Corn Looks Bullish — Here’s Why

While the trade attempted to take prices lower
off a continuation of mostly favorable weather into mid session prices appeared
rebound aggressively possibly because of oversold talk and possibly because of
talk of aggressive fund buying. Weekly export inspections came in at 32.7
million bushels compared to 36.8 million the prior week. Expectations for the
inspections report called for 32 to 36 million bushels which means that export
inspections were not helpful. However, the market did see some minor support off
talk that Asian shipping premium levels were firming and in a way were serving
to offset flat price declines. In other words, freight rates into Asia were
behaving as if players are anticipating a pick up in Chinese buying or at least
slightly improved activity ahead. Many in the trade expected US corn conditions
to improve in the report after the close, but some were also expecting pockets
to have declined due to ongoing dry weather! Unless the recovery bounce was
partly caused by the below normal temp forecasts for the end of the week, we
have not seen the cool 6 to 10 day forecast influence attitudes. Support for
December corn remains at 225 1/4 and 223, with resistance at 237 and 237 3/4.

Technical Outlook

#CORN (DEC) 08/17/04: The daily stochastics gave
a bullish indicator with a crossover up. The near-term upside objective is at
239. The market’s close above the 2nd swing resistance number is a bullish
indication. Market resistance comes in at 239 today, with support at 223. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. The outside day up is a positive signal. The upside closing
price reversal on the daily chart is somewhat bullish.

 

SOY COMPLEX RECAP

8/16/2004

September Soybeans finished down 10 3/4 at 575
1/2, 4 1/2 off the high and 10 1/2 up from the low. November Soybeans closed
down 12 at 568 3/4. This was 11 3/4 up from the low and 5 1/4 off the high.

August Soymeal closed down 3.4 at 171.9. This was
3.7 up from the low and 1.1 off the high.

August Soybean Oil finished down 0.33 at 21.79,
0.36 off the high and 0.31 up from the low.

After the initial opening slide in prices off
ongoing favorable weather the trade managed to reject part of the losses. The
trade continues to see talk of regional crop problems with dryness in the
southern regions and slow maturity rates seen in the north. However, with warm
and dry conditions expected to continue through Wednesday serving to foster
maturity prices deserved to finish lower. Late in the week cold weather might
also have prompted some shorts to take profits around the lows, especially after
intense fund buying was noted in corn. The July NOPA crush came in at 108.6
million, which was an increase of 6.2 million over the prior months and that was
also a minor support to prices. However, the weekly export inspections were a
non event, with the tally coming in at 612,000 compared to 942,000 the prior
week. In the end the early selling appeared to be fund related but even after
various chart support levels were violated the market wasn’t able to extend the
negative attitude. Crop condition expectations seemed to be mixed with a slight
majority of traders thinking that the crop would hold steady or improve
slightly. Late in the session the trade saw evidence from a crop tour that crops
were highly varied in Ohio and Indiana and that could certainly have tempered
the downside effort undertaken early in the session.

Technical Outlook

#SOYBEANS (NOV) 08/17/04: The gap lower price
action on the day session chart is a bearish indicator for trend. The close
below the 2nd swing support number puts the market on the defensive. The next
area of resistance is around 577 and 584, while 1st support hits today at 560
and below there at 550. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. Positive momentum studies in the
neutral zone will tend to reinforce higher price action. The next upside target
is 584.

MEAL (DEC): Daily momentum studies are on the
rise from low levels and should accelerate a move higher on a push through the
1st swing resistance. The near-term upside objective is at 176.1. The gap down
on the day session chart is bearish with more selling pressure possible today.
First resistance comes in at 174.3, with support at 169.5. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market’s close below the 1st swing support number suggests a
moderately negative setup for today.

BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Positive
momentum studies in the neutral zone will tend to reinforce higher price action.
The next upside target is 22.47. The swing indicator gave a moderately negative
reading with the close below the 1st support number. Daily swing resistance is
found at 22.13 and above there at 22.47. Support should be encountered at 21.46
and 21.13.

 

WHEAT MARKET RECAP

8/16/2004

September Wheat finished up 3 1/4 at 302 3/4, 3/4 off the high
and 7 1/4 up from the low. December Wheat closed up 3 1/4 at 316 3/4. This was 7
3/4 up from the low and 3/4 off the high.

Like corn, December wheat market exhibited a
technical reversal by making a new low early but and then closing back above
Friday’s high. Commercial buying was noted early, followed by fund buying later.
Export inspections came in at 15.261 million bushels versus expectation for
17-21 million, 28.082 million last week and 19.706 million a year ago. Cash bids
for soft red winter wheat were steady in quiet trade. Traders will be watching
for progress on the spring wheat harvest in this afternoon’s USDA Crop Progress
report. Last week only 10% was harvested compared to 26% the previous year and
the five year average of 23% for this time of year. Resistance for December
wheat comes in at 319 1/2 with support at 309. The COT with options on Friday
showed funds holding close to a record net short position, which does leave the
market vulnerable to short covering.

Technical Outlook

#WHEAT (DEC) 08/17/04: The new contract low and
close above the previous day’s high constitutes a key reversal which is a
bullish signal. The outside day up and close above the previous day’s high is a
positive signal. The sell-off took the market to a new contract low. The daily
closing price reversal up is positive. A positive setup occurred with the close
over the 1st swing resistance. Look for near-term support at 312 1/2 and below
there at 306 1/2, with resistance levels at 321 and 323 1/2. The market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 306 1/2. The 9-day RSI under 30 indicates the market
is approaching oversold levels.

 

LIVE CATTLE RECAP

8/16/2004

October Live Cattle closed down 0.45 at 89.35.
This was 0.15 up from the low and 0.52 off the high.

October Feeder Cattle finished up 0.37 at 114.92,
0.07 off the high and 0.72 up from the low.

October cattle futures spent the day
consolidating inside Friday’s strong day. Cash cattle are offered stronger this
week at $88-$90/cwt as compared with the $84-86 seen last week. Traders expect
decent demand from packers this week to supply upcoming Labor Day needs. The
stronger cash market late last week surprised a skeptical market and boosted the
psychology after beef prices had listed most of the week. However, the demand
situation after Labor Day is in doubt. The boxed beef cutout was 63 cents higher
at mid-session at $138.16, which is the highest in at least a week and compares
to $137.48 a week ago. Today’s estimated cattle slaughter came in at 119,000
head, in the middle of trade expectations of 114,000 to 128,000 head.

Technical Outlook

#CATTLE (OCT) 08/17/04: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The next upside
target is 90.12. It is a slightly negative indicator that the close was lower
than the pivot swing number. Support should be encountered at 89.00 and below
there at 88.77. Market resistance is at 89.67 and then again at 90.12. The
market’s close above the 9-day moving average suggests the short-term trend
remains positive.

 

LEAN HOGS RECAP

8/16/2004

October Lean Hogs closed down 2.00 at 66.32. This
was equal to the low and 2.02 off the high.

February Pork Bellies finished down 2.00 at
93.15, 1.25 off the high and 0.35 up from the low.

October lean hogs were down the limit today,
basically erasing the strong gains they made last Friday. As expected, cash hogs
were offered steady to $1.00 lower today in the face of apparently ample
supplies of hogs and with lower pork prices. Loin prices have seen strength on
decent export demand lately, but belly prices have been under severe pressure
due to poor demand. Higher retail prices and cooler than normal summer have
lowered appetites for BLTs and cut into bacon demand. The cool weather has also
allowed for strong weight gain and has brought about ample hog supplies. August
bellies were back to limit down today and to their lowest level since February
5th. The 2-day lean index for the period ending August 12th was 78.92, down 61
cents from the previous day and compared to 79.49 the week before. Today’s
estimated slaughter came in at 394,000 head, which was above the upper end of
expectations ranging from 375,000 to 388,000.

Technical Outlook

#HOGS (OCT) 08/17/04: The market is in a bearish
position with the close below the 2nd swing support number. Resistance levels
comes in at 67.35 and 68.85 today, while support is around 65.32 and then 64.80.
The market’s short-term trend is negative as the close remains below the 9-day
moving average. The major trend is down with the cross over back below the
40-day moving average. Momentum studies trending lower at mid-range should
accelerate a move lower if support levels are taken out. The next downside
objective is now at 64.80.

 

COCOA MARKET RECAP

8/16/2004

September Cocoa finished down 53 at 1574, 64 off
the high and 12 up from the low.

The cocoa market came under significant pressure
Monday and with the declines appeared to violate a number of critical levels on
the charts. Some traders are suggesting that funds have decided to bank profits
and move to the sidelines and that might take a significant source of buying
fuel from the market. Many traders suggest that a decline to $1,580 in the
December is ahead given that a series of chart support levels were violated.
While the market might move to liquidate the longs, that doesn’t mean that
recent crop stress failed to reduce the crop but that damage won’t be known
until later in the season.

Technical Outlook

COCOA (SEP) 08/17/04 The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative. There could be some
early pressure today given the market’s negative setup with the close below the
2nd swing support. Cocoa should run into resistance at 1612 and above there at
1663 with support at 1536 and 1511. Momentum studies are declining, but have
fallen to oversold levels. The next downside target is 1511.00.

 

COFFEE MARKET RECAP

8/16/2004

September Coffee closed up 3.30 at 68.90. This
was 4.10 up from the low and 0.85 off the high.

A massive upward adjustment in coffee prices was
seen Monday and was apparently done without a specific supply threat. We doubt
that news of lower Latin American exports were cause for the rise but we do
think that climbing above critical down trend channel lines on the charts
prompted aggressive stop loss buying. The fact that coffee made a contract low
and then rallied sharply seems to have come off increased industry buying. In
other words, the trade saw the lows early Monday as a fair value. Considering
the fundamentals at work in coffee few traders expect the rally to extend beyond
the usual technical knee jerk reaction typically seen following such a key
reversal. It is always possible that some weather threat contrives to add to the
upside, even if the physical threat to coffee is becoming less significant.

Technical Outlook

COFFEE (SEP) 8/17/04 The new contract low and
close above the previous day’s high constitutes a key reversal which is a
bullish signal. The outside day up and close above the previous day’s high is a
positive signal. The sell-off took the market to a new contract low. The daily
closing price reversal up is positive. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. Daily stochastics
are showing positive momentum from oversold levels which should reinforce a move
higher if near-term resistance is taken out. The near-term upside objective is
at 73.05. The Coffee contract should run into resistance at 71.40 and above
there at 73.05 with support at 66.45 and 63.15. The market’s short-term trend is
positive on a close above the 9-day moving average.

 

SUGAR MARKET RECAP

8/16/2004

October Sugar closed down 0.25 at 7.62. This was
0.02 up from the low and 0.15 off the high.

The sugar market fell aggressively and probably
did so because of the overbought condition of the market. With the sugar market
posting an extended string of record open interest readings in August it is not
surprising that the funds began to toss longs on a series of chart failures. In
fact, with the funds and small specs recently holding a combined net long of
93,000 contracts it is not surprising that stop loss selling surfaces on
weakness. Few traders think that the Florida crop was damaged by the recent
hurricane but that wasn’t an issue supporting sugar prices last week so that
didn’t contribute to the liquidation wave Monday morning.

Technical Outlook

#SUGAR (OCT) 08/17/04: The gap lower price action
on the day session chart is a bearish indicator for trend. The market is in a
bearish position with the close below the 2nd swing support number. Swing
resistance comes in at 7.82, with support found at 7.48. The market’s short-term
trend is negative as the close remains below the 9-day moving average. Daily
stochastics are trending lower, but have declined into oversold territory. The
next downside objective is now at 7.48. With a reading under 30, the 9-day RSI
is approaching oversold levels.

 

COTTON MARKET RECAP

8/16/2004

October Cotton finished up 0.05 at 43.60, 0.60
off the high and 0.50 up from the low.

The cotton market continued to correct away from
the contract low forged last week. It seems as if some traders think that a
perfect crop has been factored while other think that a perfect crop and sagging
demand has been factored. With the National Hurricane Center predicting an
active hurricane season ahead and another tropical storm forming on the same
track as Charley some worry that the perfect crop might see some wrinkle before
it is harvested. However, it is possible that the recent hurricane actually
benefited some crops in the southeast that were running a little dry.
Technically traders suggest that the trend in cotton will remain down until the
December cotton manages to rise above 45.98.

Technical Outlook

#COTTON (OCT) 08/17/04: The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. Next resistance area comes in at 44.15 and then again at 44.73,
while support is targeted at 43.05 and 42.53. Positive momentum studies in the
neutral zone will tend to reinforce higher price action. The next upside target
is 44.73.