Third Day in a Row of Massive Fund Selling

  • Posted on: October 27, 2009

A trader I have great respect and admiration for had a comment today about the recent fund selling… This individual has 35 years experience in the business, and was one of my first mentors in the business. When I walked into the Soybean Pit in 1994 he took me under his wing, pointed out some patterns which, quite frankly, helped me get over a few patches were there were days I had no rhyme or reason for the trade at that time.

In any event, he pointed out today that it was odd that the index funds had announced that October 19th was going to be when the would re-balance positions, specifically liquidating longs in Corn and Wheat…That supposed fund selling was more than absorbed by the market.

However, in reality, it seems like they disguised their real action, waiting until last Friday, yesterday and Today to liquidate their longs, hence the sharp drop in prices in the grains over the past 3 days. Today we slid through the 984 level in the SX like warm butter, and pushed down, almost to the old gap low at 967-68 level… If you check the old posts on this site, you can see I had worried that at some point they would go on a mission to fill in that gap… They did a lot of damage once before, just missing those lows by a penny or so during a wild overnight session about 3 weeks ago…

In any event, this trader is a great trader..and typically the funds come in for 3 days of solid activity when they make big moves… Today was the third day of big selling… Odds are that tomorrow we will see a rebound, if not a large turn-around…

Fundamentally, the grains still have to deal with the wet, cold weather impacting harvest rates and potential quality of the grain being harvested.. Will there be damage of some kind come home to roost? We will see it unfold over the next 5 or so weeks.

Eventually it will get dry enough to get these grains harvested, but it sure has been a wet and cold fall..
A look at the charts shows that there is some support in these grains if you take a look at the weekly charts. I will take a look at those and have some specific numbers later tonight or before the opening tomorrow…
I would look for a bounce after 3 days of selling.

Good Trading