Disappointing export sales and external macroeconomic pressures following Wednesday’s Fed meeting were a boon to grain markets this week. The silver-lining in this week’s price action comes from December corn. It was the only component of the grain complex to close in positive territory on the week, and held trendline support for three consecutive sessions.. Meanwhile, November soybeans bore the brunt of the pain in the grain complex. The contract shed 44 cents, and closed the week below $13.00 per bushel. December wheat also closed lower on the week, but at least we did not make another new contract low.
The adage, “A win is a win” is apt for the price action in December corn this week. After putting in a new contract low early in Tuesday’s trade, prices rallied all the way back to not only close in positive territory, but also breach trendline resistance that had been in place since June 20th for the first time. Moreover, the contract was able to sustain 3 consecutive closes above trendline resistance. This could be the foundation of a support/resistance flip in which the trendline should now serve as a launch pad for prices if we dwindle lower in the coming days and weeks. For the week, December corn was up just a cent to settle at 477 ¼. But again, a win is a win. Now that we’re clear of our 472-476 pivot pocket, corn bulls will look to parlay the strong finish to this week into testing 3-star resistance between 489 and 491 next week. Managed funds have maintained a sizable net-short position for quite some time, and added to that net-short for the 5th week in a row, bringing managed money’s position to 149,455 contract net-short. Broken down, that is 319,079 short positions and 169,624 long positions. If we see any short covering next week, it could propel prices toward that 3-star resistance pocket.
November soybeans closed sharply lower for the fourth week in a row. In that span, we’ve sold off approximately $1.03 per bushel, and we shed 44 cents just this week. The contract was able to claw back 2 ½ cents in Friday’s trade, but the 1296 ¼ close for the week is disheartening for grain bulls – below our 1300-1304 4-star support pocket.. The sharp-selloff over the course of the last month does afford the opportunity for producers to consider lifting hedge positions. Fortunately, we are not far off from a “cluster of evidence” in which we may find some support. The neck-line of the developing head-and-shoulders on the November soybean contract happens to be the exact 50% retracement from the May 31st low to the July 24th high at 1286 ¼. If we manage to trade down into the lower 1280s next week, it could be a strong opportunity for soybean bulls to re-enter the market in anticipation of a correction. Now that we’ve passed below previous support, it will now act as resistance. As such, if we do bounce higher amidst the lower 1280s next week, the contract should see formidable resistance between 1300 and 1304. Managed funds added to their small net-long position, bringing it to 38,414 contracts. Broken down, that is 88,139 long positions and 49,725 short positions.
December wheat dropped 24 ¾ cents this week to settle at 579 ½, but the good news is that we did not make a new contract low. Seasonally, wheat prices tend to bottom toward the end of September before trending higher through the duration of October. Despite this week’s downward price trajectory, wheat traders will start turning their eyes toward the upside. In order to stage a rally to test our 3-star resistance pocket between 595 and 599 ½ next week, we will have to pass through our 585-587 pivot pocket. As in corn, managed funds have maintained a significant net-short for a long time on December wheat, and they added to it again this week. Managed funds now hold a net-short position of 103,932 contracts. Broken down, that is 63,148 long positions compared to 167,100 short positions.