure the roller coaster will be as rough as it looks like it should be.
I am getting dizzy from turning circles.......
02-18-2013 07:41 PM - edited 02-18-2013 07:42 PM