1) Fiscal cliff, on again, off again. Bottom line, watch the key resistance at 12,300. I might expect an intra day pop above there just on weak short covering. I’d be more inclined to watch where we SETTLE. A settlement above 13,300 blows me out of all my short positions. Forewarned is fore armed.
2) Rain in the plains putting a little pressure on wheat. that 809 level has now been tested. If we settle below 8.00, that opens the door to another 30 to 50 cents lower. A lot of producers were wary to sell b/c its hard to sell forward dirt. However, the market is speaking louder than the weather right now. Farmers are amateur weather men. If we break another $1.00 or 1.50 down to the old lows at 6.50, my guess is that’s when they will panic and either price grain at the elevator, or hedge. Hopefully they hedge w/ options, so at least they can hang onto their grain if prices rally back.
Worst case scenario: Farmers hold on, sell wheat in the hole, either 1) at the elevator or 2) w/ futures.
At that point, unless the sell off continues, then the market could snap back and rally back on a weather scare. At that point they are making margin calls w/ their futures hedges, or calling up the elevator buying out of their earlier sales. Either way, its bad marketing risk management.
Tomorrow we have informa which is expected to be bullish for corn. If that number comes out bullish and we break, it could be a sign of underlying softness in the market.
I have said it before and I’ll say it again. December is one of the worst months to trade.
Act accordingly.
CER