MARKET UPDATE - GRAINS, SOFTS, MEATS

MARKET UPDATE
JUDY CRAWFORD
TRADES FOR FRIDAY, OCTOBER 25, 2019
888-301-8120
jcrawford@zaner.com

EMOTION is your enemy more than any market will ever be.

IS WHEAT SUGGESTING A STEEPER SELLOFF? Since the Sept. 3 low, the corrections to the current rally have been brief. There has been four so far. The first was 16 1/4 cents, the second correction 15 3/4, the third 10 3/4, and now were on the fourth. So far it has exceeded the previous ones - its 19 1/2 cents. So is wheat suggesting a steeper selloff?

That probability is high for more than one reason. For one, today it also closed under its 10 avg. Normally, when a market does that, it heads for the 20 avg. that is lower (when a market is in an uptrend). Wheat did that earlier in the move so it could easily do so again. If so, that means it could sell off to 505 at least. And more likely 500 or more since the weekly is forming a reversal top this week. That is going to increase the pressure on the market.

Secondly, this recent rally high formed a reversal top on the daily chart too. Not one of the previous brief selloffs did so. That formation is negative and could help push the market lower too. And it could be the reason this selloff has already exceeded the previous ones.

A third reason is that there are several similarities between this rally and the extended one wheat had in May/June. That rally had brief selloffs too. And it wasnt until the fourth selloff that things changed. Sound familiar?

Assuming it sells off to 505, that could be key as to whether there will be more to the selloff or not. In June when the fourth selloff got under way, it initially held at support (after exceeding earlier selloffs)and attempted to rally but that rally did not hold. Wheat instead continued the selloff and established a downtrend on its daily chart.

We dont know yet whether it will do the same this time and to what extent but the probabilities with the current market technicals does suggest it could try for that 505 level at least. For a way to approach the market, see Trade Alert below.

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GOAL OF THE MARKET UPDATE: To give traders a technical explanation of market behavior with the goal to educate and better understand and trade the markets. What I convey to readers is not a personal opinion but what the markets are suggesting by their technical formations and action.

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TRADE SUGGESTIONS: All trades suggested are for the day session only. I normally wait until after 7:30 a.m. to place suggested trades. I do not enter trades for the night session.

Sell December wheat. Sell 514 3/4 stop. Protective stop 524. Potential projection near term 500. Long term 495. (Potential risk $462.50. Potential reward $737.50 and $987.50). Margin: $1450.
Reasons for the Trade:
1. On the monthly chart wheat is backing off from resistance.
2. The weekly chart is forming a reversal top indicating a trend change from up to down.
3. The daily chart has a reversal top.
4. On the daily chart wheat failed and closed under the 10 avg. today.
5. On the daily chart the macd is in sell mode.
6. The daily chart has followed the same pattern that the May/June rally formed increasing the potential for a more extended selloff.

GRAINS: Except for bean oil, all the grains suggest further weakness.

DEC CORN: No change from yesterday. Its daily action is starting to look like the consolidation it formed in late September. That was almost two weeks of a five cent range before breaking out to new levels. But at that time it was in a different framework regarding both the 10 & 20 avg. It was above them. Currently it is below them. That could suggest corn needs to correct more to the downside. If so, the next good support level is at 375. And that would be approx. a 50% retracement of the entire rally since the Sept. 9 low. Either way, this selloff should be a buying opportunity.

DEC WHEAT:
It closed under its 10 avg. today as the technicals become more negative. A trade could be developing. See Trade Alert for details.

NOV BEANS: They attempted to rally again today but closed near the low end of the days range again. Keep stops at 945 3/4.
Position: Short 929 1/2 (10.23).
Projection: 905.

DEC MEAL: The sell signal triggered yesterday continued today and it closed under its 20 avg. for the first time since the rally began. Potential for this wave down is 302.00.

DEC BEAN OIL: Another huge rally today as it quickly negated the reversal top formed yesterday. It is pushing into resistance with the 200 avg. coming in around 31.80. That area could cause a correction.

MEATS: Beef is having difficulty with a follow through rally after yesterdays performance. Both live and feeders formed reversal tops today. Both are dealing with resistances on their long term charts and that appears to be the issue.

DEC HOGS: I said a rally could set up a shorting opportunity. That changes, of course, if it continues to sell off from this level first and finishes filling the gap. It tested 64.00 again today and held. Keep in mind 64.00 is good market support on the weekly and that is where the 100 avg. intersects too on that chart. This could help a rally form from this level. Just watching for now.

DEC CATTLE: The next main resistance in cattle is up at 117.00. Today they reached 115.77 before selling off and forming a reversal top. That could abort the attempt for 117.00.

NOV FEEDERS: Technically they triggered a buy today from yesterdays outside day on their daily chart. This occurred right at their 200 avg. on that chart. That average stopped the rally attempt. They are up against resistance on every chart. Just watching.

SOFTS:

DEC COCOA: Yesterday I said it had potential for a near term rally based on yesterdays action. It did rally further today but is struggling with its 10 & 20 avg. on its daily chart. The weekly suggests the selloff is not over with. Watching closely.

DEC COTTON: It rallied up to the 65.50 resistance and backed off again. An inside day yesterday triggered a buy today but obviously there isnt any follow through yet.

DEC COFFEE: Yesterday I suggested that a correction could be starting due to the reaction at the 99.00 resistance. Today it triggered a sell from yesterdays inside day. It already reached the 96.00 market support and a 50% retracement of the rally so far. Keep in mind the monthly chart has a buy signal being triggered this month. That suggests this near term selloff should set up a buy. A 61.8% retracement would bring it down to 95.00. That was the extent of the selloff in mid-September prior to the rally attempt after that. Watching closely to buy.

MAR SUGAR: It rallied today but was stopped by its 10 avg. on its daily chart. It filled that 12.09 gap yesterday that I mentioned earlier. It is attempting to recover over the 61.8% retracement for this selloff. Waiting for a good setup to go long.


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