FIRST LOOK, by Duane Lowry
Monday, December 19, 2016
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SUNRISE OUTLOOK OVERVIEW:
At 6:27 am> Grain/Soy Snapshots: Corn= 1 1/2 lower, Wheat= 1 higher, Soybeans= 5 1/4 lower.
Day Session Expectations vs Night Session Tone:
March Corn: Support= $3.53-55, Resistance= $3.75.
*Support will build on probing below $3.55. Search weakness for ownership opportunities.
January Soybeans: Support= $10.20-25, Resistance= $10.60.
*Near-term weakness needs to be searched for ownership opportunities.
March Wheat: Support= $4.05, Resistance= $4.35.
*Limited ability to probe below last week’s lows. Capable of building upside momentum in the days/weeks ahead. Trade only from the long side. Overnight levels likely offer ownership opportunities.
Outside Market Influences:
At 6:26 am> Price Snapshots: Crude was down $0.01, Gold up $2.30, Dow Index was up 22 and the US $ Index was up 4.
*Crude oil will build resistance on further corrective strength. Strength today offers selling opportunities. Downside risk remains far more than recent rhetoric suggests.
*Gold has achieved price levels capable of producing stabilizing price action. I have no interest in any bearish stance from here forward. We may see additional price erosion, but it is now reasonable for longer-term bulls to return to the marketplace at this time.
*US Dollar Index has achieved some longer-term upside targets. Some pausing/corrective action is possible during the next several days/few weeks. Yet, it remains possible that the overall tone here will be supportive for months to come. I see no reason to focus on picking a top, despite my willingness to recognize that much has been accomplished and that it may be time for this market to spend some time churning up here.
*Dow Index is in a bubble. This process will create a major and long-lasting top. Current levels offer selling opportunities.
Weather produced winterkill conditions during the weekend, impacting at least 50% of the US hard red winter wheat region. Some of the impacted acres also experienced poor (dry) conditions this fall, setting the stage that damage from this event could be quite significant. South American weather is improving, with weekend moisture and upcoming moisture expectations, although this is not significantly different than Friday’s weather expectations.
Wheat will be supported by US winterkill storylines. Concerns related to the weekend’s winterkill conditions should continue to be a storyline and should not be seen as just a 1-day focus. Technical conditions have been supportive for some time and appear capable of building upside energy in the days/weeks ahead. Ability to build downside momentum below last week’s lows should be seen as limited. Current values offer ownership opportunities.
Corn will find spillover fundamental support from US wheat winterkill storylines. Technical conditions will provide support on near-term probing below $3.55, basis March, limiting the ability for near-term weakness to develop much downside momentum. Technical conditions suggest more upside potential than most expect. While it may be premature to discuss now, it remains very possible/probable that 2017 US acreage mix discussions will see reduced US 2017 corn acreage. US soybean yields the past two years, especially the 2017 harvest, have US Midwest producers extremely confident about their ability to ratchet-up their pre-season soybean yield calculations when it comes to generating cash-flow/profitability predictions. Current corn/soybean price relationships will definitely increase 2017 US soybean acreage and reduce US corn acreage. At some point, the marketplace may need to address/change this calculation. This can be accomplished by depressing soybean prices or by increasing corn prices. Since at least September, it has been quite clear that the soybean market has preferred to completely reject bearish fundamental factors in its price discovery process, which now finds values that are nearly $1 higher than pre-harvest values, despite yields and carryout projections only rising significantly since pre-harvest expectations. This leads me to believe that if an acreage/price relationship storyline develops between now and the time US planters begin to roll in the spring, it will be a supportive corn price storyline. Search weakness for ownership opportunities.
Soybeans traded both sides overnight, after rejecting early near double-digit overnight losses on improving/favorable South American conditions. Prices have since eased steadily into negative territory as morning arrives. Fundamental storylines remain bearish. Technical conditions will encourage support to develop on any near-term weakness below $10.25, basis Jan, limiting ability to develop much sustainable downside momentum at this time. While it is difficult to offer a fundamental storyline, it appears that weakness needs to be searched for ownership opportunities.
In summary, overnight directions will be seen as following weather-related logic, with wheat higher and soybeans lower. However, wheat is poised to have both fundamental and technical conditions creating buying energy and trending higher action in the days/weeks ahead. Soybeans have been rejecting clearly bearish fundamental storylines for months, so why should we think that is about to change? Technical conditions in both corn and soybeans should provide support and suggest trending higher values may be ahead there as well. Search for ownership opportunities.
Barge Values: Dec= +31 H
CH: Support= 3.53-55, Resistance= 3.75
**PROFILE: March Corn> Technical conditions will provide support on probes below $3.55. Search weakness for ownership opportunities. IN SUMMARY, we seem poised for a price strengthening move that will take us back to the highest values seen since July, but it is difficult to offer a fundamental storyline for such a conclusion.
Barge Values: Dec= +38 F
SF: Support= 10.20-25, Resistance= 10.65
SMF: Support= 310-13, Resistance= 330
BOF: Support= 36.25-50, Resistance= 38.00
**PROFILE: January Soybeans> Price action remains constructive. Near-term weakness will be well supported on probes below $10.25, limiting ability to develop much sustainable downside momentum at this time. IN SUMMARY, near-term weakness needs to be searched for ownership opportunities.
Barge SRW Values: Dec= +30 H
WH: Support= 4.05, Resistance= 4.35
**PROFILE: Chicago March Wheat> Price action has been supportive. It seems unlikely that this market has desires to develop much downside momentum below last week’s lows. This very mature and old bear market has much ability to build upside momentum from both short-covering activity and new ownership interest. IN SUMMARY, search for ownership opportunities.
GLOBAL HIGHLIGHTS & HEADLINES: .
The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account.
This newsletter is prepared from information believed to be reliable. Early Market News, Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Opinions expressed are subject to change without notice.
© 2016 Duane Lowry. All Rights Reserved.