Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 07/27/14

Grain Markets: Weekly Analysis

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.43, down 8.00cts for the week. This is the lowest weekly close for the NCI.X since the week of July 19, 2010. National average basis (NCI.X - September futures) was calculated at 20cts under Friday evening, continuing to run below the 5-year average and unchanged weaker for the week. The combination of weak national average basis while the futures market trades in the lower 10% of the 5-year price distribution range reflects a continued bearish old-crop supply and demand situation. Technically the NCI.X is testing old support between $3.50 and $3.10 set from February 2010 through July 2010.

New-crop Corn: The December contract closed 6.75cts lower. The secondary (intermediate-term) trend remains down. Weekly stochastics are deep in single digits indicating a sharply oversold situation. The close of $3.71 3/4 has the December contract priced in the lower 15% of the market's 5-year distribution range. Friday's weekly CFTC Commitments of Traders report showed noncommercial traders trimming another 17,338 contracts from their net-long holdings. The December to July forward curve shows a neutral to bearish level of carry (62% of total cost of carry). Major (long-term) support in the futures market is $3.43 1/4.

Soybeans: The DTN National Soybean Index (NSI.X, national average cash price) closed at $12.24, up $0.19 for the week. The NSI.X is now priced in the lower 38% of its 5-year distribution range, a level that could continue to attract buying attention given the bullish supply and demand situation indicated by the uptrends in the futures spreads. Weekly stochastics are in an oversold position and nearing a bullish crossover below 20%.

New-crop Soybeans: The November contract closed 1.75cts lower. The secondary (intermediate-term) trend remains down as noncommercial traders added another 5,534 contracts to their net-short futures position. After posting a new low of $10.55 last week the contracts was able to post a solid rally to close at $10.83 1/2. This puts the contract in the lower 22% of the market's 5-year price distribution range. Weekly stochastics are below 20%, indicating an oversold situation. The combination of low price, oversold stochastics, a noncommercial net-short position, and weakening carry in futures spreads could spark a move to a secondary uptrend in the near future.

Wheat: The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $5.07, up 5.00cts for the week. Despite the higher close the SR.X remains in a price level not seen since the week of July 12, 2010. National average basis was calculated at 31 cents under Friday, 1-cent weaker than the previous Friday and below the strongest basis for the last five years of 22 cents under.

SRW Wheat: The September contract closed 5.75cts higher. The secondary (intermediate-term) trend is now sideways. Weekly stochastics established a bullish crossover below the oversold level of 20%, indicating the contract could be seeing the beginning of a secondary uptrend. Friday's CFTC Commitments of Traders report showed noncommercial traders adding to their net-short futures position by 5,689 contracts. Meanwhile, the September to December futures spread saw its carry weaken slightly on a weekly close only basis. With the September contract priced in the lower 18% of the market's 5-year distribution range, the pieces seem to be in place for a test of initial resistance near $5.97 1/2, a price that marks the 33% retracement level of the downtrend from $7.51 3/4 through last week's low of $5.20 1/4.

The most recent CFTC Commitments of Traders report was for positions held as of Tuesday, July 12.

Posted at 8:40AM CDT 07/27/14 by Darin Newsom
Comments (1)
There is a great deal of misinformation on Twitter following the higher open in soybeans. The market did not "gap" higher, meaning no island bottom was formed. Nevertheless, the soybean market is posting an impressive rally early in the Sunday night session. As discussed in the blog's analysis, this could lead to a secondary uptrend in soybeans this week. Stay tuned.
Posted by DARIN NEWSOM at 7:41PM CDT 07/27/14
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