Options play: Are corn and beans ready for the next leg down?
After the USDA supply demand and crop progress report on Friday, Oct. 10, I watched grains fall.
Fundamentally, according to a Bloomberg report today, "Corn futures fell the most since September after a government report signaled a record-high U.S. crop will add to a grain glut, driving down global food costs. Soybeans had the biggest drop in in two months..." The article, written by Jeff Wilson, was titled, Corn Tumbles Most in Five Weeks on Bumper Crop; Soy Drops. The report that slammed these markets was the USDA supply demand and crop progress report. The article went on to state that the U.S. will harvest a bumper and record crop this year 3.927 billion bushels of soybeans.
This in my view is all very bearish for the corn and beans. There is still the possibility that rains could make it to wet to get the grains harvested on time, which could help the bulls. Although each day that goes by, this scenario becomes less and less likely in my expert opinion.
Technically, I have added my favorite technical indicators to this soybean and corn charts below. They are the 9- (red line), 20- (green line), and the 50- (blue line) day simple moving averages (SMA). I have also added Bollinger bands or BB's (the light blue shaded area) and candlesticks (the red and green bars with the wicks, on these daily charts each bar represents a day of trading). I have also left the volume chart at the bottom. These few technical indicators tell me 8-10 different characteristics about the market at a quick glance. I have them saved on my charts in MARKETHEAD so they can populate any chart, any market, and any time frame at the click of a mouse.
What we have here with the November soybeans first and foremost is a market that has gone from a "SUPER-TREND" down to a downward trend. The reason that the market is technically still in a downward trend according to my favorite indicators is because of the 20-day SMA (green line). The 20 day is still pointing on a downward angle and the market is trading on it or below it and that to me is a downward trend.
The market also closed below the 9-day SMA (red line) as well, but the 9-day SMA is pointing on an upward angle which I expect may change in the next week to pointing down. I also have some very clear resistance lines by using my favorite indicators. The first line is the 20-day SMA, then the top line of the Bollinger bands (BB's, light blue shaded area), and finally the 50-day SMA (blue line). Also note that all three of these indicators are pointing lower on good sharp angles.