Breaking: China’s Hubei province reported 14,840 new cases of coronavirus last night, which renewed the risk off trade in the outside markets overnight. The situation remains very fluid, we are in the camp that the number of cases reported is grossly underestimated.
Note: The shot clock is winding down on March futures so we will be shifting to May futures in our daily reports by the start of next week.
Corn Futures (March)
Fundamentals: March corn futures managed to rally yesterday as shorts started to cover positions on the inability to break lower on a bearish USDA report on Tuesday. We classify this as a “fundamental rejection”, meaning there was reason to break the market lower over the past two days, but the market held firm, indicating that the majority of the bearish news has been baked into the cake. We believe a fundamental rejection is significant, in this case, it is a bullish development, prompting us to send out an email yesterday afternoon. Weekly export sales this morning came in at 968,800 metric tons, 22% below last week’s report and 9% below the 4-week average.
Technicals: The market is still technically rangebound, but we saw yesterday’s price action as extremely encouraging, setting up for what we see as a good risk/reward situation to the buy-side. With that said, there is still some work to do on the charts. First resistance comes in from 384 ¾-387 ¼, consecutive closes above here could spark a bigger rally. The must hold support pocket is 375 ¼-377 ¾. With the shot-clock winding down on the March contract, you may want to consider using the May contract. 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: Neutral
Resistance: 392-394 ¼***, 407 ¾-411 ¾****
Pivot: 384 ¾-387 ¼
Support: 375-377 ¾***, 365-365 ¾****
Fundamentals: March soybean futures managed to close higher, again. Yesterday’s session had more conviction behind it with a higher participation rate, in terms of volume. The market gave back some gains in the overnight session as coronavirus fears throw a wet blanket on things, but we still feel there is an opportunity for prices to work higher from here. Weekly export sales this morning came in at 644,800 metric tons, down 8% from last week, but 2% above the 4-week average.
Technicals: The market was able to close above our resistance pocket from 888 ¼-890 ½, the bulls will now want to defend this pocket in the coming sessions. This pocket represents the breakdown point from January 30th and a key retracement. If the bulls can continue to defend support, we could see the March contract grind back towards the psychologically and technically significant $9.00 handle.
Chicago Wheat (March)
Fundamentals: This morning’s weekly export sales came in at 643,100 metric tons, up 90% from the previous week and 10% above the 4-week average. The surge in the US Dollar may continue to be a headwind for wheat futures, which historically seem to be more closely correlated relative to the other grains.
Technicals: Chicago wheat futures staged a relief rally yesterday, taking prices to our resistance pocket from 548-551 (previous support now becomes resistance). If the bulls can chew through this pocket, perhaps we see an extension towards 560, but we still believe the bears have the advantage and are looking to resell relief rallies.