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
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