After bottoming on Sept. 10 at $4.97 1/2, December corn has exhibited trendy, impulsive behavior higher, suggesting seasonal lows could have been set last month. The higher highs notched on Sept. 27 were the first of their kind since mid-August, alerting traders to a change in trend. Fortunately, momentum indicators have not diverged from price but have mainly followed price higher. This would suggest price is not currently at risk of forming a bearish divergence with momentum. While it should not surprise given the preponderance of time spent at that level, the Volume Weighted Average Price (VWAP) since May 7 is $5.53. That lines up well with the corrective highs from Aug. 30 around $5.58 and highlights the significant amount of resistance December corn is likely to encounter between spot levels and the $5.50 to $5.58 area. These issues considered, a supportive policy for December corn remains advised with the report day low at $5.27 1/4 the first major support candidate, which needs to hold on any setback attempt.
On the other end of the spectrum, the downtrend in November soybeans remains impressive, shredding through support candidates at every turn. The six-month lows set overnight highlight how strong the current downtrend is with significant price strength needed to arrest the current sell-off. The stochastic measure of momentum remains pointed sharply lower with no semblance of bottoming or diverging taking place. The fact stochastics are reading under "20" does not mean soybeans are oversold but simply strengthens the argument for the downtrend continuing. The last major moving average was broken through last Thursday as November soybeans settled underneath the 200-day moving average for the first time since mid-August of 2020. The next support levels that can be objectively identified would be the $11.85 to $12.00 level from March, which doesn't provide much solace to bulls. A bearish policy remains advised with additional downside expected. Strength above the report day high near $12.95 would be needed to stand aside from the current bearish structure.
DECEMBER SOYBEAN MEAL:
In similar fashion to soybeans, December soybean meal is a picture-perfect downtrend on all applicable scales. Overnight, the December contract hit the lowest level since October of 2020 with momentum indicators tipped sharply lower. In fact, the reading on stochastics is the lowest since March of 2020, illustrating just how weak the current market structure is. The December contract has sliced through all major Fibonacci retracement levels with little in the way of major support until the $290.00 to $300.00 levels from March-May of 2020. Fortunately, funds are already net short this market, removing the threat of further liquidation by this group. That said, if managed funds want to build a larger net-short position, meal could be vulnerable to further pressure. Bulls need to push price above the Sept. 29 corrective high at $342.30 at the very minimum to force bears to the sideline. Ideally, strength above the $347.30 corrective high from Sept. 14 could be achieved, which would argue much stronger for a major low having been made.
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.
Tregg Cronin can be reached at email@example.com
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