After doing some technical analysis on the weekly chart of the S&P 500 futures (attached), it looks like if indeed the S&P 500 maintains its strength over the next several months, we could end up seeing 2350 by the summer. That would be around a 4% rally from here, which does not seem too extreme. Major technical indicators still seem bullish for the S&P 500.
While last year’s South American weather problems were much more harmful to corn, we continue the tradition of trading this as a soybean problem. Soybeans broke 50 cents last week on good weather in Argentina and rallied 25 cents on Tuesday, Dec. 27, on dry weather for northeastern Brazil. Reports of record yields in Mato Grosso, Goias and Parana were ignored yesterday, but embraced today. As always, news follows price.
The month of November proved to be a very interesting month for agricultural commodities. After starting with a traditional focus on the U.S. harvest and the record yields in corn and soybeans, our markets were impacted mid-month by a Chinese speculative buying frenzy and late month by the combination of the EPA’s increased biofuels mandate, the USDA’s 10-year Baseline projections, and OPEC’s agreement to cut production by 1.2 million barrels per day.
Soybeans continued their march higher as they closed higher for a 7th consecutive session. The Chinese market as well as the Malaysian palm market closed higher last night giving market bull’s early momentum.
Soybeans began the week like they ended last week, on a volatile note as January traded a 14-½ cent range. Weakness was attributed to a continuing run up in the U.S. dollar and a weaker Chinese market. The U.S. dollar continues to see strength as the rest of the world currencies are under pressure and the bond market continues to fall apart which is pushing money to the United States. The Chinese soybean market was down another 5% overnight after dropping 4% on Friday.
Monday morning, corn saw 8 a.m. sales of 101,000 tonnes to Barbados, which was enough to suggest very light support. At 101,000 this sale was the smallest possible to make the 8 a.m. sales report, so it didn't catch large market attention.
There was little doubt at all fund buying was seen in the corn on Monday. Now the next question should be: Is this just a one day buy to start a new month and new quarter or if this is going to be a longer term short covering event for the funds?