Technically Speaking
Darin Newsom DTN Senior Analyst

Saturday 02/21/15

Weekly Analysis: Grain Markets

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.64, down $0.01 for the week. The secondary (intermediate-term) trend remains down with the last signal a bearish crossover by weekly stochastics the week of December 29. After falling to a low of $3.44, a test of technical support at $3.47, the NCI.X has moved sideways. The last two weeks has seen a test of resistance between $3.62 and $3.68, prices that mark the 50% and 67% retracement levels of the initial selloff from $3.80 through the $3.44 low. Weekly stochastics remain neutral to bearish.

Corn (Old-crop): The May contract closed 2.25cts lower at $3.93 last week. Weekly stochastics are bearish, indicating the secondary (intermediate-term) trend remains down. Support is between $3.82 1/4 and $3.72, prices that mark the 50% and 61.8% retracement level of the previous uptrend from $3.39 1/4 through the high of $4.25 1/4. If the contract is able to post a commercial-led rally against its prevailing trend, resistance is pegged between $4.01 3/4 and $4.11.

Corn (New-crop): The December contract closed 1.25cts lower at $4.16 1/4 last week. Weekly stochastics remain bearish indicating the secondary (intermediate-term) trend is down. Given the continued neutral view of new-crop supply and demand indicated by the carry in the December 2015 to March 2016 futures spread, Dec corn could fall back to a test of support at $4.03 1/2. This price marks the 50% retracement level of the previous uptrend from $3.64 1/4 through the high of $4.40.

Soybeans (Cash): The DTN National Soybean Index (NSI.X, national average cash price) closed at $9.55, up 9 cents for the week. Technical indicators show the NSI.X has rejoined its secondary (intermediate-term) uptrend. The NSI.X posted a new 4-week high of $9.63, with the higher weekly close leading to a bullish crossover by stochastics above the oversold level of 20%. The last major signal in stochastics remains the bullish crossover below 20% the week of October 13, 2014. The bearish crossover seen the January 12 occurred below the overbought level of 80%, signaling the move to the sideways trend between $10.02 and $9.12 the NSI.X has been in since. The longer-term target remains $10.66, a price that marks the 33% retracement level of the downtrend from $14.97 through the low of $8.50.

Soybeans (old-crop): The May contract closed 7.50cts higher at $10.02 1/4 last week. May soybeans posted a new 4-week high $10.20 3/4 indicating the secondary (intermediate-term) trend has turned up again. The higher weekly close, though well off its high, led to a bullish crossover by stochastics above the oversold level of 20%. Initial resistance is between $10.48 and $10.65 3/4, prices that mark the 33% and 38.2% retracement levels of the previous downtrend from $12.87 1/4 through the low of $9.28 3/4. The May to July futures spread looks to be establishing an uptrend (weakening carry) reflecting an increasingly bullish commercial outlook. Given this, the May contract could extend its uptrend to the 50% retracement level of $11.08.

Soybeans (new-crop): The November contract closed 9.00cts higher at $9.80 last week. Nov soybeans posted a new 4-week high $9.94 1/4 indicating the secondary (intermediate-term) trend has turned up again. The higher weekly close, though well off the high, was enough to establish a bullish crossover by weekly stochastics above the oversold level of 20%. The last major turn signal by weekly stochastics was a bullish crossover below 20% the week of October 6. The November 2015 to January 2016 futures spread continues to trend sideways at a neutral to bullish level of carry between 4 3/4 cents and 6 1/2 cents. This could support an extension of the secondary uptrend to a test of the 50% retracement level of $10.79 3/4.

Wheat (Cash): The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $4.83, down 23 cents for the week. The secondary (intermediate-term) trend has turned sideways. Last week's action saw the SR.X post a bearish outside week, offsetting the bullish key reversal from two weeks ago. Weekly stochastics are below the oversold level of 20%, indicating cash SRW wheat could find renewed buying interest as it nears support at the previous low of $4.66.

SRW Wheat (old-crop): The May Chicago contract closed 22.25cts lower at $5.07 last week. May Chicago wheat posted a bearish outside week, indicating the contract could move toward a test of its low of $4.89 1/4. Weekly stochastics are below the oversold level of 20% meaning downside potential could be limited. The last major turn signal by stochastics was a bullish crossover below the oversold level of 20% the week of September 29, 2014.

SRW Wheat (new-crop): The July Chicago contract closed 20.75cts lower at $5.11 1/2 last week. July Chicago wheat posted a bearish outside week indicating a test of the contract low of $4.96 1/2 is possible in the coming weeks. Stochastics are below the oversold level of 20% indicating downside potential could be limited.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 10:46AM CST 02/21/15 by Darin Newsom
 
Weekly Analysis: Livestock Markets

Live Cattle: The April contract closed $4.70 lower at $148.525 last week. The secondary (intermediate-term) trend looks to have turned sideways. As discussed last week, April live cattle ran into resistance near $154.05, the 38.2% retracement level of the Wave C sell-off from $166.00 through the low of $146.65. The fact the contract couldn't push to resistance at the 50% level of $156.325 indicates increased pressure from the commercial side of the market, an idea confirmed by the April weakening against the June contract last week. Noncommercial traders continue to add to their short-futures position, with Friday's CFTC Commitments report showing an increase of 3,444 contracts. Weekly stochastics finished last week back below the oversold level of 20%.

Source: DTN ProphetX

Feeder Cattle: The March contract closed $4.675 lower at $199.175 last week. The secondary (intermediate-term) trend remains sideways. Support is at the 4-week low of $193.00, a price that was a test of technical support near $193.90, the 67% retracement level of the previous uptrend from $172.00 through the high of $237.80. Resistance is now pegged at the new 4-week high of $206.40. Weekly stochastics are neutral, just below the oversold level of 20%.

Lean hogs: The April contract closed $1.375 higher at $67.40 last week. The secondary (intermediate-term) trend turned up last week as the contract posted a bullish key reversal. After moving to a new contract low of $63.225, April hogs rallied above the previous week's high of $68.50 before closing higher for the week. This also created a bullish crossover by weekly stochastics below the oversold level of 20%, confirming the pattern seen in the futures market. Given the increasing bearish commercial view indicated by the strong downtrend in the April to June futures spread, solid resistance is expected between $74.70 and $76.40. These prices mark the 33% and 38.2% retracement levels of the previous downtrend from $97.65 through last week's low.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.64, down $0.01 for the week. The secondary (intermediate-term) trend remains down with the last signal a bearish crossover by weekly stochastics the week of December 29. After falling to a low of $3.44, a test of technical support at $3.47, the NCI.X has moved sideways. The last two weeks has seen a test of resistance between $3.62 and $3.68, prices that mark the 50% and 67% retracement levels of the initial selloff from $3.80 through the $3.44 low. Weekly stochastics remain neutral to bearish.

Soybean meal: The May contract closed $12.70 higher at $338.70 last week. The secondary (intermediate-term) trend turned up as the futures contract posted a new 4-week high of $342.50 and weekly stochastics turned bullish again. Initial resistance could be seen near $351.00, a price that marks the 50% retracement level of the previous downtrend from $409.60 through the low of $292.30. However, the strong uptrend (strengthening inverse) in the May to July futures spread reflects an increasingly bullish commercial view of supply and demand. This could lead to a test of resistance between $364.80 and $370.50, the 61.8% and 67% retracement levels, if not a full retracement back to the $409.60 high.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom


Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 9:20AM CST 02/21/15 by Darin Newsom
 
Weekly Analysis: Energy Markets

Brent Crude Oil: The spot-month contract closed $1.30 lower at $60.22. Despite the lower close the secondary (intermediate-term) trend remains up with weekly stochastics bullish. However, the spot-month contract did find resistance at $62.22 (last week's high was $63.00), a price that marks the 23.6% retracement level of the previous downtrend from $117.34 through the low of $45.19. If this leads to follow-through selling, initial support is pegged at $56.20, then $54.09. Given the uptrend in the spot futures spread (weakening contango), this area should hold a possible sell-off. The longer-term price upside price target remains the 38.2% retracement level of $72.75.

Crude Oil: The spot-month contract closed $2.44 lower at $50.34. While technical signals continue to show the secondary (intermediate-term) trend is up, the market may look to continue its consolidation between resistance at the 4-week high of $54.24 and the recent low of $43.58. To this point the rally has lacked the backing of the commercial side of the market, with the trend in the spot futures spread still down (strengthening contango). Support has come from noncommercial short-covering, with Friday's CFTC Commitments of Traders report showing this group reducing their short futures holdings by 28,111 contracts.

Distillates: The spot-month contract closed 14.04cts higher at $2.1118. The secondary (intermediate-term) trend uptrend continues to strengthen with the next target $2.2286. This price marks the 38.2% retracement level of the previous downtrend from $3.2633 through the low of $1.5890. However, given the market's inverted forward curve the spot-month contract could extend this rally the 61.8% retracement target of $2.6237.

Gasoline: The spot-month contract closed 1.45cts higher at $1.6407. The secondary (intermediate-term) uptrend is poised to strengthen following the bullish outside week posted by the spot-month contract. While it hasn't been able to clear initial resistance at $1.7081, a price that marks the 23.6% retracement level of the previous downtrend from $3.2672 through the low of $122.65, a slightly weaker contango in the spot futures spread could result in a test of the $2.0060 to $2.2469 area. These prices mark the 38.2% and 50% retracement levels.

Ethanol: The spot-month contract closed 1.0ct lower at $1.4320. The secondary (intermediate-term) remains sideways as the spot-month contract continued to consolidate. Resistance remains at $1.5040 with support at $1.2920, the highs and lows from the week of January 12. Weekly stochastics remain neutral below the oversold level of 20%.

Natural Gas: The spot-month contract closed 14.7cts higher at $2.951. As discussed last week, the secondary trend looked to have turned up with the establishment of a 2-week reversal. This past week saw the spot-month contract follow-through with a solid rally, allowing weekly stochastics to establish a bullish crossover below the oversold level of 20%. This would confirm the previous technical signal. Initial resistance is pegged at $3.494, the 23.6% retracement level of the previous downtrend from $6.493 through the low of $2.567. A test of this level would close a bearish gap on the weekly chart between $3.444 and $3.351.

Propane (Conway cash price): Conway propane closed 0.75ct higher at $0.5675. The secondary (intermediate-term) trend remains up. Initial resistance is pegged between $0.7455 and $0.7996, the 33% and 38.2% retracement levels of the previous downtrend.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 17.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 8:13AM CST 02/21/15 by Darin Newsom
 

Sunday 02/15/15

Yes It's True: Cotton Looks Bullish

One of the interesting things about travel season is that at the end of each presentation, you have time for questions on any market. Recently I've been asked what the outlook for new-crop cotton might be. And after years of being the bearer (get it, "bear", as in bear market?) of bad news it looks like the cotton market has finally turned a bullish corner.

Source: DTN ProphetX

As I discussed during DTN's Trading Markets Quarterly Outlook back on January 6 (you can see the rebroadcast at: http://www.dtn.com/…) cotton's long-term monthly chart showed the potential for a long-term bullish change. Eventually, January saw the nearby contract post a fresh low of 57.05 before rallying to close out the month. Unfortunately, at least from a bullish standpoint, the market did not establish a true bullish turn signal heading into February.

But as we work our way through the unofficial close of winter (February), the more active May contract continues to rally. Last Friday (February 13) saw the contract close at 63.32, just a few ticks of last week's high (and the monthly high) of 63.49. This has monthly stochastics (long-term momentum indicator) nearing a bullish crossover well below the oversold level of 20%. If this signal is established at the end of the month, it would be similar to what was seen in the corn market this past October indicating the major (long-term) downtrend that began back in March 2011 has come to an end.

But what about the new-crop December contract specifically? Similar to the major trend of the market, Dec cotton looks poised to establish a secondary (intermediate-term) uptrend on its weekly chart. The first seeds of such a move were planted the week of August 3, 2014 with an initial bullish crossover by weekly stochastics (second study). However, as is sometimes the case, this signal failed to generate strong follow-through buying despite the contract moving to a new 4-week high the week of August 24. From there the market fell back to a new low of 62.85 the week of September 28.

The following week saw Dec cotton rally, establishing a secondary bullish crossover by weekly stochastics that would presumably confirm the first change in momentum seen in August. But once again, after a few weeks of struggling to trade higher, Dec cotton posted a bearish outside week and again headed lower to eventually post a new contract low of 61.28 the week of January 18, 2015.

Here's where the contract seems to finally change its mind though. After closing near its new low that week, the contract posted a solid rally the next. As we head into mid-February Dec cotton is on the cusp of posting another new 4-week high if it can get above last week's peak of 64.37 again hinting at a secondary uptrend.

Skeptics will ask, "What makes this time different than all the other failed bullish signals?" That's a fair question, and it comes down to market structure of the contract.

Take note of the net-futures position of noncommercial traders, as reported in the weekly CFTC Commitments of Traders report released each Friday (third study, blue histogram). While the cotton market was seeing one failed bullish signal after another, this group continued to defend their net-short futures position (histogram columns down, below the dashed "0" line). This time around noncommercial traders are building a net-long futures position, reported last Friday at 23,748 contracts.

More importantly the view of expected market fundamentals has changed. The bottom study shows the trend of the December 2015 to March 2016 futures spread (green line). Notice that from August 2014 through early December 2014 the trend was down, reflecting a strengthening carry in the futures spread. However, from its low weekly close of 1.27 (week of December 7) the spread has moved into an uptrend (weakening carry), closing this past week at 0.45, just above the previous high of 0.50 (week of January 25).

With support now coming from both noncommercial and commercial traders, the new-crop Dec cotton contract could make a run at resistance between 68.50 and 72.12, prices that mark the 33% and 50% retracement levels of the previous downtrend from its contract high of 82.95 through its contract low of 61.28. The more bullish market fundamentals become (uptrend in Dec/March futures spread), the stronger the likelihood for a test of the high side of that resistance range.

One last thing: A move to the 50% retracement level by the December contract, particularly if it occurs while this contract is registering on the long-term monthly chart (most active contract), it would be a test of expected resistance between 70.47 and the July 2014 high of 73.70.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

Posted at 8:37AM CST 02/15/15 by Darin Newsom
 

Saturday 02/14/15

Weekly Analysis: Grain Markets

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.65, up $0.03 for the week. The secondary (intermediate-term) trend remains down while the minor (short-term) trend is up. Minor resistance is between $3.62 and $3.68, prices that mark the 50% and 67% retracement levels of the sell-off from $3.80 through the low of $3.44. Secondary resistance remains at $3.84 with secondary support at $3.47.

Corn (Old-crop): The March contract closed 1.50cts higher at $3.87 1/4 last week. Weekly stochastics remain bearish, indicating the secondary (intermediate-term) trend remains down. However, the March contract could post a new 4-week high this coming week, indicating a possible test of resistance near $4.04. This price marks the 38.2% retracement level of the secondary downtrend from $5.23 through the low of $3.30 1/2. The previous high was $4.17. Support remains between $3.73 3/4 and $3.63 1/2.

Corn (New-crop): The December contract closed 0.75ct higher at $4.17 1/2 last week. Weekly stochastics remain bearish indicating the secondary (intermediate-term) trend is down. However, support near $4.15 1/2 continues to hold, with next support pegged at $4.03 1/2. If the contract is able to post a new 4-week high, above last week's high of $4.21 3/4, then it could soon test secondary resistance near $4.34 1/4. The previous high was $4.40.

Soybeans (Cash): The DTN National Soybean Index (NSI.X, national average cash price) closed at $9.46, up 19 cents for the week. Weekly stochastics are neutral indicating the secondary (intermediate-term) trend remains sideways. However the latest signal generated by weekly stochastics was a bullish crossover the week of October 13. This could eventually lead to a test of the previous high of $10.02. National average basis strengthened 1 cent last week with the NSI.X 45 cents under the close of the March futures contract.

Soybeans (old-crop): The March contract closed 17.00cts higher at $9.90 1/2 last week. Weekly stochastics are neutral indicating the secondary (intermediate-term) trend is sideways. The contract could move back into an uptrend with a move to a new 4-week high, above $9.99. If so, resistance remains near $10.60 3/4, a price that marks the 38.2% retracement level of the downtrend from $12.87 1/2 through the low of $9.20 3/4. Support remains between $9.69 1/2 and $9.55 1/4.

Soybeans (new-crop): The November contract closed 11.00cts higher at $9.71 last week. Weekly stochastics are neutral indicating the secondary (intermediate-term) trend remains sideways. Support is at the 4-week low of $9.40. If the contract can move to a new 4-week high, above $9.78 1/2, it could rejoin its secondary uptrend that began the week of October 6, 2014. Secondary resistance is between $10.29 and $10.43 3/4.

Wheat (Cash): The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $5.05, up 6 cents for the week. The secondary (intermediate-term) trend remains up with initial resistance pegged at $5.18, a price that marks the 33% retracement level of the previous downtrend from $6.23 through the low of $4.66. However, given the continued strength of national average basis the SR.X could test the 50% retracement level of $5.45.

SRW Wheat (old-crop): The March Chicago contract closed 6.00cts higher at $5.33 last week. March Chicago wheat continues to consolidate, though a move to a new 4-week high could trigger a move back to its secondary (intermediate-term) uptrend that began the week of September 29, 2014. The 4-week high is $5.44 1/2. Support remains at the recent low of $4.09 1/4.

SRW Wheat (new-crop): The July Chicago contract closed 1.00ct higher at $5.32 1/4 last week. July Chicago wheat remains poised to rejoin its secondary (intermediate-term) uptrend from the week of September 29, 2014. However, it would not be surprising to see another week of consolidation for the contract with resistance at the 4-week high of $5.51 1/4 and support at the 4-week low of $5.01.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 11:14AM CST 02/14/15 by Darin Newsom
 
Weekly Analysis: Livestock Markets

Live Cattle: The April contract closed $1.25 higher at $151.025 last week. The secondary (intermediate-term) trend looks to have turned sideways. Resistance is pegged near $154.05, a price that marks the 38.2% retracement of the sell-off from $166.00 (Wave B high) through $146.65 (Wave C) low that brought about the end of the three wave downtrend from the high of $171.00. April live cattle could pull back to a test of support at $150.65, setting up a potential bullish crossover by weekly stochastics below the oversold level of 20%.

Feeder Cattle: The March contract closed $4.40 higher at $203.85 last week. The secondary (intermediate-term) trend has turned sideways. Support remains between $197.15 and $193.10, prices that mark the 61.8% and 67% retracement levels of the previous uptrend from $172.00 through the contract high of $237.80. Initial resistance is at the 4-week high of $208.375.

Lean hogs: The April contract closed $3.25 lower at $66.025 last week. The secondary (intermediate-term) trend remains down with the contract moving to a new low of $63.675. However, weekly stochastics are in single digits indicating a sharply oversold situation that could soon lead to a bullish crossover. Pressure continues to come from an increasingly bearish market view of fundamentals, as indicated by action in the April to June futures spread.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.65, up $0.03 for the week. The secondary (intermediate-term) trend remains down while the minor (short-term) trend is up. Minor resistance is between $3.62 and $3.68, prices that mark the 50% and 67% retracement levels of the sell-off from $3.80 through the low of $3.44. Secondary resistance remains at $3.84 with secondary support at $3.47.

Soybean meal: The March contract closed $2.90 higher at $332.30 last week. The secondary (intermediate-term) trend remains sideways with the March contract holding above support at $321.30 while weekly stochastics are neutral to bearish. Market volatility remains high meaning weekly price swings could remain wide. The market's inverted forward curve continues to show a bullish supply and demand situation, with pressure coming from noncommercial interests.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom


Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 10:27AM CST 02/14/15 by Darin Newsom
 
Weekly Analysis: Energy Markets

Brent Crude Oil: The spot-month contract closed $3.72 higher at $61.52. The secondary (intermediate-term) trend remains up. The spot-month contract is testing initial resistance at $62.22, the 23.6% retracement level of the previous downtrend from $117.34 through the low of $45.19. The 38.2% retracement level is up at $72.75. Weekly stochastics remain bullish.

Crude Oil: The spot-month contract closed $1.09 higher at $52.78. The secondary (intermediate-term) trend is up. Initial resistance is at the 4-week high of $54.24, then $59.78. This price marks the 23.6% retracement level of the previous downtrend from $112.24 through the low of $43.58 is up at $69.81. The 38.2% retracement level is up at $69.81. The uptrend could be limited by continued bearish fundamentals indicated by the downtrend (strengthening contango) in the nearby futures spread.

Distillates: The spot-month contract closed 13.22cts higher at $1.9714. The secondary (intermediate-term) trend is up. The spot-month contract is testing initial resistance at $1.9850, the 23.6% retracement level of the previous downtrend from $3.2668 through the recent low of $1.5890. The 38.2% retracement level is up at $2.2299. A strong uptrend in the futures spreads, reflecting an increasingly bullish supply and demand situation, should continue to provide support.

Gasoline: The spot-month contract closed 6.71cts higher at $1.6262. The secondary (intermediate-term) trend is up. The spot-month contract is moving toward a test of initial resistance at $1.7081, the 23.6% retracement level of the previous downtrend from $3.2672 through the low of $1.2265. The 38.2% retracement level is up at $2.0060.

Ethanol: The spot-month contract closed 0.30cts higher at $1.4420. The secondary (intermediate-term) remains sideways as the spot-month contract continued to consolidate. Initial resistance is at the 4-week high, now last week's high, of $1.4730. Weekly stochastics established a bullish crossover below the oversold level of 20%, indicating the secondary trend could soon turn up.

Natural Gas: The spot-month contract closed 22.5cts higher at $2.804. The secondary (intermediate-term) trend looks to have turned up last week as the spot-month contract posted a two-week key bullish reversal. A confirmation of this move could come with a move to a new 4-week high above $3.048 or a bullish crossover below 20% by weekly stochastics.

Propane (Conway cash price): Conway propane closed 5.50cts higher at $0.5600. The secondary (intermediate-term) trend remains up. Initial resistance is pegged between $0.7455 and $0.7996, the 33% and 38.2% retracement levels of the previous downtrend.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 9:30AM CST 02/14/15 by Darin Newsom
 

Sunday 02/08/15

KC (Wheat) At the Bat

Maybe it’s the fact high temperatures for much of the U.S. grain growing area is forecast to be well above freezing this week, melting some of the blanket of snow left by Winter Storm Linus, that has me thinking about baseball already. The U.S. Southern Plains, home of the bulk of the HRW wheat crop, is expected to see high temps 13 degrees to 15 degrees above normal, with parts of Oklahoma and Texas running consistently in the 70's. In February. The 70's. To heck with Punxsutawney Phil.

Source: DTN ProphetX

Is it any wonder the new-crop July Kansas City (HRW) wheat contract (KWN5) looks like it is about to get interesting?

Last week saw the KWN5 post a bullish key reversal, one of the more important technical signals I look for when it comes to changes in trend. A bullish key reversal means the contract moved to a new low, in this case $5.37, before rallying back above the previous week's high ($5.74 1/2) and closing higher for the week. Take a look at the attached chart: KWN5 posted a high of $5.76 and closed at $5.67 1/4, up 21 cents from the previous Friday's settlement. The bottomline is that KWN5 is showing that it is set to embark on a secondary (intermediate-term) uptrend, possibly leading the rest of the wheat complex higher as well.

Getting a read on the bullishness or bearishness of wheat futures spreads remains difficult due to the variable storage component, though the July to September Kansas City (bottom study, green line) continues to trend sideways at a strong carry near 11 cents. If this is indeed a reflection of bearish fundamentals, then the upside potential of this new secondary uptrend would be limited to a test of $6.31, the 33% retracement level of the downtrend from $8.20 through last week's low, with a chance of an extension to the 50% retracement level of $6.78 1/2.

For what it's worth, a similar pattern (bullish key reversal) was seen in the March Kansas City contract. With the bullish fundamentals indicated by the uptrend (weakening carry) of the March to May futures spread the upside target area would be between $6.97 1/2 and $7.52 1/2, the 50% and 67% retracement levels of that contract's previous downtrend from $8.62 through its low last week of $5.33.

Weekly stochastics for the July Kansas City contract are nearing a bullish crossover below the oversold level of 20%; another signal that if/when established over the coming weeks would confirm the secondary uptrend indicated by the key bullish reversal.

Maybe KC (wheat) strikes out again, as the feared baseball player did in the legendary poem. But for now it looks like HRW wheat, both new-crop and old-crop, are ready to round the bases.

Man I'm looking forward to baseball season.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

Posted at 5:03AM CST 02/08/15 by Darin Newsom
 

Saturday 02/07/15

Weekly Analysis: Grain Markets

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.62, up $0.18 for the week. Weekly stochastics are neutral to bearish, indicating the secondary (intermediate-term) trend remains down. However, the NCI.X looks to be moving into its seasonal rally lasting through the first weekly close of March. If so it could establish a double-top formation near resistance at $3.84, the 50% retracement level of the downtrend from $4.186 through the low of $2.81. The previous high was $3.80 the week of December 22. Despite a rally in the futures market, national average basis firmed 2 cents last week with the NCI.X 24 cents under the close of the March contract. The combination of stronger basis and a rallying futures market reflects increased commercial demand.

Corn (Old-crop): The March contract closed 15.75cts higher at $3.85 3/4 last week. Weekly stochastics are bearish, indicating the secondary (intermediate-term) trend remains down. However, the March contract has been able to rally off its test of support near $3.63 1/2 (posting a low of $3.65 3/4 the week of January 25). Friday's higher close could be the first of a classic three week move against the trend, fitting with the market's seasonal tendency to rally through the first weekly close of March. If so March corn could test resistance near $4.04, a price that marks the 38.2% retracement level of the downtrend from $5.23 through the low of $3.30 1/2, with a move to its previous high of $4.17 less likely. Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long holdings by 40,224 contracts, with an increase of 41,854 contracts in short futures.

Corn (New-crop): The December contract closed 16.00cts higher at $4.16 3/4 last week. Weekly stochastics are bearish indicating the secondary (intermediate-term) trend remains down. However, the contract's 10-year seasonal index shows a tendency for a rally extending through mid-June. Given the neutral view of new-crop fundamentals indicated by the uptrend (weakening carry) in the December 2015 to March 2016 futures spread, Dec corn could see a rally against its downtrend resulting in a test of its previous high of $4.40 (week of December 29). Resistance is between $4.34 and $4.50, prices that mark the 50% and 61.8% retracement levels of the downtrend from $5.04 through the low of $3.64 1/4.

Soybeans (Cash): The DTN National Soybean Index (NSI.X, national average cash price) closed at $9.27, up 14 cents for the week. Weekly stochastics are neutral to bearish, indicating the secondary (intermediate-term) trend remains sideways to down. However, the NSI.X continues to hold above technical support at $9.01, a price that marks the 67% retracement level of the rally from $8.50 through $10.02. The March to May futures spread continues to trend sideways at a neutral level of carry, while national average basis strengthened by about 2 cents last week. Friday's NSI.X was 46 cents under the close of the March futures contract. This support from the commercial side of the market could allow the NSI.X to test minor (short-term) resistance at $9.57. It should also be note that the NSI.X posted a bullish key reversal last week, indicating a possible move back to a secondary uptrend in the coming weeks.

Soybeans (old-crop): The March contract closed 12.50cts higher at $9.73 1/2 last week. Weekly stochastics are neutral to bearish indicating the secondary (intermediate-term) trend remains sideways to down. However, March soybeans closed back above technical support near $9.69 1/2, a price that marks the 67% retracement level of the rally from $9.20 3/4 through the high of $10.66 3/4. Last week's rally could be the start of a move to renew the secondary uptrend that started with the bullish crossover by stochastics the week of October 6, 2014. Given the neutral carry in the old-crop forward curve (March through July contracts), the upside target remains resistance between $10.60 and $11.04. Friday's CFTC Commitments of Traders report showed noncommercial interests decreasing their net-short futures position by 7,241 contracts, with an increase of 9,421 contracts of long futures.

Soybeans (new-crop): The November contract closed 14.25cts higher at $9.60 last week. Weekly stochastics are neutral to bearish indicating the secondary (intermediate-term) trend remains sideways to down. The range of the secondary sideways trend remains wide, with support at the contract low of $9.27 1/2 and resistance near $10.29, the 33% retracement level of the previous downtrend from $12.32 through the contract low. The last major signal by weekly stochastics was a bullish crossover the week of October 6, 2014, meaning the contract could look to renew its seasonal uptrend.

Wheat (Cash): The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $4.99, up 26 cents for the week. The SR.X posted a bullish key reversal, trading well outside the previous week's range before closing at its weekly high indicating the secondary (intermediate-term) trend has turned up. Friday's settlement also sets the stage for a possible island reversal if the SR.X posts a breakaway gap next week, in combination with the exhaustion gap between $5.01 and $4.91 left the weeks of January 19 and January 26. National average SRW basis firmed 2 cents last week, with the SR.X priced 28 cents under the close of the March futures contract. Stronger basis combined with the strong uptrend (weakening carry) in the March to May futures spread indicates commercial support could continue to push the cash market higher.

SRW Wheat (old-crop): The March Chicago contract closed 24.25cts higher at $5.27 last week. March Chicago wheat came up just short of establishing two important technical signals last week: 1 cent from trading above the previous week's high, establishing a bullish key reversal; and weekly stochastics a few percentage points away from a bullish crossover below the oversold level of 20%. Despite that Chicago wheat looks more bullish and in position to establish a secondary (intermediate-term) uptrend. The March to May futures spread is in a strong uptrend (weakening carry) reflecting solid commercial support. Friday's CFTC Commitments of Traders report showed noncommercial interests increasing their net-short futures position by 19,288 contracts, though this group was likely covering some of this position late in the week.

SRW Wheat (new-crop): The July Chicago contract closed 19.75cts higher at $5.31 1/4 last week. July Chicago wheat looks to be in the process of moving to a secondary (intermediate-term) uptrend. Last week's action saw the July Chicago establish a double-bottom in conjunction with its contract low of $4.96 1/2 (September 22, 2014) by posting a low of $5.01 before rallying. Weekly stochastics are below the oversold level of 20% and nearing a bullish crossover. Support continues to come from commercial buying, as indicated by the weakening carry in the new-crop (July 2015 to May 2016) forward curve.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 3.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 10:09AM CST 02/07/15 by Darin Newsom
 
Weekly Analysis: Livestock Markets

Live Cattle: The April contract closed $1.25 lower at $151.025 last week. While technical indicators continue to show the secondary (intermediate-term) trend is down, the contract still looks to have established its Wave C (Elliott Wave theory) low near support at $145.825. This price marks the 61.8% retracement level of the previous uptrend from $130.20 through the high of $171.10. While the futures contract continues to consolidate above technical support, weekly stochastics are nearing a bullish crossover below the oversold level of 20%. While the April to June futures spread continues to reflect a bullish supply and demand situation, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 6,051 contracts.

Feeder Cattle: The March contract closed $5.75 lower at $199.45 last week. The secondary (intermediate-term) trend remains down. However, the March contract continues to find support near $193.90, a price that marks the 67% retracement level of the previous uptrend from $172.00 through the high of $237.80. Weekly stochastics are nearing a bullish crossover, a signal that would indicate the downtrend has come to an end and the market has moved into either a sideways trend or possibly an uptrend. Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 1,975 contracts.

Lean hogs: The April contract closed $2.975 lower at $69.275 last week. All indications are that the contract remains in a secondary (intermediate-term) downtrend. However, April lean hogs were able to post a solid rally off last week's new low of $66.15, putting weekly stochastics in position to establish a bullish crossover below the oversold level of 20% in the coming weeks. If this occurs the trend could be viewed as sideways, and depending on action in the contract itself, possibly move to an uptrend. Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 602 contracts.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.62, up $0.18 for the week. Weekly stochastics remain neutral to bearish, indicating the secondary (intermediate-term) trend remains down. However, the NCI.X looks to be moving into its seasonal rally lasting through the first weekly close of March. If so it could establish a double-top formation near resistance at $3.84, the 50% retracement level of the downtrend from $4.186 through the low of $2.81. The previous high was $3.80 the week of December 22. Despite a rally in the futures market, national average basis firmed 2 cents last week with the NCI.X 24 cents under the close of the March contract. The combination of stronger basis and a rallying futures market reflects increased commercial demand.

Soybean meal: The March contract closed $0.50 lower at $329.40 last week. The secondary (intermediate-term) trend remains sideways with the March contract holding above support at $321.30 while weekly stochastics are neutral to bearish. Market volatility remains high meaning weekly price swings could remain wide. The market's inverted forward curve continues to show a bullish supply and demand situation, with pressure coming from noncommercial interests. Friday's CFTC Commitments of Traders report showed this group reducing their net-long futures position by 7,782 contracts.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 3.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom


Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 8:32AM CST 02/07/15 by Darin Newsom
 
Weekly Analysis: Energy Markets

Brent Crude Oil: The spot-month contract closed $4.81 higher at $57.80. The secondary (intermediate-term) trend is up. The spot-month contract moved to a new 4-week high of $59.06 last week, confirming the bullish crossover by stochastics the week of January 12. Initial resistance is pegged at $62.22, the 23.6% retracement level of the previous downtrend from $117.34 through the low of $45.19. The 38.2% retracement level is up at $72.75.

Crude Oil: The spot-month contract closed $3.45 higher at $51.69. The secondary (intermediate-term) trend is up. The spot-month contract moved to a new 4-week high of $54.24, confirming the bullish crossover by stochastics the week of January 26. The last two weeks have also established, though not to the letter of the definition, a 2-week key reversal. The initial rally could be limited to the 23.6% retracement level of $59.78 by bearish fundamentals, indicated by the continued downtrend (strengthening contango/carry) in the nearby futures spread. Also, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 2,075 contracts. The 38.2% retracement level of the previous downtrend from $112.24 through the recent low of $43.58 is up at $69.81.

Distillates: The spot-month contract closed 15.28cts higher at $1.8391. The secondary (intermediate-term) trend is up. The spot-month contract posted a new 4-week high of $1.8747, confirming the bullish crossover by stochastics the week of January 12. Support continues to come from commercial traders, as indicated by the solid uptrend (strengthening backwardation/inverse) in the nearby futures spread. However, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 4,293 contracts. Initial resistance is pegged at $1.9850, the 23.6% retracement level of the previous downtrend from $3.2668 through the recent low of $1.5890. The 38.2% retracement level is up at $2.2299.

Gasoline: The spot-month contract closed 14.39cts higher at $1.4491. The secondary (intermediate-term) trend is up. The spot-month contract posted a number of bullish signals last week. First, it left a breakaway gap above the previous week's high of $1.4475, establishing a new 4-week high of $1.6260. This confirms the bullish crossover by stochastics established the week of January 12. Friday's CFTC report showed noncommercial interests reducing their net-long futures position (early in the week) by 1,196 contracts. Bearish fundamentals indicated by the downtrend (strengthening contango/carry) in the nearby futures spread) could limit the rally to $1.7081, the 23.6% retracement level of the previous downtrend from $3.2672 through the low of $1.2265. The 38.2% retracement level is up at $2.0060.

Ethanol: The spot-month contract closed 7.20cts higher at $1.4390. The secondary (intermediate-term) is sideways as the spot-month contract continued to consolidate. A breakout above the 4-week high of $1.5040 would confirm the bullish crossover by stochastics established last week indicating a move to an uptrend. If this occurs, initial resistance is pegged at $2.0532, the 33% retracement level of the previous downtrend from $3.5780 through the recent low of $1.2920.

Natural Gas: The spot-month contract closed 11.2cts lower at $2.579. The secondary (intermediate-term) trend remains down as the spot-month contract posted a new low of $2.567 last week. Weekly stochastics are below the oversold level of 20% indicating the market is in an oversold situation. Pressure continues to come from commercial traders, as indicated by the sharp downtrend (strengthening contango/carry) in the nearby futures spread. Also, Friday's CFTC Commitments of Traders report showed noncommercial interests increasing their net-short futures position by 12,233 contracts to a total of 241,077 contracts. This is the largest net-short futures position held by this group since the week of March 14, 2011.

Propane (Conway cash price): Conway propane closed 5.63cts higher at $0.5050. The secondary (intermediate-term) trend is now up as the spot- month contract took out the previous 4-week high of $0.4850. This confirms the bullish crossover by stochastics the week of January 12. The initial upside target is $0.7455, the 33% retracement level of the previous downtrend.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 3.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 7:51AM CST 02/07/15 by Darin Newsom
 

Monday 02/02/15

It's Groundhog Day So the Dow Must Be Going Down Again

If it was any other market, my analysis of the attached chart would conclude that the underlying market was set for a sharp sell-off. But in this particular case we are talking about the Dow Jones Industrial Average (DJIA), a market that has proven its bullish resiliency over time. Followers of this blog might recall the last time I wrote about the Dow, oddly enough almost exactly a year ago ("The Dow: Singing a Familiar Springsteen Tune"). By the time February 2014 came to a close the DJIA had regained its strength.

Source: DTN ProphetX

This time around the tune is the same but the picture is different. The end of January saw the DJIA close at 17,828.24, just off its monthly high of 17,894.83. During December the Dow moved to a new high of 18,013.45, take out the December low of 17,278.36, before closing slightly lower (for the month) at 17,823.07. If you reread the December description carefully, it has all the characteristics of a classic bearish key reversal. The fact that trade during January remained volatile, with the DJIA closing near its monthly low of 17,136.30 with a settlement of 17,164.95 seems to confirm the idea the Dow has established a top.

I know, this is becoming as repetitive as Punxsutawney Phil seeing his shadow, but February 2015 is again showing signs that the DJIA should see a hard fall. Using Dow Theory, the initial target price would be the 33% retracement level of 14,229.49. The interesting thing about that is it's between pockets of previous trade, highs near 13,300 from March 2012 through December 2012 and lows near 14,700 from May 2013 through October 2013. Generally speaking, retracement levels tend to line up with these previous pockets of trade.

The 50% retracement level of 12,886.70 is a closer fit, but still not ideal. And it is hard to imagine an analyst wanting to go on record saying the DJIA is set for a 5,800 point sell-off. Nevertheless, the chart speaks for itself and seems to be saying 2015 should see increased pressure in equities. We'll see. It's possible I'll be saying this same thing again next Groundhog Day.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

Posted at 8:11AM CST 02/02/15 by Darin Newsom
 

Sunday 02/01/15

Monthly Analysis: Grain Markets

Corn (Futures): The March contract closed at $3.70, 27cts lower on the monthly chart. Despite the lower close the major (long-term) trend remains up. The sell-off since the December high of $4.17 has resulted in a test of support near $3.67 3/4, a price that marks the 50% retracement level of the rally from the October 2014 low of $3.18 1/4. March corn is expected to test next support at the 61.8% retracement level of $3.56 during February.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.44, down 20 cents for the month. The major (long-term) trend remains up. The sell-off since the December high of $3.80 has resulted in a test of support at $3.47, the 33% retracement level of the uptrend from $2.81 (October 2014). The NCI.X is expected to test the 50% retracement level of $3.31 during February.

Soybeans (Futures): The March contract closed at $9.61, 62.50cts lower on the monthly chart. Monthly stochastics have turned neutral again, setting the stage for a possible test of the previous low of $9.04 from October 2014. The bullish key reversal established that month remains in effect meaning the major (long-term) trend is up.

Soybeans (Cash): The DTN National Soybean Index (NSI.X, national average cash price) closed at $9.13, down 55cts for the month. Monthly stochastics have turned neutral, indicating the major (long-term) trend is now sideways. Support is at $8.50 (low from October 2014) with resistance at $10.08 (high from November 2014).

SRW Wheat (Futures): The March Chicago contract closed at $5.07 3/4, 87cts lower on the monthly chart. The major (long-term) trend is now sideways following a bearish crossover by monthly stochastics above the oversold level of 20%. This could lead to a test of support at the previous low of $4.66 1/4 (September 2014).

Wheat (Cash): The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $4.73, down 84cts for the month. A bearish crossover above the oversold level of 20% by monthly stochastics indicates the major (long-term) trend has turned sideways between the low of $4.25 (September 2014) and high of $6.23 (December 2014).

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom


Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 6:03AM CST 02/01/15 by Darin Newsom
 
Monthly Analysis: Livestock Markets

Live Cattle: The February contract closed at $146.65, down $11.275 on the monthly chart. The major (long-term) trend remains down following the bearish crossover by monthly stochastics at the end of December. Initial support is pegged between $141.85 and $137.30, prices that mark the 33% and 38.2% retracement levels of the previous major uptrend from $79.975 (March 2009) through the high of $172.75 (November 2014).

Feeder Cattle: The March contract closed at $205.20, down $12.125 on the monthly chart. The market extended its major (long-term) downtrend established with the bearish crossover of monthly stochastics at the end of October 2014. The January low of $195.40 was a test of initial support near $192.40, a price that marks the 33% retracement level of the previous major uptrend from $85.50 (December 2008) through the high of $245.75 (October 2014). If the market is able to rally, initial resistance is between $212.15 and $220.575.

Lean Hogs: The April contract closed at $72.25, down $8.95 on the monthly chart. The major (long-term) trend remains down with the more active April contract settling below support near $73.15. This price marks the 67% retracement level of the previous major uptrend from $43.05 (August 2009) through the high of $133.425 (March 2014). Monthly stochastics are below the oversold level of 20% indicating that the market could begin to stabilize above next support near $64.375, the 76.4% retracement level.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.44, down 20 cents for the month. The major (long-term) trend remains up. The sell-off since the December high of $3.80 has resulted in a test of support at $3.47, the 33% retracement level of the uptrend from $2.81 (October 2014). The NCI.X is expected to test the 50% retracement level of $3.31 during February.

Soybean meal: The March contract closed at $329.90, down $17.70 on the monthly chart. Monthly studies remain a mix of signals with the bullish key reversal at the end of October indicating a major (long-term) uptrend while the last crossover by stochastics was bearish (above 80%) at the end of September 2012. March bean meal closed below support at $335.90, setting up a possible test of its recent low of $295.10.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

Posted at 6:02AM CST 02/01/15 by Darin Newsom
 
Monthly Analysis: Energy Markets

Brent Crude Oil: The spot-month contract closed at $52.99, down $4.34 on the monthly chart. While the major (long-term) trend remains down, the rally late in the month had stochastics nearing a bullish crossover well below the oversold level of 20%. This would indicate the market could start to stabilize, and possibly turn bullish by the end of February. The spot-month is below support at $57.96, the 76.4% retracement level of the previous major uptrend from $36.20 (December 2008) through the high of $128.40 (March 2012).

Crude Oil: The spot-month contract closed at $48.24, down $5.03 on the monthly chart. As with Brent crude, the major (long-term) trend remains down though the late month rally brought stochastics close to a bullish crossover below the oversold level of 20%. This would indicate that the market could begin to stabilize above its January low of $43.58. The spot-month contract is below support at $51.91, a price that marks the 76.4% retracement level of the previous major uptrend from $32.48 (December 2008) through the high of $114.83 (May 2011).

Distillates: The spot-month contract closed at $1.6863, down 16.03cts on the monthly chart. A rally late in the month brought the spot-month contract back above support at $1.6550, a price that marks the 76.4% retracement level of the previous major (long-term) uptrend from $1.1252 (March 2009) through the high of $3.3700 (January 2014). Weekly stochastics are nearing a bullish crossover well below the oversold level of 20%, indicating the major trend may be turning sideways. If so, look for the spot-month contract to hold above the January low of $1.5890 as it builds toward a possible uptrend in the months ahead.

Gasoline: The spot-month contract closed at $1.4152, down 2.01cts on the monthly chart. While the major (long-term) trend remains down, technical indicators are showing the market could be stabilizing. The spot-month contract posted a late month rally to finish near technical price support at $1.4208, a price that marks the 76.4% retracement level of the previous major uptrend from $0.7850 (December 2008) through the high of $3.4789 (April 2011). Monthly stochastics remain bearish, but below the oversold level of 20%.

Ethanol: The spot-month contract closed at $1.367, down 26.0cts on the monthly chart. The major (long-term) trend remains down as the spot-month contract posted a new low of $1.292 during January. Monthly stochastics remain bearish, but are well below the oversold level of 20% setting up a potential bullish crossover in the coming months.

Natural Gas: The spot-month contract closed at $2.691, down 19.8cts on the monthly chart. The major (long-term) trend remains down as the spot-month contract posted a new low of $2.637 during January. Major support remains at the previous low of $1.902 (April 2012). Monthly stochastics are below the oversold level of 20% setting the stage for a potential bullish crossover in the coming months.

Propane (Conway cash price): Conway propane closed at $0.4887, up 3.87cts on its monthly chart. The major (long-term) trend appears to have turned sideways with cash propane holding above its December low of $0.4000 during January. With monthly stochastics deep in single digits the market is in position to establish a major uptrend, possibly in February.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

Posted at 6:01AM CST 02/01/15 by Darin Newsom
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