Providio's Daily Grains Commentary for July 18,2012

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Grains: 18July While drought conditions remain, there is some modest pressure based on fears of demand destruction. We’ve heard of stories of livestock operators bringing animals to slaughter early because of high feed costs. Further substantial damage to the current crop, however, will likely bring another round of material price increases.


CORN:
First Notice: Sep: 31Aug; Dec: 30Nov    
18July Early slaughter and a drop in ethanol output is evidence of rationing of demand. The market has dropped in early trading for the 2nd day in a row.
Traders looking for a consolidating correction should be on the lookout for signs that the farming community is starting to put hedges on as they come to terms with their actual crop size.
December
Support: 7.60: Projected measured move. 6/15 to 6/27-6/29 pause, then 1.27 move from 6/29.
7.50: Psychological level
7:08:7/5 settlement, 7/9 opening
7.00: psychological level  
6.85-6.90: support above gap since 7/5 gap open.
6.73: Aug 2011 highs
6.56 ¾: 6/26 high trade
6.45: June 2011 highs
6.17 Oct 2011 highs
5.94: Gap left on 26June opening.
5.75: March high trades, support in early January, bullish support inflection level back to 7/1/2011 low.
5.69: Previous high and gap left on 25June opening.
Resistance: 7.78: 7/16 high trade
7.90: Just above the 7/17 high  
8.00: Psychological resistance level
8.12½: +2 STD over the 21-day moving average (6.67½)
Comment: Technicals remain clearly positive in primary directional indicators. The topping action we identified last week seems to have resumed.
Watch our noted gap levels as these getting filled may give the market the structure necessary to head to new highs.
Gaps remain in place between 6.74½ and 6.85½. Additional technical gaps remain between 5.94 and 5.96¼, between 5.54 and 5.70, and then well below the consolidation between 5.34 and 5.36 ¼.
Seasonal Snapshot: For December-All 3 patterns have a modest positive bias until 7/14, when all 3 peak and head lower until starting bottoming action on 7/22. The 5 and 15-year patterns bottom on 7/25, the 30-year on 7/30. At their bottoms, all 3 will project modestly higher biases until 8/2.
 
SOYBEANS
First Notice: Aug: 31July; Sep: 31Aug; Nov: 31Oct; Jan: 31Dec 18July Even with the last 2 day’s modest negative action, the market is consolidating recent gains. Trading remains above last week's sideways' action and has established new highs. Drought issues continue to add a bid under the market. Demand destruction will tend to take some of the steam out of the rally dynamic
Support: 15.90½: New settlement high on 7/16
15.75: 7/11 high trade
15.71¼: 7/9 high trade
15.57: 7/9 early session resistance.
15.25: 7/5 & 7/26 resistance and overnight support test on 7/9.
15.00: Major psychological and round number price level, and measures to the $1.00 move higher from the previous high
14.50: Psychological level
Resistance: 15.98½: 7/16 high trade
16.00: psychological level
16.07: 7/17 high
16.27: +2 STD over the 21-day moving average (14.77)
Comment: Technicals remain positively biased in the primary directional indicators. The ROC and RSI have resumed a bit of reversion, indicating some possible topping action. The above noted +2 STD looms as a cap on further massive gains for now. Current volume indicates consolidating action.
Some serious gaps remain below, most notably 14.74¾ to 14.93. If this gets filled and the drought action remains, this may set up the Soybeans for a move to materially higher record highs.
Any news of significant rain, especially in Illinois or Iowa, will likely spark another violent move lower. Maybe this is the gap filler?
Seasonal Snapshot:  For November-All 3 patterns are in a modest positive mode until 7/14. All then enter a negative mode until bottoming action is complete on 7/29.

 
WHEAT:
First Notice: Sep: 31Aug; Dec: 30Nov  
18July The daily Wheat action continues to move largely in sympathy with Corn. There are other global supply issues with foreign growing regions threatened.
Support: 8.70: late August 2011 resistance and 7/12 highs.
8.58¾: 7/9 high trade
8.50: Psychological resistance
8.47: Settlement high on 7/5
8.41½: Resistance in late July and support in early September 2011
8.15: mid-level support area from mid-July and mid-August 2011
8.00: psychological level and mid-Sep 2011 resistance.
7.80: 8/9/11 and 9/15/11 low support
7.66: 10/11 settlement, upper level of late October through early November rally
7.60: 6//25 high, near the 6/27 low
7.45: 5/21 high.
7.30: just above 5/21 settlement, general resistance area on rallies in early January and early February
7.17-7.20:Intermediate support and resistance inflection point, was support in mid-October, resistance in late December/early January, support in early February, and resistance on rallies in early and late March
7.00: Psychological level, extends on a traded level down to 6.90 and has acted as an inflection point around which lots of trading has occurred going back to December.  
Resistance: 8.95: Support and resistance inflection point tracing back to late Jan 2011
9.00: Psychological level
9.01¾: 7/16 high trade
9.31:+2 STD over the 21-day moving average (8.02½)
Comment: Performing much like Corn, technicals are primarily pointed higher with the secondaries shifting reverting some today as well. Volume is also showing consolidation.
Seasonal Snapshot: For December-All 3 patterns enter a more positive biased mode on 7/10. 5 year will be in a very positive mode until peaking on 8/5. 15 and 30 years are in a generally positive trending direction until early September, with the 30-year swinging back and forth from positive to negative in that time period.
 
Disclaimer: The information presented in this report is taken from sources we believe to be reliable and accurate. This information is not guaranteed as to accuracy or completeness. The opinions expressed are based on our best judgment at the time of writing and are subject to change without notice. These opinions should not be construed as an inducement or advice to enter into any Futures or Options on Futures transaction except where explicitly stated. There is risk of substantial loss in trading futures and options. One's financial suitability should be considered carefully before placing any trades. Past performance is not indicative of future results.

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