Grain markets surged higher on Friday but have stalled out to in the Sunday night and early Monday morning trade.
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Corn
Technicals (July)
July corn futures had an impressive rally following last Friday’s WASDE report which took prices back near resistance from 471-474 3/4. The market has so far struggled at this level with some weakness creeping into the market to start this week’s trade. Regardless of fundamentals (though there are some tailwinds), short covering on moves above technical resistance coupled with seasonal strength has been a theme/thesis of ours for the last few months which has largely been the case as of late. Friday’s Commitment of Traders report showed Funds were net buyers of 115,527 futures and options contracts through May 7th (so not including Friday’s rally). over 77% of that was short covering. That trims the Funds net short position back to 102,513 contracts, their smallest net short position since October. This can be illustrated by the second chart below; the yellow line represents the Funds net position. The third chart below represents the seasonal averages for December corn futures which in our opinion reflects “normal” seasonal changes in supply and demand. Though not guaranteed, seasonal averages continue to firm from now into mid-June.
Bias: Bullish/Neutral
Resistance: 471-474 3/4***, 483 1/2-486***
Pivot: 456 1/2-460
Support: 448-451**, 441 3/4-444 1/2***
Wheat
Technicals (July)
The wheat rally is continuing in the early morning trade with prices threatening a breakout above resistance at 666. If the Bulls can achieve a close above here, we could see a run towards 688-690 1/4. Seasonally we are approaching a time of year where prices tend to soften, but the recent price trend isn’t something we feel should be fought, just yet.
Bias: Neutral/Bullish
Resistance: 688-690 1/4***
Pivot: 655-666
Support: 635 1/4-639***, 621 1/4-626 3/4****
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