Technically Speaking
Darin Newsom DTN Senior Analyst

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
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