Bearish technical signals have been flashed in the soybean market this week, with prices for nearby contracts as well as the continuous active chart breaking below trendline support this week for the first time since the lows reached in September.
In comparison, the canola market may be showing stability relative to soybeans, despite concerns surrounding exports and record stocks in storage estimated for Dec. 31. The March contract broke below support at $475/metric ton on Tuesday, while has reached a fresh contract low this week. Wednesday's close is reported at $470.90/mt, down $2.80/mt.
Tuesday's trade showed an estimated 70% of trade was related to spreading, largely from the March to the May contract, with the March open interest falling by 7,933 contracts, to 33,391 contracts.
The continuous active chart shows the May contract taking a leadership role since Feb.8. While Wednesday's close of $479.30/mt slipped below potential support at $480/mt, it remains above the May contract's low of $472.20/mt. At the same time, the attached chart shows prices continuing to respect the upward-sloping trend line that has governed trade since November 26. Support from this line, at $478/mt, has yet to be tested.
The brown line in the first study represents the May/July futures spread which is unchanged so far this week at minus $7.30/mt. This represents roughly 63% of full carry, while viewed as a neutral view of carry on the part of commercial traders, despite the potential for a build in ending stocks this crop year.
The lower study shows the noncommercial futures position, updated to Jan. 29 as the U.S. government releases bi-weekly reports in order to catch up from the earlier government shutdown. Noncommercial traders have held a bearish net-short furthers position over the past 14 weeks, while the size of this position has varied only 2,316 contracts in seven of the past 12 weeks, including the past four weeks (week ending Jan. 8 through Jan. 29), a sign of continued uncertainty as traders tread carefully.
Given previous weekly lows on this continuous active chart, should this market face further pressure, potential support may be found in the $471/mt-to-$475/mt range, which could act to prevent a move to 2016 lows in the $435/mt-to-$445/mt range.
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