July corn plunged to new contract lows Friday, which were the lowest spot prices since September. The flush to new lows still has momentum indicators declining rapidly with no sign of bottoming action, removing the potential for a bearish divergence. Oddly enough, on balance volume (OBV) read 996,695 contracts on Friday, suggesting bulls have been in charge of price action the last 20 days. Large spec traders remain heavily short the corn market at 301,166 contracts, just off record levels of 334,262 contracts two weeks ago. The best support candidate would in fact be the September lows, which we would be watchful of for a potential bullish divergence in momentum from even a short-term scale. Otherwise, trends are down on all applicable scales, and a continuation or even an acceleration of losses should not surprise. With the severity of the sell-off, we would need to see trade back above a minimum $3.61 3/4, but preferably the $3.68 1/4 level, to turn trends and open the possibility of a larger corrective move higher.
In similar fashion to corn, July soybeans are in freefall, notching fresh contract lows overnight and trading at the lowest spot prices since December 2008. On a continuous basis, soybeans are attempting their sixth lower weekly close in a row, which would be the longest losing streak since 2014. Momentum indicators continue to plumb new lows but have not yet diverged from price, which would be required to have any confidence that the downtrend is slowing ahead of a turn. Large spec traders continue to flex their position, pushing to a new record 167,981 contracts last week. This will become a supportive influence when funds are forced to cover, but until that happens noncommercial traders have more reason to add to winning positions than cover. Given the persistent state of the downtrend, July soybeans have almost nothing above the market in terms of corrective highs to gauge the appropriate level of bearish exposure. Initially, we would be looking to the $8.36 1/4 corrective high from May 7 as a micro level of risk that price would need to recover above to warrant bears moving to the sidelines. Like corn, the downtrends remain intact and should not surprise by their continuance or acceleration in the days and weeks ahead.
Sticking with the theme, July Kansas City wheat hit fresh contract lows overnight and spot prices are at their lowest level since 2006. One could swap the word wheat with corn and essentially have the same technical condition in both markets. Momentum indicators are in a sharp downtrend with no hint of bottoming or diverging action. Unlike corn, OBV at 173,430 contracts is sharply in bearish territory and accurately reflects the control bears have had on this market. July Kansas City wheat should be targeting the $4.09 corrective high from May 3 as the level needed to recover above to turn at least short-term trends higher. Large spec traders are net-short 52,464 contracts, which is close to an all-time record. Calendar spreads have been mainly flat with the July-September at a 10 3/4-cent carry, which is middle-of-the-road for the last month and change. Herd mentality is in full effect across grain markets, which should imply wheat isn't going to go anywhere corn and soybeans don't. Conversely, any recovery attempt should pull KC wheat along for the ride.
Tregg Cronin can be reached at email@example.com
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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.