While the range has certainly gotten wider over the last seven to 10 sessions, March corn futures remain rangebound for all intents and purposes. When we take a look at the volume point of control, or VPOC, we can clearly see why the range has developed in the manner it has. The VPOC for the life of the March contract is $3.88 1/2, meaning the most amount of volume that has changed hands at that level. The third highest level of volume throughout the life of the March contract is $3.79. Therefore, it is no wonder March futures have established a bottom end to its range around $3.79 with a top end of the range between $3.88 and $3.90. Momentum indicators are falling, offering no real clues about price direction as we near the bottom end of the range. All major moving averages are above the market, which will keep trend followers predisposed to selling until proven otherwise. Managed funds moved to aggressively cut their net-short last week by 38,328 contracts, leaving their net-short position at 29,476 contracts. From a short-term perspective, we would be using $3.78 1/2 and $3.82 3/4 as directional risk parameters from which to gauge longer-term sentiment.
The persistent selling pressure in March soybeans has been nothing short of impressive and has clearly been the dominant technical feature dating back to the start of the year. March soybeans provide us another great opportunity to completely disregard the terms "overbought" and "oversold" from our technical vernacular as they mean absolutely nothing. A quick glance at the stochastic measure of momentum shows the indicator crossing below $20.00 back on Jan. 15 when March futures closed at $9.28 3/4. If a person would have used this indicator of "oversold" conditions and exited a short position, they would have missed out on the bulk of the move and another 6.0% of the decline. These indicators can remain in "oversold" or "overbought" territory for weeks or even months as we've seen with markets like natural gas or equity futures. Simply put, March futures have taken out support from December and August and have the May lows in sight. Only when the March contract has made a recovery above a prior corrective high with enough merit to conclusively say the trend has ended, will moving to non-bearish exposure be advised. The downtrend in March futures is expected to persist and should not surprise by its continuance or acceleration.
March Soybean Oil:
In similar fashion to March soybeans, soybean oil has rolled over in impressive fashion during the last two weeks' worth of trade. On Friday, soybean oil sliced through its last major moving average by taking out the 200-day moving average, a level it hasn't traded below since Oct. 3. The same situation with momentum indicators in March soybeans is true with bean oil as it merely shows how weak the contract is without showing a bullish divergence in momentum. For even short-term trends to turn higher, we would like to see trade above the Jan. 29 corrective high at $32.11. Otherwise, corrective lows from Sept. 27 at $29.28 and Sept. 9 at $28.69 would be looked to for intermediate-term support.
Tregg Cronin can be reached at firstname.lastname@example.org
Follow Tregg Cronin on Twitter @5thWave_tcronin
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.
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