Corn Futures (March)
Fundamentals: Corn futures were mute yesterday as the market ran out of new news to break prices out above technical resistance. Today is the signing of the highly anticipated Phase-1 trade agreement. It will be nice to get some clarity on the “trade deal”, but I wouldn’t hold your breath for something magical to happen. My guess is that Phase-1 is largely an agreement to proceed to Phase-2. February option expiration is next week and there is a lot of open interest between 385-390 on puts and calls, this may keep corn stuck for the next week and a half.
Technicals: Corn futures are struggling against technical resistance, we had that defined as 390 ½-392. This pocket represents the top end of the range through December, as well as other previously important price points. If we see consecutive closes above here, we believe there is room for a short squeeze, despite any fundamental backdrop. With that said, this is the top end of the range and we have been working with clients to reduce exposure here.
Fundamentals: Soybean futures have been battling against technical support for the last week and a half. Hopes of a meaningful Phase-1 signing today has kept a floor in the market, but we would not be surprised to see that fall flat. It will be nice to get some clarity on the “trade deal”, but I wouldn’t hold your breath for something magical to happen. My guess is that Phase-1 is largely an agreement to proceed to Phase-2. Keep in mind that we rallied nearly 75-cents in December, much of that in anticipation of Phase-1, setting up for an over-promise, under-deliver scenario.
Technicals: Our technical support pocket from 933 ¾-937 ¼ has been tested each of the last nine sessions. The inability to bounce off support should be a caution flag for the bull camp. A break and close below support opens the door for a potential drop to 920-922 ¾. This pocket represents a key retracement, the 200-day moving average, and several previously important price points. Yesterday we moved our bias from Neutral to Bearish/Neutral. Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day.
Previous Session Bias: Bearish/Neutral
Resistance: 968 ½-970****
Pivot: 950 ½-955
Support: 933 ¾-937 ¼***, 920-922 ¾****
Chicago Wheat (March)
Fundamentals: Chicago wheat futures made new highs, for the move, but we still don’t see much value in prices at these levels. The Phase-1 trade deal, being signed today, may have some bearing on price action. Some are hopeful that wheat will be included on ag purchases. It will be nice to get some clarity on the “trade deal”, but I wouldn’t hold your breath for something magical to happen. My guess is that Phase-1 is largely an agreement to proceed to Phase-2.
Technicals: The market has worked higher, hunting for stops above the double-top highs from June. We still think the risk/reward favors the sell-side here in the near term. On top of being against technical resistance, the RSI is nearing overbought conditions, 69.64. On the support side of things, 554 ½-557 ¼ has been our pivot pocket. This was tested and held following Friday’s report, keeping it intact to start this week’s trade.