Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 09/14/14

Grain Markets: Weekly Analysis

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.12 3/4, down 17 1/4 cents for the week. The secondary (intermediate-term) trend remains down, in line with the market's seasonal index through the first week of October. National average basis (NCI.X minus the futures market) was calculated at about 26 cents under the December contract, fractionally weaker for the week. Weekly price distribution studies (close only) show the market to be underpriced. Last week's close puts the NCI.X in the lower 2% of the 5-year range, the lower 26% of the 10-year, the lower 18% since the beginning of corn's demand market with the 2005-2006 marketing year, and the lower 33% of the range since total domestic demand climbed above 10 bb during the 2003-2004 marketing year.

Corn (Futures): The December contract closed 17.50cts lower. The secondary (intermediate-term) remains down following last week's move to a new low of $3.35 3/4. While weekly stochastics continue to indicate the market remains sharply oversold, the December contract could look to test major (long-term) support $2.90. Both the 5-year and 10-year seasonal indexes show the futures market tends to trend down through the first weekly close in October.

Soybeans (Cash): The DTN National Soybean Index (NSI.X, national average cash price) closed at $10.80, down $0.68 for the week. National average basis (NSI.X minus the futures market) was calculated at $0.95 over the November contract, 32 cents weaker for the week. The NSI.X is now priced in the lower 23% of the market's 5-year distribution range. However, buyers could stay on the sidelines given the markets strong seasonal tendency (both the 5-year and 10-year indexes) to trend down through the first weekly close in October. The 5-year index shows a 13% drop from the first weekly close of September (2014 = $11.48) while the 10-year index shows a 10% decrease. This puts the possible target range between $10.33 and $9.99.

Soybeans (Futures): The November contract closed 36.25cts lower. The secondary (intermediate-term) trend remains down following the establishment of another new low of $9.69 1/2. Major (long-term) support on the continuous monthly chart (most active contract) remains between $9.91 1/2 and $9.28 1/4. Seasonally the futures market tends to trend down through the first weekly close in October, with the November contact dropping 8% (5-year index) from the first weekly close in September. This puts the possible low weekly close target near $9.40.

Wheat (Cash): The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $4.57, down 34 cents for the week. National average basis was calculated Friday at 45 cents under the December Chicago contract, unchanged for the week. The trend of SR.X remains down, in step with its 5-year seasonal index that shows a tendency to post a low the first weekly close of October. On average the SR.X tends to lose 9% from its high weekly close the first week of August. This year's market move has already seen the SR.X drop 12% from its secondary high of $5.19 the second week of August.

SRW Wheat (Futures): The December Chicago contract closed 35.75cts lower. The secondary (intermediate-term) trend remains down. Major (long-term) support on the continuous monthly chart (most active contract) is at $4.25 1/2, the low from June 2010. Friday's close of $5.02 1/2 put the December contract in the lower 12% of the market's 5-year price distribution range. The 5-year low weekly close is $4.35 3/4.

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

Posted at 10:09AM CDT 09/14/14 by Darin Newsom
 

Saturday 09/13/14

Livestock Markets: Weekly Analysis

Source: DTN ProphetX

Live Cattle: The October contract closed $3.475 lower last week. The October contract looks to have established a top on a variety of weekly charts. This last week saw the contract establish a new high of $161.75, the fifth point of a 5-point topping pattern, before falling to its lower close. On the weekly close only chart (see attached chart) the contract looks to have established a classic double-top formation. Confirmation of either will take a sizeable sell-off, needing a move below the point 4 low of $144.25 and/or a weekly close below the interim low weekly close of $156.275.

Feeder Cattle: The October contract closed $1.55 higher last week. October feeders posted a new high of $229.825, continuing to indicate a possible 5-point top (for more information, see the Technically Speaking blog from Thursday, September 4). Trade volume increased last week to 24,132 contracts, an important characteristic of a 5-point top as opposed to declining volume of a head-and-shoulders formation. Weekly stochastics remain bearish, dating back to the crossover above the overbought level of 80% in conjunction with the first high (point 1) of the 5-point top the week of July 7.

Lean hogs: The October contract closed $0.075 higher last week. The secondary (intermediate-term) trend is up following the bullish crossover by weekly stochastics the week of August 18, 2014. However, the contract is testing resistance between $104.40 and $109.05, prices that mark the 50% and 67% retracement levels of the previous downtrend from $118.35 through the low of $90.45. Given the bullish commercial outlook indicated by the October to December futures spread, the contract could soon see a solid test of the previously mentioned 67% retracement level.

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.12 3/4, down 17 1/4 cents for the week. The secondary (intermediate-term) trend remains down, in line with the market's seasonal index through the first week of October. National average basis (NCI.X minus the futures market) was calculated at about 26 cents under the December contract, fractionally weaker for the week. Weekly price distribution studies (close only) show the market to be underpriced. Last week's close puts the NCI.X in the lower 2% of the 5-year range, the lower 26% of the 10-year, the lower 18% since the beginning of corn's demand market with the 2005-2006 marketing year, and the lower 33% of the range since total domestic demand climbed above 10 bb during the 2003-2004 marketing year.

Soybean meal: The October contract closed $18.80 lower for the week. The secondary (intermediate-term) trend has turned down again, despite a continued bullish commercial outlook indicated by the inverse in the market's forward curve (series of futures spreads). Seasonally the market tends to trend down through September, with major (long-term) support on the monthly chart (most active contract) all the way down at $275.40 (low the month of December 2011).

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 11:54AM CDT 09/13/14 by Darin Newsom
 
Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $3.71 lower. The secondary (intermediate-term) remains down. The spot-month contract moved below the market's previous low of $96.75 (week of April 15, 2013) on continued pressure from commercial traders. The contango in the nearby futures spread strengthened to 85 cents on Friday's close. Weekly stochastics remain in single digits indicating a sharply oversold situation. Major (long-term) support is between $97.70 and $93.18 on the market's monthly chart.

Source; DTN ProphetX

Crude Oil: The spot-month contract closed $1.02 lower. The secondary (intermediate-term) trend is down after the spot-month contract moved below, and closed below, its previous low of $92.50. However, losses were trimmed by support from the commercial side of the market, as indicated by the strengthening backwardation in the nearby futures spread. Major (long-term) support remains at $89.88 (last week's low was $90.43).

Distillates: The spot-month contract closed 7.87cts lower. The secondary (intermediate-term) trend remains down. The spot-month contract moved to a new low of $2.7213 last week, with major (long-term) support pegged near $2.6420.

Gasoline: The spot-month contract closed 6.46cts lower. The secondary (intermediate-term) trend remains down. The spot-month contract tested its previous low of $2.4945 (week of November 4, 2013), hitting $2.4968 last week. Major (long-term) support is near $2.45.

Natural Gas: The spot-month contract closed 6.4cts higher. The secondary (intermediate-term) trend remains up despite the lack of strong bullish enthusiasm in the market. Weekly stochastics remain below the oversold level of 20% after posting a bullish crossover the week of August 25. Secondary support remains at the recent low of $3.723 while major (long-term) support is between $3.656 and $3.431.

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

Posted at 8:03AM CDT 09/13/14 by Darin Newsom
 

Monday 09/08/14

Livestock Markets: Weekly Analysis

Live Cattle: The October contract closed $8.325 higher last week. October live cattle are in posting to test the recent high of $160.75, with a move to a new peak setting the stage for a possible 5-point top, similar to what could be seen in October feeder cattle. Weekly stochastics remain neutral to bearish with the last secondary (intermediate-term) signal a crossover in conjunction with the bearish close the week of July 27. Friday's CFTC report showed noncommercial traders added to their net-long futures position, though high market volatility could soon lead to renewed liquidation.

Feeder Cattle: The October contract closed $7.65 higher last week. October feeders posted a new high of $225.00, setting the stage for a possible 5-point top (for more information, see the Technically Speaking blog from Thursday, September 4). Trade volume increased last week to 23,972 contracts, an important characteristic of a 5-point top as opposed to declining volume of a head-and-shoulders formation, despite the 4-day holiday shortened week. Weekly stochastics remain bearish, going back to the crossover above the overbought level of 80% in conjunction with the first high (point 1) of the 5-point top the week of July 7.

Lean hogs: The October contract closed $7.50 higher last week. October lean hogs extended its strong rally off the test of support at $90.45 (low of $90.45 the week of August 18), a price that marked the 67% retracement level of the previous uptrend from $76.525 through the high of $118.35. The contract is now testing resistance between $104.40 and $109.05, price that mark the 50% and 675 retracements of the recent downtrend. The secondary (intermediate-term) trend is up with last week's move to a new 4-week high in conjunction with a bullish crossover by stochastics below the oversold level of 20%.

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.30, down 9 cents for the week. National average basis (NCI.X minus the futures market) was calculated at 26 cents under the December contract, 1 cent weaker for the week. Weekly price distribution studies (close only) show the market to be underpriced. Last week's close puts the NCI.X in the lower 9% of the 5-year range, the lower 31% of the 10-year, the lower 23% since the beginning of corn's demand market with the 2005-2006 marketing year, and the lower 37% of the range since total domestic demand climbed above 10 bb during the 2003-2004 marketing year.

Soybean meal: The October contract closed $5.80 lower for the week. While technical signals continue to indicate the secondary (intermediate-term) trend is up, given the recent bullish crossover by weekly stochastics (week of August 11) and move to a new 4-week high (week of August 18 and last week), the lower close could lead to a minor (short-term) sell-off. Support is at the recent low (the 4-week low) of $354.60.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, September 2.

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 7:43AM CDT 09/08/14 by Darin Newsom
 

Sunday 09/07/14

Grain Markets: Weekly Analysis

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.30, down 9 cents for the week. National average basis (NCI.X minus the futures market) was calculated at 26 cents under the December contract, 1 cent weaker for the week. Weekly price distribution studies (close only) show the market to be underpriced. Last week's close puts the NCI.X in the lower 9% of the 5-year range, the lower 31% of the 10-year, the lower 23% since the beginning of corn's demand market with the 2005-2006 marketing year, and the lower 37% of the range since total domestic demand climbed above 10 bb during the 2003-2004 marketing year.

Corn: The December contract closed 8.75cts lower. December corn is showing mixed trend signals, with the move to a new low of $3.43 3/4 last week indicating a continued downtrend with a target price near $3.35. However, the rally off this new low at the end of the week established a bullish crossover by weekly stochastics below the oversold level of 20% hinting a move to a secondary sideways trend and possibly and uptrend.

Soybeans: The DTN National Soybean Index (NSI.X, national average cash price) closed at $11.48, down $0.32 for the week. National average basis (NSI.X minus the futures market) was calculated at $1.27 over the November contract, 28 cents weaker for the week. However, basis could be skewed by cash buyers moving to new-crop only given the tight supply of old-crop soybeans. The NSI.X was priced in the lower 28% of the 5-year price distribution range (weekly close only). Seasonally the cash soybean market tends to trend down through the first week of October.

Soybeans: The November contract closed 2.75cts lower. Given that the November contract posted a new low of $10.01 1/4 last week, it could be argued that the secondary (intermediate-term) trend remains down. However, using candlestick chart analysis, the contract's strong rally to close near where it opened last week ($10.21 1/2, $10.20 3/4) creates a doji formation, that in combination with a bullish engulfing pattern on the minor (short-term) daily chart indicates the trend has turned up. Also, weekly stochastics established a bullish crossover below the oversold level of 20%. If the trend has changed the initial upside target is $10.93 3/4, the 33% retracement level of the previous downtrend from $12.79 through last week's low.

Wheat: The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $4.91, down 24 cents for the week. National average basis was calculated Friday at 45 cents under the December Chicago contract, 3 cents stronger for the week. The trend of SR.X remains down as it remains priced below major (long-term) support near $5.12 3/4, the 67% retracement level of the uptrend from $3.12 (December 2008 low) through the high of $9.l4 (July 2012 high).

SRW Wheat: The December contract closed 28.25cts lower. The secondary (intermediate-term) trend has turned down again. Bullish technical signals established a week ago were erased as the contract fell to a new low of $5.27 1/2 last week. However, this could be a characteristic head fake by the wheat market, meaning it could quickly rally back above the low end of its recent sideways trend at $5.42 1/4. The major (long-term) continuous monthly chart shows a narrowing sideways trading pattern with support at the August 2014 low of $5.27 1/4 then the July 2014 low of $5.18 1/2.

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

Posted at 10:15AM CDT 09/07/14 by Darin Newsom
 

Saturday 09/06/14

Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $2.37 lower. The secondary (intermediate-term) looks to be down again after the spot-month contract posted a new low of $100.17 last week. Weekly stochastics show the market to be sharply oversold, while the contango in the nearby futures spread continues to weaken. Major (long-term) support remains at $97.70, a price that marks the 33% retracement level of the previous uptrend from $36.20 (December 2008) through the high of $128.40 (March 2012).

Crude Oil: The spot-month contract closed $2.67 higher. The secondary (intermediate-term) trend is sideways with the spot-month contract holding above its previous low of $92.50. Weekly stochastics remain below the oversold level of 20%. Major (long-term) support on the monthly chart is at $89.90, a price that marks the 50% retracement level of the range from the July 2008 high of $147.27 and the December 2008 low of $32.48.

Distillates: The spot-month contract closed 3.77cts lower. The secondary (intermediate-term) trend looks is sideways to down after the spot-month contract posted a new low of $2.7935 last week. However, weekly stochastics are below the oversold level of 20% indicating a possible bullish turn in the near future.

Gasoline: The spot-month contract closed for the week. The recent expiration of the September contract continues to cause havoc with the weekly chart. Still, weekly stochastics are below 20% indicating an oversold situation that could spark renewed buying interest.

Natural Gas: The spot-month contract closed 27.2cts lower. While technical indicators continue to show the secondary (intermediate-term) trend is up, last week's action saw the spot-month contract fall back to within striking distance of its previous low at $3.723. Next week's trade will be important as a new low would offset the recent move to a new four-week high.

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

Posted at 2:11PM CDT 09/06/14 by Darin Newsom
 

Friday 09/05/14

Nov Beans: A Bullish Candle in the Bearish Wind

I was intently watching Friday's close in November soybeans, with the contract's late rally coming up just short of establishing a bullish key reversal on its weekly chart. Friday's close was $10.21 1/2 as compared to last week's settlement of $10.24 1/4. This less than 3-cent difference was like watching a baseball team come storming back from a large deficit, only to leave the tying run on third base in the bottom of the ninth.

Source: DTN ProphetX

As I sat back and thought about the close in November beans, I figured there had to be some sort of consolation prize for market bulls following the rally of more than 20 cents off its new weekly low. I changed my chart from a standard bar chart to a Candlestick, and low and behold the answer jumped out at me.

Note that the body of this week's candle (difference between where the contract opened and where it closed) is very thin, almost to the point of being nonexistent (the actual range was $10.21 1/2 to $10.20 3/4). In "Candlestick-ese" this pattern is considered a doji.

So, what does that mean? In this type of analysis, if a doji forms following a major trend (up or down) it signals uncertainty. In this case, market bears may have lost the control over November soybeans that allowed them to drive it to its new low.

On its own, the doji does not signal a change in trend. However, if we add stochastics (bottom study) into the equation, a doji following the recent sharp downtrend putting the market into a sharply oversold situation (well below the 20% level) may indeed indicate the trend is turning up. And speaking of weekly stochastics, if you look closely, they established a bullish crossover with the faster moving blue line finishing at 5.95% while the slower moving red line ended at 5.77%. This would seem to confirm the idea of a newly established uptrend.

But in Candlestick analysis, as with other chart types, one sometimes has to look at a shorter time-frame to clear up an indecisive pattern such as a doji. Therefore, I changed my daily bar chart for November beans (not shown) to a Candlestick to see what I could see. Sure enough, Friday's session established a bullish engulfing pattern. This means that Friday's body (close of $10.21 1/2, open of $10.02 1/4) wrapped around the body of Thursday's session (open of $10.20, close of $10.03 1/4). Again this indicates that the minor (short-term) trend on the daily chart, as well as the secondary (intermediate-term) trend on the weekly chart, has turned up.

Going back to my standard retracement analysis puts the initial upside price target near $10.93 3/4, a price that marks the 33% retracement of the previous downtrend from the high of $12.79. However, given the weakening carry in the November to January futures spread (second study, green line), the November contract could possibly make a run at the 50% retracement level near $11.40.

A couple of key points: One - The futures spread closed at a 6 3/4 cent carry, even with the smallest this carry has been on its weekly close chart. Further weakening next week could turn the trend of the spread up. Two - A 50% retracement would close the gap left between the weeks of June 30 and July 7.

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

Posted at 3:57PM CDT 09/05/14 by Darin Newsom
Comments (1)
Time to pray for a killing frost, the farmers only hope for any kind of a fair price.The USDA cannot control the weather with their corrupt reports, only "markets" react to lies.
Posted by DAVID/KEVIN GRUENHAGEN at 10:57PM CDT 09/05/14
 

Thursday 09/04/14

Which Top Fits Feeder Cattle Better?

I get a number of interesting phone calls, emails, and messages each week covering a wide variety of market topics. Recently a number of questions have been about the feeder cattle market, not surprising given the dramatic price swings seen this summer.

Source: DTN ProphetX

The discussion this time around focused on the possibility of a head-and-shoulders pattern forming in feeder cattle contracts (most notably the more heavily traded October and the next deferred November). When I first glanced at the weekly chart for the October contract, I noticed something that could turn the common head-and-shoulders pattern into the rarely seen five-point top formation.

Let's quickly clarify some terms. First, my analysis is based on John J. Murphy's "Technical Analysis of the Futures Markets", 1986 edition. Definitions in quotes will come directly from this book. Regarding the markings on the chart, the red letters are for the head-and-shoulders pattern while the numbers are for the five-point top. As for the two patterns in question, let's start with what makes a head-and-shoulders top.

Before anything else, the market has to have an uptrend. A look at the chart shows this to be the case. From its low of $163.725 the week of October 18, 2013, the October 2014 contract rallied to an initial high of $220.40 (point 1(A)) the week of July 7, 2014. From there the market fell quickly to a low of $208.875 (point 2(B)) that same week. Given the lower weekly close, those familiar with this blog will quickly recognize this as a key bearish reversal, and an early sign that the market was set to change directions.

This led to another rally to a new high of $224.35 (point 3(C)) the week of July 28 before things got really interesting. The next move was to the low of $207.50 (point 4(D)). It is important to note that this is below the 2(B) low of $208.875, raising the question "Is the head-and-shoulders pattern to be, or not to be?" (Sorry, you knew I was going to do that.)

Usually, the neckline of a head-and-shoulders topping pattern (the trendline connecting points B and D) is up. But as Murphy points out, "it's sometimes horizontal and, less often, tilts downward." I had forgotten this last item in my initial analysis of the pattern. A head-and-shoulders top CAN have a descending neckline, it just isn't frequently seen.

This then leaves open the debate as to what type of formation we may be looking at, with the final piece of the puzzle yet to be put in place. If October feeders now move to a new high (point 5), it could be called the rarely seen five-point top. On the other hand, if this rally falls short of the 3(C) high of $224.35 before turning down again, then it is most likely the more common head-and-shoulders pattern. As of early Thursday morning the October contract has posted a weekly high of $224.10.

But wait; is there another way to tell what is going on? Why yes; yes there is.

If we look at weekly trade volume (bottom study, green bars) you'll notice it has been increasing since the contract came on the board almost a year ago. Weekly volume grew from about 11 contracts as the low was posted back in October 2013, to over 21,000 contracts as the market was approaching its point 4(D) low. This is telling, for in a normal head-and-shoulders pattern the high volume should have occurred roughly around the time of the point 1(A) high, with declining numbers seen from there. However, trade volume "tends to expand along with the wider price swings" seen in the five-point pattern. While not a perfect fit, it volume could be viewed as expanding over this course of the last few months, with this week's lower number reflecting only two days of trade.

We need to keep an important point in mind: Livestock futures markets (feeder cattle, live cattle, and lean hogs) continue to be heavily influenced by cash markets, as opposed to grains where futures drive the cash. For this reason, historically, technical signals have not fared well in livestock futures. Add in the potential for a rare pattern in the lightly traded feeder cattle market, and hilarity could ensue.

But this being a blog based on chart analysis, and the subject being feeder cattle, I'm going out on a limb and calling this a five-point top. Not just for the October contract, but for the November and January as well (and, for what it's worth, live cattle).

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

Posted at 8:42AM CDT 09/04/14 by Darin Newsom
Comments (1)
Update: The October feeder cattle contract posted a new high of $224.65 Friday afternoon. This now has all the pieces in place for a potential five-point top.
Posted by DARIN NEWSOM at 12:05PM CDT 09/05/14
 

Wednesday 09/03/14

Corn's "If You Give a Mouse a Cookie" Scenario

Source: DTN ProphetX

December corn has been in a sideways trading pattern on its weekly chart, dating back to late July. The contract established a low of $3.58 the week of August 11 before posting a high of $3.81 the following week. The last two weeks have seen Dec corn slowly slip back toward its low, threatening to move below as it ticked $3.59 early Wednesday morning.

So what happens if the contract takes out its previous low? Technically, that would constitute a bearish breakout, regardless of recently established bullish signals in weekly stochastics. If we take the range of 23 cents ($3.81 high minus the $3.58 low), and subtract it from the breakout point ($3.58) the result is a downside price target of $3.35 (bottom side of blue rectangle). On the other hand, had the contract taken out the topside price of $3.81, the upside target would have been $4.04 (top side of blue rectangle).

The bearish threat to the market is that a move below the $3.58 level could trigger a wave of noncommercial long-liquidation selling. Last Friday's weekly CFTC Commitments of Traders report showed this group still holding a net-long futures position of 67,309 contracts (as of Tuesday, August 26), a reduction of 11,648 contracts. Given this week's sell-off it is logical to think this position will be even smaller in the next CFTC report.

But what if this group decides to go to a net-short position ahead of USDA's Supply and Demand report set for release on Thursday, September 11? A move below the $3.58 mark could be the trigger that sparks the selling that leads to the establishment of a net-short futures position that drives the market to a new low. A series of events that bring to mind a classic "If You Give a Mouse a Cookie" scenario.

What then though? If Dec corn sets a new low around the time of the report due to increased noncommercial selling, and given that weekly (and monthly) stochastics below 20% (bottom study) already indicate the market is oversold, it is possible commercial buying could lead to an end of the month upturn. At that point, it is not out of the realm of imagination that corn could, I repeat could, see a secondary bullish crossover by monthly stochastics indicating a possible change in the long-term trend.

Stay tuned, as things are about to get more interesting.

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 8:40AM CDT 09/03/14 by Darin Newsom
Comments (1)
Seems like economic terror on farmers for a year or more.
Posted by andrew mohlman at 9:52AM CDT 09/04/14
 

Monday 09/01/14

Ag Markets: Monthly Analysis

Source: DTN ProphetX

Corn: The nearby contract closed 2.00cts higher. After posting a new low of $3.47 3/4 in August the nearby futures contract was able to rally to a higher close. Last month's low was a test of major (long-term) support at $3.43 1/4, a price that marks the 67% retracement level of the sideways trend from $2.90 through the high of $4.50. This range was established from December 2008 through June 2009. Weekly stochastics remain neutral given the initial bullish crossover below the oversold level of 20% at the end of March 2014. A secondary bullish crossover, possible at the end of September, would signal a move to a major sideways trend, if not the beginning of an uptrend. Weekly CFTC reports showed a slight build in the noncommercial net-long futures position during August. Possible downside risk remains a test of the previous low of $2.90 while waiting for the establishment of long-term bullish signals.


Soybeans: The nearby contract closed 57.75cts lower. The major (long-term) trend remains down. Major support remains at $9.91 1/2, a price that marks the 61.8% retracement level of the previous uptrend from $4.98 1/2 (February 2005 low) through $17.89 (September 2012 high). Below that is the 67% retracement level of $9.28 1/4. The market's 5-year and 10-year seasonal indexes would indicate a test of the $9.91 1/2 mark through the close the first week of October. Noncommercial traders added to their net-short futures position in August, a factor that could eventually be viewed as bullish if this group begins a round of short-covering buying. The market's forward curve continues to indicate a neutral long-term view of supply and demand.

Wheat: The nearby Chicago contract closed 20.00cts higher. The major (long-term) trend remains sideways to up. Monthly stochastics established a bullish crossover below the oversold level of 20% at the end of February 2014, a move that led to an initial 50% retracement of the downtrend from $9.47 1/4 (July 2012 high) through $5.50 1/4 (January 2014 low). The subsequent sell-off to a new low of $5.16 1/4 (July 2014) is characteristic for wheat, followed by a move back to its previous low at the end of August. Given the still bearish view of supply and demand indicated by the strong carry in the market's forward curve, the upside target remains between $6.82 1/2 and $7.48 3/4, the 33% and 50% retracement levels of the previous downtrend. Support could come from continued noncommercial short-covering, with this group trimming their net-short futures position during August.

Cotton: The spot-month contract closed 3.70cts higher. The major (long-term) trend is sideways. The last major (long-term) signal posted by monthly stochastics was a bullish crossover at the end of July 2012 as the more active contract rallied off its June 2012 low of 65.57. Since then the market has been in a sideways trend before posting a spike low of 62.87 in July 2014. August saw the December contract rally back above the July 2012 low, reestablishing the major sideways trend. The structure of the market remains bearish with noncommercial traders adding to their net-short futures position in August while the forward curve continues to show a strong carry (bearish view of supply and demand). This could limit buying interest in cotton over the coming months.

Live Cattle: The nearby contract closed 5.90 lower. The major (long-term) trend is down. Monthly stochastics posted a secondary bearish crossover above the overbought level of 80% at the end of August, confirming the bearish crossover at the end of March 2014. Initial support is now pegged near $133.85, a price that marks the 33% retracement level of the previous major uptrend from $79.975 (March 2009 low) through $160.75 (July 2014 high). The combination of less bullish futures spreads (market's view of supply and demand) and continued noncommercial long-liquidation (this group reduced their net-long futures position in August, the fourth consecutive month this was seen) could eventually lead to a test of the 50% retracement level near $120.35.

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 10:23AM CDT 09/01/14 by Darin Newsom
Comments (2)
Higher dollar may not be sign of "higher" interest rates to come. Deflation is the sin the Fed has no/minimum control over. Policies were developed to keep deflation at bay. Low interest rates are the result of those policies. The goal is to have some inflation so they can manage/control economic growth. Commodity prices are not raising - no inflation there. Employment has bounce back but wage inflation does not seem to be occurring. France's failed policies along with trade problems with the Russia may be making the dollar a flight to "safety" play. Folks may be moving away from future EU problems. The Fed may "back off" but until commodities, inventories and/or wages have a solid move up interest rates will remain "low". A quick return to "higher" rates could/would "kill" what has taken the Fed 7-8 year to correct. Regardless of the cause and/or effect, if other markets have exportable supplies, a stronger dollar reduces our exports chances - transportation cost is also part of landed cost. Freeport, IL
Posted by Freeport IL at 11:53PM CDT 09/02/14
Higher dollar may not be sign of "higher" interest rates to come. Deflation is the sin the Fed has no/minimum control over. Policies were developed to keep deflation at bay. Low interest rates are the result of those policies. The goal is to have some inflation so they can manage/control economic growth. Commodity prices are not raising - no inflation there. Employment has bounce back but wage inflation does not seem to be occurring. France's failed policies along with trade problems with the Russia may be making the dollar a flight to "safety" play. Folks may be moving away from future EU problems. The Fed may "back off" but until commodities, inventories and/or wages have a solid move up interest rates will remain "low". A quick return to "higher" rates could/would "kill" what has taken the Fed 7-8 year to correct. Regardless of the cause and/or effect, if other markets have exportable supplies, a stronger dollar reduces our exports chances - transportation cost is also part of landed cost. Freeport, IL
Posted by Freeport IL at 11:53PM CDT 09/02/14
 

Sunday 08/31/14

Grain Markets: Weekly Analysis

Source: DTN ProphetX

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.39, down 8 1/4 cents for the week. National average basis (NCI.X minus the futures market) closed out the 2013-2014 marketing year by weakening 2 cents to 20 cents under the September and 25 cents under the December. The NCI.X is priced in the lower 14% of its 5-yerar distribution range (weekly close only) and the lower 37% of its 10-year distribution range.

New-crop Corn: The December contract closed 6.75cts lower. The secondary (intermediate-term) trend is sideways. Resistance is at the 4-week high of $3.81 while support is at the recent low of $3.58, creating a range of 23 cents. Using this range to establish price targets: a bullish breakout (above the 4-week) high would project to $4.04, just short of a 33% retracement of the previous downtrend from $5.17 (week of April 7) through the recent low near $4.11. On the other hand, a move to a new low would project a downside target of $3.35. Weekly stochastics are neutral to bullish below the oversold level of 20%, while the December contract closed in the lower 11% of the market's 5-year price distribution range.

Soybeans: The DTN National Soybean Index (NSI.X, national average cash price) closed at $11.80, down $0.20 for the week. National average basis (NSI.X minus the futures market) weakened by about 3 cents, but still at $1.55 over the November futures contract. The NSI.X is priced in the lower 32% of its 5-year distribution range (weekly close only). Seasonally the NSI.X has a strong tendency to trend down through the close the first week of October, with both the 5-year and 10-year seasonal indexes showing similar patterns.

New-crop Soybeans: The November contract closed 17,75cts lower. The secondary (intermediate-term) trend remains down, despite weekly stochastics well below the oversold level of 20%. Using the price gap between $11.32 and $11.29 1/2 (red circle on attached chart, weeks of June 30 and July 7) as a measuring gap results in a downside target of $9.85. Interestingly enough this would create a test of major (long-term) support at $9.91 1/2, a price that marks the 61.8% retracement of the previous major uptrend from $4.98 1/2 through the high of $17.89. The weak carry in the new-crop forward curve continues to indicate a neutral market view of supply and demand.

Wheat: The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $5.15, down 3 cents for the week. National average basis was calculated Friday at 48 cents under the December Chicago contract, 4 cents weaker for the week. Major (long-term) support remains at the July low of $4.89. Weekly stochastics show the trend to be sideways to up, with initial resistance at the 4-week high of $5.37. Seasonally the SR.X tends to trend down from the close the first week of August through the first week of October. However, the market's contra-seasonal downtrend could be followed by a contra-seasonal uptrend.

SRW Wheat: The December contract closed 1.25cts higher. The secondary (intermediate-term) trend is sideways. While the argument could be made for an uptrend given the bullish crossover by weekly stochastics below the oversold level of 20% (week of August 4), the spike high by the futures contract to $5.91 looks to be a characteristic (for wheat) head-fake. Still, if the market does work higher initial resistance is pegged near $6.16 1/2, a price that marks the 33% retracement level of the downtrend from $7.65 through the recent low of $5.42 1/4.

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

Posted at 12:27PM CDT 08/31/14 by Darin Newsom
Comments (1)
I am slowly learning the value of the numerical challenges that different sides of the trade use to make decisions. While I don't always agree with their strategy, I am so thankful you break down the hieroglyphics and present it to us simple farmers. :-) Stephen
Posted by Unknown at 4:39PM CDT 08/31/14
 
Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $0.90 higher. The secondary (intermediate-term) trend appears to have turned sideways. Support is at the recent low of $101.07 while weekly stochastics are nearing a bullish crossover below the oversold level of 20%. Commercial buying has been indicated recently by the weakening contango in the nearby futures spread with last Friday's close showing 58 cents, compared to the previous week's settlement of 75 cents.

Source: DTN

Crude Oil: The spot-month contract closed $2.31 higher. The secondary (intermediate-term) trend looks to have turned up following a bullish crossover by weekly stochastics below the oversold level of 20%. If so the initial price target is $98.32, a price that marks the 38.2% retracement level of the previous downtrend from $107.73 through the recent low of $92.50. However, given the bullish read on market supply and demand indicated by the backwardation in the nearby futures spread, the spot-month contract could test the $100.12 to $101.91 area, the 50% and 61.8% retracement levels respectively.

Distillates: The spot-month contract closed 3.22cts higher. The secondary (intermediate-term) trend looks to have turned sideways once again. Support is at the recent low of $2.8017 with resistance at $2.9175. A bullish breakout could lead to a test of $3.0711, the high from the week of June 16. Weekly stochastics established another bullish crossover below the oversold level of 20%, indicating a potential rally to the high side of the sideways price range.

Gasoline: The spot-month contract closed 11.55cts lower. The expiration of the September Friday led to a skewed weekly chart. While the market now shows a bullish outside week last week, recent activity had shown the spot-month contract to have established a secondary (intermediate-term uptrend. The market may take a week to sort its trends back out.

Natural Gas: The spot-month contract closed 22.5cts higher. The secondary (intermediate-term) trend is up following a bullish breakout by the spot-month contract last week. The spot-month moved above the 4-week high of $4.02, establishing a new high of $4.101 in conjunction with a bullish crossover below the oversold level of 20% by weekly stochastics. Seasonally the market tends to rally through the end of the year. The longer-term target is $4.781, a price that marks the 38.2% retracement level of the downtrend from $6.493 through the recent low of $3.723.

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

Posted at 10:41AM CDT 08/31/14 by Darin Newsom
 

Sunday 08/24/14

Grain Markets: Weekly Analysis

Source: DTN ProphetX

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.48 1/2, up $0.015 for the week. National average basis strengthened by about 2 cents, coming in at 18 cents (rounded) under the September futures contract. The NCI.X remains priced near the lower-third of numerous price distribution ranges, including the 5-year and 10-year. This could spark increased buying interest in the cash market.

New-crop Corn: The December contract closed 5.50cts lower. Despite the lower weekly close the secondary (intermediate-term) trend remains up. A number of bullish technical signals have been established the last two weeks including a bullish key reversal, a bullish crossover below 20% by weekly stochastics, and consecutive weeks of posting new 4-week highs. From a technical perspective, the initial upside price target is near $4.18 3/4, the 38.2% retracement level of the downtrend from $5.17 through the recent low of $3.58. A test of this resistance would also close the bearish price gap between $4.14 1/2 and $4.10 1/2.

Soybeans: The DTN National Soybean Index (NSI.X, national average cash price) closed at $12.00, up $0.31 for the week. National average basis firmed to $1.58 over the November futures contract, 42 cents stronger than the previous Friday's calculation. Support for the cash market continues to come from solid demand as the old-crop marketing year nears its end this coming week. Seasonally the cash market sees its strongest sell-off through the month of September.

New-crop Soybeans: The November contract closed 10.00cts lower. Technically, the secondary (intermediate-term) trend remains down following the posting of a new low of $10.35. However, the November to January futures spread is poised for a move to an uptrend with a weekly close of a carry less than 6 3/4 cents (last week's settlement). Weekly stochastics are below 20%, indicating the market is oversold and in position for a possible bullish crossover. The major (long-term) trend remains down with support pegged between $9.91 1/2 and $9.28 1/4.

Wheat: The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $5.18, down $0.01 for the week. National average basis was calculated Friday at 34 cents under the September Chicago contract, 2 cents weaker for the week. Major (long-term) support remains at the July low of $4.89.

SRW Wheat: The December contract closed 1.25cts lower. The secondary (intermediate-term) trend remains sideways. While weekly stochastics did establish a bullish crossover the previous week, the December futures contract hasn't established a bullish turn signal yet. Resistance this coming week is at the 4-week high of $5.91. Support is at the recent low of $4.42 1/4.

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

Posted at 1:37PM CDT 08/24/14 by Darin Newsom
 
Energy Markets: Weekly Analysis

Brent Crude Oil: The spot-month contract closed $1.24 lower. The secondary (intermediate-term) trend is down. However, after posting a new low (for this sell-off) of $101.07 the spot-month contract rallied to close at $102.29. Weekly stochastics remain below the oversold level of 20%, meaning a bullish turn could soon occur. The contango in the nearby futures spread continues to strengthen, indicating a more bearish view of supply and demand.

Source: DTN ProphetX

Crude Oil: The spot-month contract closed $3.70 lower. The secondary (intermediate-term) trend remains down. The spot-month contract extended its sell-off to a low of $92.50, putting the market in position to possibly test its previous low of $91.24. Weekly stochastics moved below the 20% level indicating the market is oversold.

Distillates: The spot-month contract closed 2.01cts lower. The secondary (intermediate-term) trend is down after the spot-month contract posted a new low for this move of $2.8017. Weekly stochastics moved below the oversold level of 20%, setting the stage for a possible bullish crossover in the near future.

Gasoline: The spot-month contract closed 3.98cts higher. The higher weekly close by the spot-month contract following the establishment of a new-low for the downtrend of $2.6374, hints at a possible move to at least a secondary sideways trend. If so, initial resistance is pegged between $2.8340 and $2.8947. These prices mark the 38.2% and 50% retracement levels of the previous downtrend from $3.1520 through last week's low. Weekly stochastics saw a bullish crossover below 20%, opening the door for a possible uptrend.

Natural Gas: The spot-month contract closed 6.4cts higher. The secondary (intermediate-term) trend is sideways, with support at the recent low of $3.723 and resistance at the 4-week high of $4.020. Last week's low of $3.737 may have established a double-bottom formation, putting the market in position to establish a secondary uptrend this coming week. Weekly stochastics are below the oversold level of 20% and nearing a bullish crossover.

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

Posted at 12:29PM CDT 08/24/14 by Darin Newsom
 

Friday 08/22/14

Soybean Fundamentals

With all the talk of record yield this, and record production that in soybeans, it may come as a surprise to some just how bullish the commercial side of the market has become. New-crop futures spreads are all showing strong uptrends, led by the front running November to January as it trimmed its carry to less than 7 cents on Friday's close, and its percent of total cost of carry (full cost of holding grain in commercial storage) to less than 44%.

Source: DTN ProphetX

Despite those changes in the market, the real story remains the last vestige of interest in old-crop supply and demand. The lightly traded September contract, used for little more than an indicator of the spot-market, has seen its inverse against the new-crop rocket higher this week, posting a close of $1.24. This was a gain of 73 1/2 from last Friday's settlement.

National average basis (bottom chart) has followed suit, with the DTN National Soybeans Index (NSI.X, national average cash price) calculated at $11.83 Thursday evening, $1.45 over the November contract. Given Friday's action it would not be surprising to see basis jump another 10 cents or so, putting it within striking distance of the recent high of $2.10 over (blue line, bottom chart).

So what does all of this mean? My interpretation should come as no surprise: U.S. supplies, approaching the end of the marketing year next Friday, are nowhere near the 140 mb estimated by USDA in its August report. Remember that this figure was only made possible by USDA "finding" another 25 mb to push residual use to (-94) mb. It has also been forgotten that the 140 mb, regardless of how fictitious it might be, still results in a record low ending stocks to use figure of 4.2%.

Given the action in spreads and basis, one's mind wanders to how tight the supply situation may actually be.

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

Posted at 3:20PM CDT 08/22/14 by Darin Newsom
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