By Jim Wyckoff
This is a routine feature item to provide you, my valued reader, with a quick analytical "snapshot" of the futures markets that most interest you. In a short paragraph I'll tell you if I'm bullish, bearish or neutral the market, and why.
Corn. (December) Bearish. This market has turned into a sideways trade the past few weeks, after a two-and-one-half-month steep downtrend. The recent bearish USDA crop production report could not push prices significantly south. This, combined with the recent narrow trading range, gives the bulls more hope that prices are close to, or have indeed already scored their summertime lows. Sellers seem to be exhausted right now. A push below the recent low at 1.85 opens the door to major support at the 1.80 area, basis December. I'll turn neutral when prices can push back above the psychological $2.00 resistance level.
Soybeans (November) Bearish-neutral. Last Thursday saw prices set a new monthly high for August and then this week saw a push toward that level. But resistance at the 4.78 area again checked gains and prices sold off. Still, bulls are gaining confidence by the day. The shorter-term moving averages I follow (9- and 18-day) have turned positive. Price action in the wake of the recent bearish USDA crop report has worried the bears, as selling interest has been limited. Major support lies at 4.43-50. If that zone gets soundly penetrated on the downside, the door could be open to a test of the $4.00 level. I'll turn neutral-friendly to this market when prices can push above the 4.79 level.
Soybean meal (December) Neutral. December soybean meal futures appear to be forming a nice rounding-bottom reversal pattern on the daily bar chart. The popular Moving Average Convergence Divergence (MACD) indicator has also turned positive recently. However, for me to get excited about playing the long side in meal, prices need to push up through a resistance zone seen at 165.50-167.80 and begin to fill a downside gap created on the daily bar chart in early June. Strong support lies at the 145.00 area.
Soybean oil (December) Bearish. New contract low scored on Wednesday. Oil is in a solid downtrend, but the trend lower may be flattening out. This is the weak sister of the soy complex. Don't fight the trend and be a bottom-picker, even if prices are close to a low. Watch for a sign of market strength before playing the long side. And there are none yet.
Chicago Wheat (December) Bearish. Another new contract low eked out Wednesday. A mild rebound in prices early last week has been reversed as prices trade close to key support at 2.50. A drop below the 2.50 support level would open the door for bears to attempt to push prices to the next level of support, basis the monthly bar chart, which does not show up until a zone at 2.20-2.35. I've said for a while now that I do not think there is much more downside left in wheat, and do want to play the long side at some point. But the market needs to show me some signs of strength, first. So far, there have been no technical signals of market strength in wheat. Prices need to clear the 2.70 level before I turn neutral.
Kansas City Wheat (December) Bearish. Last week's push to very close to $3.00 was met by good selling pressure that drove prices back down. Like Chicago wheat, there is not much more downside left, but don't try to pick a bottom. Let the market show some strength, first. I want to see prices close above the psychological $3.00 area before I get very excited about playing the long side of this market. Strong support comes in at the 2.86 level, and prices are struggling to stay above that area. Bulls need to keep prices moving at least sideways in order to gain some momentum. If prices do fall below 2.86, then the door is open to losses down to major support at the 2.75 area.
Live Cattle (October) Bearish. The market is in a four-month downtrend. Recent price action has been choppy, but favors the bears. For bulls to get back in the ballgame, they need to push prices above a downtrend line drawn off the April and July highs. That means a push above $69.50 before the downtrend line is broken. If that happens, it would turn me neutral to the market.
Feeder Cattle (October) Neutral. The market has been choppy lately and looks like it wants to chop some more. Bears have the advantage this week as prices traded to a new two-week low Wednesday. There is stiff resistance at the 87.40-50 level. Feeders, basis the longer-term monthly chart, do look "toppy."
Lean Hogs (October) Bearish. Big gap-lower trading days last week did some major chart damage to hogs. Futures on Wednesday spiked lower on the daily bar chart--only to rebound and close higher. This price action did form a minor double-bottom on the daily bar chart. However, the bears are in firm control and have socked the bulls a good one recently. For bulls to even get up off the canvas, prices need to push back above solid resistance at the 55.00 level. Prices need to push above $59.50 to break a 3.5-month-old downtrend line.
Pork Bellies (February) Bearish. The market has been in a downtrend since early May. New 3.5-month lows scored this week on a big move lower. It will take a move above $72 to turn me neutral.
Cotton (December) Bullish. A big upside breakout Monday as cotton continues a strong runup since scoring a V-bottom reversal in early July. Price consolidation Tuesday and Wednesday should not worry the bulls. Significantly, prices Monday pushed soundly above the May highs and scored a new high for the year. This qualifies as an upside "breakout," which is what many traders look for in determining trading opportunities. Also, cotton futures have now pushed above a five-year-old downtrend line on the monthly continuation chart for nearby futures.
Sugar (October) Bullish. Sugar has had a nice bull run the past four and one-half months. That bull run may continue, but there are some early warning signs on the horizon for the bulls in this market. The October N.Y. contract has formed a diamond pattern on the daily bar chart. These patterns usually occur at market tops and are formed because of increased volatility and wider daily trading ranges at lofty levels. While I would not call the late July-early August volatility in the sugar market extreme, the volatility increased nonetheless--enough to form a bearish diamond pattern. A second clue that the rally may be losing steam is the fact that the shorter-term moving averages have turned negative--the 9-day crossing under the 18-day moving average. These two moving averages kept a trader in the market during the recent bull run. Now, they have turned negative. Finally, the Directional Movement Index (DMI) shows that the trend in the sugar market has lost its power. The ADX line has fallen well below 30, which means the market is no longer in a strong trend. What will it take for the bulls to regain their momentum? Prices need to push above the resistance level at 11 cents, and then see some good follow-through strength.
Crude Oil (October) Neutral. Even though prices soared to new highs again Wednesday, I can't be a bull in this politically charged market--or at least I can't play the long side. It's just too volatile and prices are too lofty. I can't see getting long crude oil with prices over $32 per barrel. This market has been brutal to short-side players. I'll turn neutral-bearish when (or if) prices close below $30.00.
Heating Oil (October) Neutral. Big surge again Wednesday, but like crude oil, I can't be bullish. A close below 84 cents turns me neutral-bearish.
Unleaded Gasoline (October) Neutral. New contract high Wednesday, but I won't play the long side in gasoline, either. I want to see prices close below 84 cents before I become neutral-bearish.
U.S. Dollar Index (September) Bullish. Prices ran right up to stiff resistance at the 112 area and backed off Wednesday. Bulls will argue that it's just healthy consolidation and I can't argue with them. Longer-term and shorter-term charts are all friendly. For bulls to get really snorting, however, prices need to push and hold above the May high around 112.10.
If you have any questions or comments, drop me an email. I enjoy hearing from all my readers.
Jim Wyckoff
