The lack of any meaningful changes in the March supply/demand report appeared to have touched off a bit of a hissy-fit amongst a few of the weaker longs in the grain and soy markets yesterday, but that initial burst of selling passed rather quickly. You could almost hear their mothers offer comforting words after the release. “Now, now, Uncle Sam will be back at the end of the month, and maybe he will bring you the presents you want then.” While that did appear to placate many of them yesterday, they obviously experienced a change of heart after trying to sleep on the news, maybe a few had nightmares, and after waking, decided it was time to head for the exits. To be fair, as I have said countless times, bulls need a regular supply of fresh feed even to maintain their weight, that that which was offered up by the USDA yesterday was rather stale. Even with the little tantrum that we are witnessing this morning, we have not really gone anywhere, but this beast will need something by the end of the month, or it could be forced into a “crash” diet.
We do have a couple of pieces of economic data to share this morning. The February Consumer Prices Index numbers have been compiled, and the core number shows an increase of .4% over January. If you exclude food and energy, it was actually a .1% increase, as energy prices for the month moved up 3.9%. The CPI was up 1.7% year over year, which was right at expectations and excluding food and energy, +1.3%. Of course, equity markets would never miss an opportunity to try and push higher on even the faintest of positive news. Once again, we have the DJIA flirting around the 32,000 mark, which happened to be where it had set a reaction peak back in late February. It has attacked that high for three days running but thus far has failed to close into a new high. Just like the “Little Engine Who Could,” though, traders keep telling themselves, “I think I can, I think I can,” and I suspect they will ultimately be successful.
Looking across the rest of the macros, we find energies under minor pressure, metals lower, financial instruments flat and the U.S. Dollar slightly lower. Before you take any comfort in the weaker dollar though, keep in mind that yesterday, it reached the highest point traded since November of last year and appears to have confirmed a bottom.
Wheat
Over the past few days, May wheat has made several attempts to poke through resistance around 6.60, but gauging from today’s action, bulls may have given up the effort for now. Granted, we have not pressed into lower lows just yet, but the bias is tilted downward and it would appear we could finally be set to take that stab down to the 6.30 level. The question of course will be, can we hold there. Cycle counts line up through Friday and then the 20th/23rd.
We have a slightly lower low for the week in KC July futures but have yet to reach down to the base support level at 6.09. Ideally, we should reach that level as we move into this coming weekend, at which point, daily stochastics should be back at the oversold zone as well. Cycle counts ahead between the 12th/15th and then the 24th/26th.
Corn
While trading down to the lowest point yet this week, May corn has not even reached back to last week’s lows which were down at 5.29 ¼. Let’s do keep in mind, if we continue to break and closed out the week below that mark, it would not look good as we would have then recorded two, outside lower weeks in the past five. Anything in between is just market noise. I have daily cycle counts on the 15th and then the 22nd/25th of March and weekly cycle counts through the rest of this month.
Soybeans
Yesterday, May beans posted its highest close to date, which was in fact, above the mid-January high, but obviously, that accomplishment has impressed few. Today, we are looking at a possible outside lower daily reversal. It is interesting to note that the rally from the December 2nd corrective low lasted 29-days and gained 25.6%, while this current rally was also at 29-days this week, but only gained 12.6%. Seems that we have lost a bit of the bullish momentum. A close today below 14.23 would look negative and a close on Friday below 13.81 would potentially confirm a peak. Daily cycle counts ahead on the 12th, 19th and 29th, with weekly cycle counts lining up for the weeks ending the 19th and 26th.
Soy Oil
For the sixth day in a row, May bean oil has poked in higher daily highs, and in five of them, they were new contract highs to boot. Overnight, we nearly reached the next measuring target at 53.98, which also happened to have been the peak in 2013. We have turned lower from that early burst but nothing yet to suggest we have reached a peak. Cycle counts are on the 19th and the 31st.
Soy Meal
While the day is still young, May meal has finally pushed through the 413 level and has reached down to the lowest point traded since the 29th of December. We could still recover into the close, but failure to do so should open the door for a run down to the 397/392 zone. Cycle counts ahead on the 15th and the 25th.
Cotton
Cotton bulls were quite disappointed after the release of the USDA numbers yesterday and we witnessed a flush down though the recent support at 83-cents. This morning we did extend, and briefly pushed through the equal leg target at 81.12 before recovering. Note that we almost touched the 55-day moving average for the first time since November. We have not closed below that line since May of last year and currently crosses at 79.85. Indicators are still pointed lower and will probably not be back into the oversold zone at least until next week. Cycle counts ahead line up for the 16th and the 26th.
