What’s Up, What’s Down: Spotlight on Grains

Comments for December 14, 2011

Looking ahead to Wednesday by reflecting back on Tuesday’s trading

Futures and options trading is speculative in nature and involves substantial risk of loss. Futures and options trading is not suitable for all investors


GRAINS: 12/14/11 Higher closes for for oats, soybeans, soymeal, corn, rough rice,  Minneapolis, Kansas City and Chicago wheat but lower for soyoil. Look, we’ve had credit easing around the world giving the grains sort of a ‘dead cat bounce’ percentage wide, mainly due to poor demand causing larger stocks and carryover than anticipated for the grain complex. Therefore, the grain complex is, in my opinion, in a down-trend and don’t try to paint a different picture. Look for technical reasons for a turn-a-round and also watch how bullish and bearish fundamental news affects the marketplace. Granted, the continuously changing news and/ or interpretation of the news coming out almost daily from Europe has made it more difficult than usual to trade futures but ‘it is what it is’ and we have to adjust to the times or just lose. The previous crop production and supply/ demand reports were more bearish for the beans than the corn due to poor demand which is holding back the grains overall. However, the corn has been showing some possible bottoming signs at least for a retracement over the last week. The March corn contract has had lows of 585, 585 1/4 and 585 on three consecutive days with the recent low of this downtrend being 580. Those are the price areas to be aware of at this time. Minneapolis, KC and Chicago wheat continue to look very weak overall with Minneapolis still in heavy resistance while KC needs to hold the critical 650 area. KC also has resistance over 700 and 720 but very little support underneath. I really don’t see much support down to 500 off the weekly chart. Finally, KC does have a precarious DOUBLE BOTTOM at 649 1/2 but I wouldn’t put much faith in it. Still, you be cognizant of it. Chicago has strong resistance  over 650 based on the March contracts. Oats had another strong close and with little resistance up to the 350 area, making it more dangerous than usual playing the short side even though it is in a down-trend overall.  A key price to watch is the last high of 322 1/5 along with a close over 325.  Going back to corn (March), it still has a gap at 698 with, in my opinion, strong resistance from 650 to the 700 area. Also a major portion of its resistance is from 650 to 675 and history says the odds are that this gap will be filled, but right now it looks like a fading memory. Rice settled higher this time but not by much looking very weak overall. The beans and meal made their lowest lows since 2010 before settling higher in reversal type action while oil closed down. However,the bean complex continues to look weak overall as evidenced by the charts below!. SELL SIGNALS FOR MINNEAPOLIS,KANSAS CITY AND CHICAGO WHEAT ALONG WITHSOYBEANS, SOYMEAL AND SOY OIL ALONG WITH ROUGH RICE AND OATS. CALL FOR DETAILS!

001 chart

002 chart

Rick Alexander has been a broker and analyst in the futures business for over thirty years. He is a Vice-President for Sales and Trading at the Zaner Group (www.zaner.com) a Chicago-based futures brokerage firm. Email Rick at ralexander@zaner.com or call toll-free (888) 281-4158.

Futures and options trading is speculative in nature and involves substantial risk of loss. Futures and options trading is not suitable for all investors. The information in this Report and the opinions expressed are subject to change without notice. All known news and events have already been factored into the price of the underlying commodities discussed.