by Duane Lowry
Thursday, October 25, 2012
SUNRISE OUTLOOK OVERVIEW:
*At 6:46 am> Grain/Soy Snapshots: Corn= 1/2 lower, Wheat= 2 1/2 lower, Soybeans= 1 lower.
*Export Sales data will be released at 7:30 this morning. Here are the trade estimates: Wheat= 250-450 tmt, Corn= 150-375 tmt, Soybeans= 600-900 tmt, Soymeal= 150-250 tmt, Soyoil= 15-25 tmt.
Day Session Expectations vs Night Session Tone:
Dec Corn: Support= $7.40-45, Resistance= $7.57-60
*Price action is pathetic. We appear very vulnerable to quickly expanding liquidation pressures.
Jan Soybeans: Support= $15.40, Resistance= $15.75-80
*No trust in recent gains. We are poised for a significant decline from current levels during the next few weeks.
Dec Wheat: Support= $8.60, Resistance= $8.85
*Here too, no trust in the sustainability of recent strength.
Outside Market Influences:
At 6:45 am> Price Snapshots: Crude was up $0.89, Gold was up $16.50, Dow Index was up 63 and the US $ was down 12.
*New downtrends have developed. Short-term 2-4 day corrective bounce efforts will find selling interest building above the market in crude, gold and stocks. Overall conditions warn of these markets trending lower in the weeks to come.
Weather offers hope of a broad rain event through the US hrw wheat region late next week. Northern Brazil will see improved moisture patterns beginning next week.
Wheat has limited new news. Yesterday was the highest settlement price since October 11. Traders are building bullish confidence. However, short-term technical conditions are not consistent with this being the beginnings of a protracted bullish trend unfolding. When I look at corn and soybeans, I see markets where traders want seasonal bottom frameworks to evolve into a nice bullish trend. However, there too the internal conditions don't seem conducive for that unfolding. Wheat's fundamental storyline here does not build sponsorship for an immediate bullish sponsorship stance. I am very concerned that recent gains falter, probably rather quickly. If true, then I don't think the market gracefully returns to recent lows and consolidates. There is a very real risk that we experience a notable price flushing, which suggests that we should respect downside risk of something around 75 cents from current levels, possibly more. Producers have good new-crop pricing opportunities and it is not difficult to build a case that warrants taking a protective stance. Speculators have technical reasons to consider sales opportunities at current levels.
Corn has little for new news. Price action is pathetic. The trade is saturated with bullish-only sentiment, as nobody is willing to trade this market from the short side. It may not feel like the market has this saturation of bullishness because we have reduced overall involvement. However, it is worth noting why we have reduced the overall involvement, which is due to the fact that corn so badly underperformed expectations from August forward. During the past month the trade has been anxious to view the market as establishing a major seasonal bottom. Yet, price action here has been rather pathetic in my opinion. It won't take much weakness here to unleash another wave of liquidation selling pressures. My concern here is that we don't just gracefully flush recent buyers and then conveniently consolidate above the late September low and start the winter/spring rally phase, but rather that we are in fact vulnerable to a much more devastating downward price push that seeks to violate the late September lows. This implies that we need to respect downside risk of at least 75 cents from current levels. This may sound crazy, but only if you completely forget and ignore the fact of how the market was able to break $1.50 from the August price peak when virtually nobody believed a 25-cent correction was possible.
Soybeans produced the highest settlement of the month yesterday. New news is limited. Northern Brazil is poised for a much improved moisture pattern to begin next week. Short-term technical conditions suggest recent strength is more corrective in nature and not the beginning of a new up leg. Overall chart patterns warn that recent lows may not yet be the major seasonal bottom everyone is hoping that it was. If recent strength is truly not the beginning of a seasonal rally phase, then the risk here is that we don't gracefully evolve consolidation and respect for recent lows. We must respect the potential for a deeper test of longer-term support in the market's search for a major seasonal bottom. Such implies that we should respect downside risk of $1.00-25 from current levels.
In summary, while short-term enthusiasm is running high because of the past few days performances, the overall technical profiles warn that this strength is not the beginning of a new seasonal rally phase, but rather harboring more characteristics of this being nothing more than corrective bounce efforts. Downside risk is much more than current passive trader sentiment suggests. There is a real risk that we have not yet established major seasonal lows.
Barge Values: October= +65 Z
CZ: Support= 7.15-25, Resistance= 7.60-62
**PROFILE: Dec Corn> Charts are vulnerable to increased selling pressures. Price action is discouraging to longs established during the past three weeks in hopes of having established a seasonal bottom. This market is much more vulnerable to a flushing and test of the late September low than trader sentiment is willing to consider. My concern is that we more aggressively violate the low currently perceived to be the seasonal low. Such concerns suggest downside risk of 75 cents from current levels. Such a statement sounds crazy until you honestly consider how much this corn market has underperformed expectations during the past 2-3 months.
Barge Values: October= +73 X
SF: Support= 15.15, Resistance= 15.75-80
SMZ: Support= 455, Resistance= 480-85
BOZ: Support= 50.50, Resistance= 52.00
**PROFILE: Jan Soybeans> Yesterday was the highest close since September 28. Short-term conditions are not conducive to a new trending higher pattern unfolding, but are more in line with this having been a correction rally. Longer-term support will build below the October lows, but it remains likely that we are headed to a probe below recent lows in search of a more full defining of major support levels. IN SUMMARY, I fully anticipate another test/probe of recent lows and current strength should be seen as a selling opportunity.
Barge SRW Values: October= +58 Z
WZ: Support= 8.50, Resistance= 8.80-85
**PROFILE: Chicago December Wheat> Short-term rally potential should be limited. Still prone to another downswing below last week's lows. My concern here is that we are poised for a significant new downswing, suggesting downside risk of 75 cents from current levels. New-crop futures offer reasonable and warranted producer hedging opportunities at current levels.
GLOBAL HIGHLIGHTS & HEADLINES:.
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