Beans Scream Higher Again
August soybeans
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PowerRating) gapped open for the second consecutive day, extending a recent rally for a gain of as much as 21 1/2 cents before pulling back and almost filling the morning gap. Beans have rallied nearly 40 cents in three sessions, sparked by a change in the fundamentals that has inspired heavy fund and commercial buying interest.
A report out today from the USDA was supportive of the recent rally, forecasting a slightly lower crop carryover, and follows a similar report out last week that initiated the surge. Yet much of the early surge in beans came on speculation about next week’s weather. One forecast predicted dry and triple-digit heat, a situation that could stress young crops and reduce the harvest. But weather forecasts did not universally call for scorching temperatures and that dampened the rally.
As pointed out in the Mid-Day Futures Alert, beans logged a topping pattern on their intraday charts -— a volatility-compressing Doji on the five-minute chart — and were pulling back from highs. Beans accelerated to the downside as traders took profits on the heavy gains of the past three sessions and amid the uncertainty of next week’s weather forecast. Another acceleration came after beans broke the afternoon low at 511, and one final profit-taking opportunity was possible out of a 1-2-3-4 Pullback From Intraday Lows setup, which finished the day with a final plunge of six cents in the final 10 minutes. Beans closed 7 1/2 higher at 504.
On a technical note, take notice of Monday’s outside-day expansion bar that preceeded the past two days gapping strength and that the 520-ish resistance today in beans coincided with the late December “island†consolidation. Also note that the grains are completely dominating the Momentum-5 List and that the major grain contracts also registered on the New 10-Day Highs List, both signs of potent momentum.
August corn
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PowerRating) also had its biggest up day of the year and exhibited similar behavior to beans, in that it logged an outside-day expansion bar on its high before gapping for the past two consecutive sessions. Corn has traded higher for the past seven straight sessions. When a market trades consistently higher, it will register on the 6/100 Volatility List (as corn did last night) and provide a clue of a potentially larger-than-normal move. Corn rallied as many as 12 cents before settling up 8 at 224 1/2. Word that China was a buyer of physical corn was cited along with weather as a factor driving corn higher.
Nasdaq 100 futures
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PowerRating) closed on their highs of the session after tracing a potentially bullish tail and after logging a three-month low. Intraday, the NDU1 also traced a cup and handle. Additional factors arguing for a rally tomorrow were three positive indicators on TradingMarkets Proprietary Market Bias Indicators Page.
T-bonds
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PowerRating) curtailed a three-day rally as stocks rose, closing down 8/32 at 101 2/32. Today’s high was made at what could be interpreted as the right shoulder of a potential head-and-shoulders top pattern. Additional signs of economic recovery will result in this shoulder area providing resistance.
August gold
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PowerRating) registered a TS+1 Buy signal three days ago and made a decent move higher for a third consecutive session to continue to make good on the reversal pattern. Gold also signaled it could maker a larger-than-normal move by registering on the 6/100 Low Volatility List and gained more than 3.0 before settling up 2.1 at 268.8.
Pork bellies
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PowerRating) closed down their daily limit of 3.000 at 84.950 after hitting a New 10-Day Low yesterday.
Cotton finished higher, demonstrating nascent signs of upside potential. Two days ago cotton gapped higher and closed on its high, a constructive sign. Today, cotton traced an outside day at a seven-day high and again closed on its high in a pattern similar to the one described above in soybeans (and corn) that preceded beans’ strong upside behavior. Cotton
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PowerRating) finished up .52 at 42.70.