Its the weather market of 2010. July 15th and we have our bullish scenario. Significant 66 cent rally from the June 29th contract low in Dec corn, 115 rally in old crop beans. 150 rally in new crop wheat. Certainly a gift for farmers who held out on cash sales.
As of yesterday, we had funds continuing to move towards new long positions, which is positive. Longs adding to longs, adding to previous winners, are necessary for a sustained rally.
If you are a bull, this is the type of action you want to see, as opposed to weak specs jumping on the band wagon late after a large up move.
If we continue to get hot and dry, and if Skilling gets to talk about a high pressure ridge or a “dome of death” heat dome, it may put enough stress on the corn to drop some yields.
Bulls need the yield to drop. Even with the reduction of 1 million acres from the June 30th report, with average trend line yields, we are looking at a larger crop than 09.
Sunday night, should be an interesting open.
I have been saying for the past 3 weeks, its time to buy dips and sell rallies. I believe a pop in CZ up to the old March 1st highs at 415 will be met with selling once again. Use it as a place to take profits.
Look for a break from that level to re-own those contracts. However, I think your core position should remain. You can add to that position on any good 10 cent to 20 cent correction.
I have seen it before, we will kill this crop more than once in the next 6 weeks.
Ditto for the beans. 950 to 1000 will be critical resistance in new crop SX beans. However, I still think its a good spec to be long beans. I would have wanted to be long as of about 2 weeks ago, when SN corrected for the last time from 920.. Now that SN is expired, Look for 1035, 1055 and 1075 to be trading points for SQ.
The wheat story, is exactly that. A bullish tone can snap on a dime. If Russia gets rain, or the price issues calm down with the French, be ready to exit longs quickly. A 150 rally could be wiped away in two or three trading days, if the psychology shifts. So for the wheat, your sell stops to protect longs are especially key.
Quickly, to the indexes, the Dow hit the 10400 band of resistance. I was surprised myself that we broke so hard, but on a Friday, after a decent rally, traders ran for the exits. Summer time markets are thin and crappy in the equities… Many large traders are on vacation. Or they work Mon through Thursday and then bail for long weekends, depending on the weather forecasts. Generally, Friday’s are dangerous trade during the summer for that reason alone.
Most professional traders love to sell. Period. That is a common trait I have found over the past 21 years in this business. Therefore, on a Friday, if the market is thin, and if the pro’s can push it, they will very often look to profit from sharp downside moves.
I firmly believe that for the rest of the summer, we will be in a 1000 point trading range.
I think that range, actually, will extend for quite some time, as we go through mid-term elections, and we look to have an economy starting to look like 1970’s Gerald Ford, Jimmy Carter Stag-flation. All I can say is Yuck…
If that’s the case, you will see re-newed interest in commodity trading, on inflation worries, real or imagined.
Finally, take a look at this link please :
Its a new commentary I may be doing once a week, if everything goes as planned.
Have a great weekend, and look for a big move Sunday night at when they turn the computers back on. Right now, its looking to be higher, however, if we get some rain, that will not be the case.