Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 04/13/14

Ag Markets: Weekly Analysis

Corn: The July contract closed 3.00cts lower. A bearish crossover by weekly stochastics above the overbought level of 80% last week indicates the secondary (intermediate-term) trend has turned down. However, the major (long-term) trend on the monthly chart remains up. Given the neutral to bullish commercial outlook indicated by old-crop futures spreads the expected sell-off in the more active July contract should find support between $4.90 and $4.73, prices that mark the 33% and 50% retracement levels of previous uptrend from $4.21 3/4 and last week's high of $5.24 1/4.

New-crop Corn: The December contract closed 7 1/2 cents lower. A bearish crossover by weekly stochastics above the overbought level of 80% indicates the secondary (intermediate-term) trend has turned down. The neutral carry in the new-crop futures spread implies a possible 50% retracement of the previous uptrend from $4.35 through last week's high of $5.17 puts the downside target at $4.76.

Soybeans: The July contract closed 7.75cts lower. While weekly stochastics indicate old-crop soybeans could move into a sideways trend, this same technical study (stochastics) is nearing a bearish crossover above the overbought level of 80%. Given the weakening commercial outlook and continued noncommercial long-liquidation shown in weekly CFTC Commitments of Traders reports, the July contract could soon test support between $13.86 3/4 and $13.35. These prices mark the 33% and 50% retracement levels of the previous uptrend from $11.80 and $14.90. Major (long-term) resistance on the monthly chart at $14.75 3/4 has held so far.

New-crop Soybeans: The November contract closed 6 3/4 cents higher. The secondary (intermediate-term) trend remains up, though weekly stochastics are well above the overbought level of 80% as the contract tests resistance between $12.10 3/4 and $12.39 1/2. This combination increases the contract's likelihood of establishing a top in the near future. The new-crop November to January futures spread has seen its carry strengthen slightly, though last week's close of 5 1/2 cents remains on the border of a bullish level of total cost of carry. If the contract does establish a secondary downtrend, support is pegged between $11.85 1/2 and $11.61 1/4.

Wheat: The new-crop July Kansas City contract closed 12.50cts lower. Weekly stochastics show the secondary (intermediate-term) trend remains sideways to up. The July KC contract dipped below initial support at $7.29 1/2, a price that marks the 33% retracement level of its previous rally from $5.99 through the recent high of $7.94 1/2, though this could prove to be nothing more than a normal (for wheat futures) head fake. If so, look for a return rally back to a test of resistance at $7.77 3/4. However, the trend in the July to September futures spread has turned down, reflecting an increasingly bearish and counter-intuitive commercial outlook. If the contract does move lower, next support is at the 50% retracement level of $6.96 3/4.

Cotton: The July contract closed 2.22cts lower. Bearish weekly stochastics indicate the secondary (intermediate-term) trend remains down with the July contract testing initial support between 90.43 and 89.49, the 33% and 38.2% retracement levels of the previous uptrend from 77.74 through the recent high of 96.76. However, given the sharp downtrend (strengthening carry) in the old-crop May to July futures spread, the July contract should test support at the 50% retracement level of 87.25 and possibly the 67% retracement level of 84.07. Seasonally the futures market tends to trend down through late July, dropping an average of 24% from early April (weekly close only).

New-crop Cotton: The December contract closed 1.55cts higher. The secondary (intermediate-term) trend remains up. However, weekly stochastics are near 90% or higher indicating a sharply overbought situation as the contract tests resistance at 91.89. This price marks the 61.8% retracement level of the previous downtrend from 86.00 through the low of 75.25. While the weekly CFTC Commitments of Traders reports showed noncommercial interests liquidating some of their net-long futures position (in cotton in general), the strengthening inverse in the new-crop December to March futures spread indicates continued support from commercial traders. This could push the Dec contract to a test of resistance at the 67% retracement level of 82.42, if not beyond.

Live Cattle: The June contract closed 0.975 higher. Despite the higher close for the week the secondary (intermediate-term) trend remains down. If the contract continues its rally, resistance is between $135.90 and $136.675, the 33% and 50% retracement levels of the initial sell-off from $139.00 through last week's low of $134.35. The structure of the market is showing a divergence with noncommercial traders adding to their net-long futures position while the weakening June to August futures spread reflects a less bullish commercial outlook. Eventually this should lead to a test of secondary support between $133.20 and $130.275, roughly the 33% and 50% retracement levels of the previous uptrend from $121.575 through the high of $139.00.

The most recent CFTC Commitments of Traders report was for positions held as of Tuesday, April 8.

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

Posted at 10:54AM CDT 04/13/14 by Darin Newsom
 

Saturday 04/12/14

Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $0.61 higher. The secondary (intermediate-term) trend remains sideways. Support is pegged at $104.62, a price that marks the 61.8% retracement level of the previous uptrend from $96.75 through the high of $117.34. Resistance is at the recent high of $112.39.

Crude Oil: The spot-month contract closed $2.60 higher. The secondary (intermediate-term) trend on the weekly chart is sideways to up. The spot-month contract is testing resistance between $104.22 and $105.25, the 61.8% and 67% retracement levels of the previous downtrend from $112.24 through the low of $91.24. Weekly stochastics are nearing the oversold level of 80%.

Distillates: The spot-month contract closed 2.53cts higher. The secondary (intermediate-term) trend remains sideways. The spot-month contract is priced near longer-term trendline support, pegged this coming week at $2.9102. However, weekly stochastics are below 20% and indicating an oversold situation and nearing a bullish crossover. This could lead to the establishment of a secondary uptrend in the near future.

Gasoline: The spot-month contract closed 8.31cts higher. The secondary (intermediate-term) trend remains sideways to up. As expected, the spot-month contract is testing resistance between $3.0099 and its previous high of $3.0558. Meanwhile, weekly stochastics are approaching the overbought level of 80%. The market could extend this rally to a test of major (long-term) resistance at $3.1343.

Natural Gas: The spot-month contract closed 5.6cts lower. While the secondary (intermediate-term) trend remains down, the spot-month contract has rallied off its recent test of support between $4.414 and $4.249. This could lead to a retracement rally to test resistance at $5.089, the 38.2% level of the sell-off from $6.493 through the recent low of $4.221.

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

Posted at 7:14AM CDT 04/12/14 by Darin Newsom
 

Friday 04/11/14

The US Dollar Index and Grains

While the U.S. dollar index doesn't seem to have the influence on most commodities that it has had in the past, there is still a great deal of interest in what would happen if the greenback continued to weaken. To answer that, we need to have an idea of just how much further the index could slide.

Source: DTN ProphetX

A look at its weekly chart shows the USDX into to be nearing secondary (intermediate-term) technical support, first at its recent series of lows

79.280 and 79.268, then at its previous low of 78.998 (week of October 21, 2013). On its long-term monthly chart (not shown) technical support is at 78.725, a level that marks the 50% retracement of the previous uptrend from 72.696 (May 2011) through the high of 84.753 (July 2013). It is interesting to note that this long-term support level held the lows of a consolidation period from September 2012 through February 2013, and the previous mentioned low that occurred in October 2013.

If we look at the DTN National Indexes (national average cash prices) for grains going back to last October; cash corn was near $4.20, cash soybeans near $12.60, and cash SRW wheat near $6.55. By comparison Thursday's calculations had these indexes at $4.68, $14.39, and $6.39 respectively. If we are looking for a connection on the weekly chart, a continued sell-off in the U.S. dollar index would seem to have little effect on cash grains.

However, if we extend our study out to the monthly chart and look at average prices for the DTN Indexes as the U.S. dollar index consolidated near the previously mentioned long-term support (September 2012 through February 2013), the picture is far different. Cash corn averaged approximately $7.30, cash soybeans $14.59, and cash SRW wheat $7.85.

Does this suggest that a dip in the dollar equates to $7.00 corn? Not necessarily.

We need to keep in mind that grains, like most commodities, will be driven by their own underlying fundamentals. Using corn as an example, if demand continues to strengthen and ending stocks tighten as much as USDA projected in its April Supply and Demand report (ending stocks of 1.331 bb, ending stocks to use of 9.9%) then there is a good chance corn continues to extend its recently established major (long-term) uptrend, discussed in the April 1 Technically Speaking blog.

However, if corn demand comes in below current projections, with Q2 stocks implying a 1.475 bb ending stocks figure, then corn could just as easily pull back to projected technical support near $4.63. The bottom line is that the next move in grains probably won't be tied to the U.S. dollar index, but to commercial outlooks shown to us in the futures spreads.

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Posted at 6:45AM CDT 04/11/14 by Darin Newsom
 

Thursday 04/10/14

The Technically Sound Gold Market

Some of you may know that I take part in a weekly gold market survey put together by Kitco News. This survey compiles opinions of a number of different market analysts, both fundamental and technical, answering the simply questions of "What direction do you see the market going" and "Why". While I don't know the actual makeup of the panel surveyed, there is part of me that believes I, as a technical analyst, am usually in the minority.

Source: DTN ProphetX

But that may be a point in my favor, for the gold market has been closely following its technical patterns for quite some time. Take a look at the price chart (top study) for the more active June contract. Notice that after it peaked at $1,392.20 (week of March 17, 2014) the contract took out the previous week's low of $1,328.00 before closing lower for the week.

All together now: What pattern does that establish? A BEARISH KEY REVERSAL! Very good, you've done your homework. Anyway, this pattern usually indicates a key turning point, as its name would suggest, with this example being no exception. From that week forward the June gold contract fell to a low of $1,277.40 (week of March 31, 2014) with a low weekly close of $1,294.30.

Do you notice anything interesting about those last two prices? Take another look at the weekly chart. The initial sell-off resulted in a 50% retracement of the previous secondary (intermediate-term) uptrend from $1,186.70 (week of December 30, 2013) through the high the week of March 17.

From there, the June contract has rallied to a high of $1,324.90 this week. Again the weekly chart is playing out as expected. Given its history the contract should make a high near $1,334.80, the 50% retracement of the initial sell-off, before turning lower.

Weekly stochastics (bottom study) have also done a good job of indicating changes in trend. Note that when the low of $1,186.70 was established the week after a bullish crossover by stochastics (faster moving blue line crossing above the slower moving red line) below the oversold level of 20%. Subsequently, when the contract established its bearish key reversal, weekly stochastics saw a bearish crossover (faster moving blue line crossing below the slower moving red line) above the overbought level of 80%.

The recent rally in the June contract hasn't created much of a change in weekly stochastics, implying that after the expected test of the 50% retracement level, gold should resume its secondary downtrend. The major (long-term) trend on the monthly chart remains up following a bullish crossover by monthly stochastics this past February, with technical support pegged between $1,287.00 and $1,262.10.

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

Posted at 8:27AM CDT 04/10/14 by Darin Newsom
 

Wednesday 04/09/14

July KC Wheat's Technical Picture

If you look at the DTN Winter Wheat Crop Condition Index chart posted in the Grains segment Wednesday one would almost immediately turn bullish July KC (HRW). However, the contract's weekly chart paints a somewhat different picture.

Source: DTN ProphetX

Weekly price action (top chart) shows the contract has fallen back from its recent high, to the point of testing initial support near $7.29 1/2. This price marks the 33%* retracement level of the previous uptrend from $5.99 through the high of $7.94 1/2. Notice that there were two weeks where the contract posted highs above resistance near $7.77 3/4, a price that marks the longer-term 67% retracement level of the previous downtrend from $8.67 through the $5.99 low, but the contract did not close above this resistance.

Also, weekly stochastics are near the overbought level of 80%, but have not established a bearish crossover above this level. This means that the contract could rally again, with another test of the $7.77 3/4 level expected. To push past this mark the contract will need to see increased support from both commercial and noncommercial traders.

In regards to the latter, this group has been building its net-long futures position of late, with last Friday's CFTC Commitments of Traders report (as of Tuesday, April 1) showing an increase of 3,394 contracts from the previous week to 35,486 contracts. However, market volatility (bottom study) has also been on the rise, sitting at almost 20.5%. Usually, noncommercial traders are reluctant to add substantially to positions at times of elevated market volatility, unless market fundamentals dictate otherwise.

In this case, that means the commercial outlook needs to grow more bullish. Again, based solely on crop conditions that would seem to be a no-brainer, but a look at the trend in the July to September futures spread (second study, green line) would suggest otherwise. Notice that recent weeks have seen the spread trend down, falling from a carry of only 3 cents (in conjunction with the high in July futures contract of $7.94 1/2) to this week's 7 3/4 cents. Based on a standard cost of carry table, questionable at best given the ongoing issue of variable storage rates, the 7 3/4 cents amounts to roughly 56% of full commercial carry, a neutral level. This would imply that the market has already priced in the worsening conditions, and is fully cognizant of the lack of correlation between initial condition numbers and final yield.

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 8:20AM CDT 04/09/14 by Darin Newsom
Comments (1)
Update: As discussed in the blog post, the July Kansas City wheat contract has tested support near the $7.29 1/2 level.
Posted by DARIN NEWSOM at 12:18PM CDT 04/10/14
 

Monday 04/07/14

Nov Beans at Key Point

One look at the weekly chart for the new-crop November soybean contract and a number of technical factors jump out at you. First, the contract itself is locked on tight to resistance near $12.10 3/4, a price that marks the 50% retracement level of the previous downtrend from $13.33 through the low of $10.88 1/4. This after posting a bullish outside week last week (the contract traded below the previous week's low, above the previous week's high, before posting a higher weekly close).

Source: DTN ProphetX

Meanwhile, weekly stochastics (bottom study) are showing the market to be overbought above the 80% mark and poised for a possible downturn. Also, the carry in the November to January futures spread (second study, green line) continues to hold near the 4 1/2 cent level, reflecting a bullish commercial outlook toward new-crop soybeans.

So what can we make of all of this? The combination of last week's bullish pattern (bullish outside week) and still bullish futures spreads should spark an extended rally to test resistance between $12.39 1/2 and $12.51 1/2, prices that mark the 61.8% and 67% retracement levels of the previously mentioned downtrend. This would fit with the five-year seasonal index for November soybeans (not shown) that shows the contract tends to rally 11% from the first week of April (last week's close) through the end of August.

However, noncommercial traders could start to back out of the market given the overbought look to weekly stochastics. That could make it difficult for the contract to push much above the upper retracement levels initially.

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


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 8:24AM CDT 04/07/14 by Darin Newsom
 

Sunday 04/06/14

Ag Markets: Weekly Analysis

Corn: The May contract closed 9.75cts higher. The secondary (intermediate-term) trend on the weekly chart is sideways to up. The May contract posted a bullish outside week last week, closing on initial resistance at $5.01 3/4. Friday's CFTC Commitments of Traders report showed noncommercial traders adding to their net-long position by another 50,036 contract, putting the total at 308,663 contracts. This is their largest net-long position since early December 2012. However, weekly stochastics are indicating the contract is sharply overbought and due for a sell-off. Also, the carry in the nearby May to July futures spread is strengthening, with Friday's close of 5 3/4 cents approximately 45% of full cost of carry, a neutral level. Given this structure, the contract could be hard pressed to extend its rally to the next targeted resistance of $5.45 1/2.

Soybeans: The May contract closed 37.25cts higher. The secondary (intermediate-term) trend has turned up again. Renewed noncommercial buying saw this group adding only 5,156 contracts to their net-long position, leaving the total well below its recent high of 211,816 contracts (week of February 23, 2014). The May contract is testing major (long-term) resistance on the market's monthly chart at $14.75 3/4 while weekly stochastics show the contract to be sharply overbought. The commercial outlook remains bullish, though the inverse in the nearby May to July futures spread had been weakening and is in position to test support at the 16 3/4 cent level (weekly close only). Increased pressure from commercial traders could soon lead to a sell-off on the weekly chart.

Wheat: The Chicago July contract closed 22.75cts lower. The secondary (intermediate-term) trend on the weekly chart has turned sideways to down. Weekly stochastics saw bearish crossover below the overbought level of 80%, indicating the contract could slide lower. Initial support is pegged near $6.69 1/4, a price that marks the 33% retracement level of the previous rally from $5.57 1/4 through the recent high of $7.25 1/4. Given the strengthening carry in the July to September futures spread, the contract could test the 50% retracement level of $6.41 1/4. Longer-term resistance remains at $7.07 1/2, the 50% retracement level of the previous downtrend from $8.57 3/4 through the low of $5.57 1/4.

Cotton: The May contract closed 1.34cts lower. The secondary (intermediate-term) trend has turned down. As discussed in this space last week, the bullish outside week leading to a close just over unchanged turned into what looks to be a spike high as weekly stochastics established a bearish crossover above 80%. Noncommercial traders reportedly trimmed their net-long futures by 1,187 contracts. The May contract is testing initial support at 90.63, a price that marks the 33% retracement level of the previous uptrend from 77.18 through the high of 97.35. However, given the strengthening carry in the nearby May to July futures spread reflecting increased pressure from commercial traders, the contract should test at least the 50% retracement level of 87.27 if not the 67% level of 83.90.

Live Cattle: The June contract closed 3.550 lower. The market moved back into a secondary downtrend last week, building on the bearish key reversal seen two weeks prior, a move confirmed by a bearish crossover in weekly stochastics above the overbought level of 80%. While the June to August spread continues to show a bullish commercial outlook, this spread has weakened of late. This would imply the June contract should test initial support near $133.20, the 33% retracement level of its previous uptrend from $121.575 through the recent high of $139.00, and possibly the 50% retracement level near $130.30.

The most recent CFTC Commitments of Traders report was for positions held as of Tuesday, April 1.

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

Posted at 8:02AM CDT 04/06/14 by Darin Newsom
 

Saturday 04/05/14

Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $1.35 lower. The secondary (intermediate-term) trend remains sideways. Support is pegged at $104.60, a price that marks the 61.8% retracement level of the previous uptrend from $96.75 through the high of $117.34.

Crude Oil: The spot-month contract closed $0.53 lower. The secondary (intermediate-term) trend on the weekly chart is sideways. The last major signal on the secondary chart was a bearish key reversal (week of March 3). Support remains at $98.23, the 50% retracement level of the previous rally from $91.24 through the recent high of $105.22. Resistance is at the recent high, which is also the four-week high.

Distillates: The spot-month contract closed 5.00cts lower. The secondary (intermediate-term) trend remains sideways. The spot-month contract is priced near longer-term trendline support, pegged this coming week at $2.9066. Weekly stochastics are below 20% and indicating an oversold situation. This could lead to a rally back to the high-side of the trading range.

Gasoline: The spot-month contract closed 0.62ct lower. The secondary (intermediate-term) trend remains sideways. However, the spot-month contract has rallied off support at $2.8676, a price that marks the 33% retracement level of the previous rally from $2.4945 through the high of $3.0538, setting the stage for a possible test of the recent high.

Natural Gas: The spot-month contract closed 5.6cts lower. The secondary (intermediate-term) trend is sideways to down. The spot-month contract continues to hold support between $4.414 and $4.249, the 61.8% and 67% retracement levels of the previous uptrend from $3.129 through the high of $6.493. While weekly stochastics remain bearish, a possible rally could run into initial resistance at $5.089.

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

Posted at 1:10PM CDT 04/05/14 by Darin Newsom
 

Friday 04/04/14

Dec Corn Posts Another Bullish Sign

A quick look at the weekly chart for the new-crop December corn contract and one can easily that the market seems to be growing more bullish. This past week saw Dec corn take the previous week's low of $4.78 1/2 (Monday, before the release of USDA's Prospective Plantings report) before spending the latter part of the week establishing a new recent high.

Source: DTN ProphetX

This activity created a bullish outside week, indicating that the recent consolidation phase near resistance at $5.03 1/2, a price that marks the 38.2% retracement level of the previous downtrend from $6.14 through the low of $4.35, has come to an end.

However, the contract is already sharply overbought, as indicated by weekly stochastics (bottom study) well above the 80% level. Usually this would indicate that noncommercial buying could begin to slow. Friday's CFTC Commitments of Traders report (not shown) had noncommercial traders adding about 50,000 contracts to their net-long futures position for activity the week ending Tuesday, April 1.

The commercial side of the market is also providing support, with the December to March futures spread (second study, green line) closing at a 6 1/4 cent carry. Based on cost of carry calculations, this puts the spread at a bullish 33% of total commercial carry.

The combination of a new recent high, an increasingly bullish commercial outlook, and relatively low market volatility (third study, red line) could pull the contract to a test of the 50% retracement level of $5.24 1/2. At that point, it seems likely weekly stochastics could be well above 90%, setting the stage for a short-term sell-off.

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Posted at 3:24PM CDT 04/04/14 by Darin Newsom
 

Wednesday 04/02/14

Soybeans Testing Long-Term Resistance

At first glance the monthly chart for soybeans shows a strong major (long-term) uptrend. Dating back to the bullish key reversal posted in August 2013 (discussed in Technically Speaking on August 19, "A Long-Term Bullish Signal Brewing in Beans") that projected a test of $14.75 (50% retracement) to $15.89 (67% retracement), the market has been on a quest to fulfill those projections after a period of consolidation from September 2013 through January 2014.

Source: DTN ProphetX

Now in early April 2014 the market seems to be gaining bullish momentum as the nearby May contract pushes past the target price near $14.75 and now could set its sights on the range between $14.59 and the aforementioned $14.89. Again, these prices mark the 61.8% and 67% retracement levels of the previous major downtrend from the high of $17.89 through the August low of $11.62 1/2.

A sidenote for those who are skeptical over the value of retracements: Note that the August low was a test of the previous uptrend's 67% retracement level near $11.89 1/4, while the next target high ($15.49 3/4) held interim rallies in both May 2013 and June 2013, giving it more weight as resistance during this uptrend.

Monthly stochastics (second study) remain neutral to bullish. Why neutral? Because the key bullish reversal last August was not confirmed by a bullish crossover in monthly stochastics below the oversold level of 20%. The bullish crossover that did occur in August did so with the faster moving blue line fractionally above the 20% level (20.6%). Does this make a big difference? Probably not, as the market was driven higher by solid buying from both noncommercial and commercial traders anyway.

And as bullish as the market appears early this month, there are potential problems on the horizon. First let's look at noncommercial activity. Recall that it is this group that sets the trend (price direction over time) of the futures market. A look at CFTC Commitments of Traders numbers late in each month (third study, blue histogram) shows that this group increased their net-long futures position from about 80,000 contracts (late July 2013) to roughly 212,000 (late February 2014). However, by late March this position had been trimmed to just over 176,000.

Pressure is also being seen on the commercial side of the market. The nearby futures spread (bottom study, green line) saw its inverse strengthen to 34 cents at the end of March, only to weaken dramatically to 24 cents the first couple of days in April. If this continues it would indicate that demand for U.S. soybeans is finally starting to slow and cash merchandisers can back on their push to secure supplies.

Given the current (today's) structure of the soybean market, a last gasp extension of the rally could push the nearby contract toward the 61.8% retracement level. However, this market can turn bearish quickly (e.g. September 2012) so will need to be watched closely and handled carefully.

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

Posted at 8:21AM CDT 04/02/14 by Darin Newsom
Comments (1)
What is the current cost to buy, load, and ship beans from Brazil to ADM Decatur?
Posted by Roger Cooper at 10:38AM CDT 04/03/14
 

Tuesday 04/01/14

No Foolin': Corn Finally Turned Long-Term Bullish

I know it is hard to take serious anything you see or read on April 1, but those who have been patiently tracking this blog month to month know that corn has been building toward a bullish change in its long-term trend. Back on January 31 (Corn: Long-Term Trend Change) I talked about how the market could establish a bullish key reversal if only the nearby March contract could crawl above the December high of $4.36. It didn't quite make it, posting a high of $4.35 1/2, and putting clear signs of a bullish turn on hold.

Source: DTN ProphetX

My post from March 3 (Corn: Long-Term Change Under Way) talked about how corn, though not establishing a key bullish reversal in January, was in the process of building a more traditional rounded bottom (or saucer bottom) as it slowly changed course from its major downtrend that began with the high of $8.43 3/4 in August 2012. The only thing missing was the confirming bullish crossover by monthly stochastics (second study), a technical pattern that had not occurred since October 2009.

But now as March has come to an end and April, meaning spring and baseball, begins the corn market has confirmation of its rounded bottom (don’t laugh) and a bullish long-term change in trend. Monday's close saw the faster moving monthly stochastic (second study, blue line) calculated at 15.7% while the slower moving red line finished at 12.8%. The fact both were below the oversold level of 20% is key, indicating this change is to something more than just a sideways trend.

Other indicators have been in place for months now awaiting this confirmation. The rally off the January low of $4.06 1/4 was generated by consistent noncommercial buying as this group rebuilt its net-long futures position (bottom study, blue histogram) to 258,627 contracts in late March.

How far might the corn rally go? First, it is unlikely that the market will revisit the $8.00 to $8.50 range any time soon with memories of demand destruction still fresh in its head. However, given the neutral to bullish weak carry in the nearby futures spread (third study, green line) the move to a major (long-term) uptrend could ultimately result in a test of resistance between $6.25 and $6.98. These prices mark the 50% and 67% retracement levels from the previous major downtrend. Initial resistance is pegged near $5.52, the 33% retracement level.

Similar patterns are also seen in the DTN National Corn Index (NCI.X), an index that represents the national average cash price. As with the futures market, monthly stochastics for the NCI.X established a bullish crossover at the end of March. Again given the neutral to bullish carry in the nearby futures spread, cash corn could look to test $6.10. This price marks the 50% retracement level of its own previous major downtrend from $8.26 through the low of $3.94. Comparing retracement levels between cash and futures would imply a national average basis of about 15 cents under. If the cash market stalls at the 33% retracement level of $5.38, national average basis would be near 14 cents under. The difference between the NCI.X and May futures was 38 cents under.

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 8:30AM CDT 04/01/14 by Darin Newsom
Comments (1)
What about 7B+ bu. in stocks?
Posted by Roger Cooper at 10:21AM CDT 04/03/14
 

Monday 03/31/14

Ag Markets: Monthly Analysis

Corn: The nearby contract closed 44.50cts higher. The major (long-term) trend has turned up. The bullish crossover by monthly stochastics in March confirms the rounded-bottom formation on the monthly chart. The initial price target is near $5.52, a price that marks the 33% retracement level of the previous downtrend from $8.43 3/4 (August 2012) through the low of $4.06 1/4 (January 2014). The 50% retracement level is at $6.25.

Soybeans: The nearby contract closed 50.00cts higher. The major (long-term) trend remains up. The nearby May contract is testing resistance at $14.75 3/4, a price that marks the 50% retracement level of the previous downtrend from $17.89 (September 2012) through the low of $11.62 1/2 (August 2013). It should be noted that this low was part of a key bullish reversal that turned the long-term trend up. Given the bullish commercial outlook indicated by the strong inverse in the nearby futures spread (May to July) the market could test the 61.8% retracement level near $15.49 3/4.

Wheat: The nearby Chicago contract closed 98.25cts higher. The major (long-term) trend has turned up. The nearby May contract is testing resistance near $7.02, a price that marks the 38.2% retracement level of the previous downtrend from $9.47 1/4 (July 2012) through the low of $5.50 1/4 (January 2014). The 50% retracement level is up at $7.48 3/4. Monthly stochastics remain bullish.

Cotton: The spot-month contract closed 6.93cts higher. The major (long-term) trend is up. The initial price target is 119.20, a price that marks the 33% retracement level of the downtrend from 227.00 (March 2011) through the low of 66.10 (June 2012). Monthly stochastics remain bullish and well below the overbought level of 80%.

Live Cattle: The nearby contract closed 7.400 lower. The major (long-term) trend appears to have turned down. The nearby April contract posted a bearish key reversal on the monthly chart, closing below the February low of $138.60 after posting a new high of $148.825 earlier in the month. Monthly stochastics confirm this move to a downtrend with a bearish crossover above the overbought level of 80%. The initial downside target is near $121.30, a price that marks the 38.2% retracement level of the previous uptrend from $79.975 (March 2009) through the March 2014 high.

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


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 3:00PM CDT 03/31/14 by Darin Newsom
 

Sunday 03/30/14

Ag Markets: Weekly Analysis

Corn: The May contract closed 13.00cts higher. The secondary (intermediate-term) trend on the weekly chart is sideways. Secondary resistance remains at $5.01 3/4, the 33% retracement level of the previous downtrend from $6.76 1/2 through the low of $4.14 1/2. Support is at the four-week low of $4.52. Next resistance and support is at $5.45 1/2 and $4.58 1/2 respectively. Friday's CFTC Commitments of Traders report showed noncommercial interests adding 16,276 contracts to their net-long futures position, putting it at 258,627 contracts, the largest net-long futures position since late March 2013.

Source: DTN ProphetX

Soybeans: The May contract closed 27.75cts higher. The secondary (intermediate-term) trend remains sideways with weekly stochastics back above the overbought level of 80%. The May contract is nearing resistance at the recent high of $14.60. If the secondary trend turns down, initial support is at $13.51 1/4, the 38.2% retracement level of the previous rally from $11.75 1/2. A move through the previous high could lead to a test of major (long-term) resistance on the monthly chart between $14.75 3/4 and $15.49 3/4. The weekly CFTC Commitments of Traders report showed noncommercial traders reduced their net-long futures position by another 11,549 contracts, putting it at 176,363 contracts.

Wheat: The Chicago May contract closed 2.25cts higher. The secondary (intermediate-term) trend on the weekly chart remains up. However, the May contract is consolidating below resistance at $7.25 3/4. This price marks the 50% retracement level of the previous downtrend from $8.98 through the low of $5.53 1/2. Weekly stochastics remain bullish but are approaching the overbought level of 80%. Friday's weekly CFTC Commitments of Traders report showed noncommercial traders adding to their net-long futures position by 9,748 contracts, putting it at 21,575 contracts.

Cotton: The May contract closed 0.43cts higher. The secondary (intermediate-term) trend remains up. The May contract posted a bullish outside pattern last week, establishing a new high of 97.35. However, the close just above the previous week's high may have established a spike top, particularly considering the bearish crossover seen in weekly stochastics (see chart). If the secondary trend has turned, initial support is pegged at 90.63, the 33% retracement level of the previous uptrend. Friday's weekly CFTC Commitments of Traders report showed noncommercial traders reducing their net-long futures position by 464 contracts, putting it at 65,272 contracts.

Live Cattle: The June contract closed 2.225 higher. The market reestablished its uptrend as the June contract moved to a new high of $139.00 last week. This action offset the key bearish reversal seen the previous week despite the fact weekly stochastics show the market is sharply overbought. Initial support is now pegged between $132.35 and $130.30, the 38.2% and 50% retracement levels of the previous uptrend. Friday's weekly CFTC Commitments of Traders report showed noncommercial traders added to their net-long futures position by 1,918 contracts.

The most recent CFTC Commitments of Traders report was for positions held as of Tuesday, March 25.

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

Posted at 7:08AM CDT 03/30/14 by Darin Newsom
 

Saturday 03/29/14

Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $1.15 lower. The secondary (intermediate-term) trend remains sideways. Support is pegged at $104.60, with resistance near $111.85. Weekly stochastics remain neutral.

Crude Oil: The spot-month contract closed $2.21 higher. The secondary (intermediate-term) trend on the weekly chart is sideways. The last major signal on the secondary chart was a bearish key reversal (week of March 3). Support is pegged near $98.23, the 50% retracement level of the previous rally from $91.24 through the recent high of $105.22. Resistance is at the recent high, which is also the four-week high.

Distillates: The spot-month contract closed 3.78cts higher. The secondary (intermediate-term) trend remains sideways. The spot-month contract has held longer-term trendline support near $2.8995. Weekly stochastics are below 20% and indicating an oversold situation. This could lead to a rally back to the high-side of the trading range, calculated this coming week at $3.1867.

Gasoline: The spot-month contract closed 2.96cts higher. The secondary (intermediate-term) trend remains sideways. Weekly stochastics are near the overbought level of 80% as the spot-month contract holds above support at $2.8676. Resistance remains near $3.01, the 67% retracement level of the previous downtrend from $3.2672 through the low of $2.4945.

Natural Gas: The spot-month contract closed 17.2cts lower. The secondary (intermediate-term) trend may be turning sideways following the establishment of a bullish reversal by the spot-month contract last week. If so, the initial upside target is pegged at $5.114, the 38.2% retracement level of the previous sell-off from $6.493 through this past week's low of $4.262. However, weekly stochastics remain bearish meaning renewed selling interest could be seen this coming week.

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

Posted at 7:35AM CDT 03/29/14 by Darin Newsom
 

Friday 03/28/14

May Soybeans: Waiting for the Verdict

In a mere 67 hours or so (from the time this blog was posted) the soybean market will likely have a better idea of which direction it is going. That's how much time (roughly) until USDA releases this year's round of March Quarterly Stocks and Prospective Plantings reports.

Source: DTN ProphetX

If we look at the charts, can we get a sense of how things might go? Not really. As the weekly chart shows the nearby May contract has spent the last number of week's consolidating below its recent high of $14.60. Meanwhile, noncommercial traders have been trimming their net-long futures position, most recently to 176,363 contracts (bottom study, blue histogram). If this group was confident Monday's reports would be bullish it would stand to reason they would be buying again.

The commercial side of the market is also undecided. While the inverse in the May to July spread remains at a stout 28 3/4 cents (third study, green line), it too remains below its peak of 33 cents posted the week of March 2, 2014. If the contract starts to fall after the release of the quarterly stocks numbers, commercial traders may not be strong enough to hold back a flood of noncommercial sell orders.

And though logic would hint at a stronger likelihood of a bullish quarterly stocks report, as discussed in DTN's Report Preview "Stocks Watching", we all know these things are nothing more than a modern day version of pollice verso (Latin for with a turned thumb) with USDA playing the role of Emperor. Does the quarterly stocks number have to make sense or be logical? Everyone can answer for themselves.

Weekly stochastics (second study) show the May contract to be in an overbought situation. Therefore, from a momentum point of view, the market would be expected to turn down. If so initial support is near $13.51 1/4, a price that marks the 38.2% retracement of the previous uptrend from $11.75 1/2 through the recent high of $14.60.

However, what if the report is bullish? Trading so close to the recent high, we need to turn to the long-term monthly chart for perspective (I'll be discussing monthly charts in more detail next week). If by chance quarterly stocks are bullish, the next upside target for soybeans is $14.75 3/4. This price marks the 50% retracement level of the downtrend from $17.89 (September 2012) through the low of $11.62 1/2 (August 2013). Beyond that is the 61.8% retracement mark near $15.49 3/4.

Which way will it go? I'd guess bullish, but again, that's only based on logic and one of the many reasons I don't bet on USDA reports.

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

Posted at 3:29PM CDT 03/28/14 by Darin Newsom
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