As we digest the market info yesterday: look at bean /corn ratio at 3:1 18 months ago it was at 1.9
Overnight, we tested 14.00 in the beans. One extremely important piece of information. Open interest in Beans jumped 11k in beans and 15K in the corn. This suggests new money coming into that spread which has been a huge winner in the past18 months. I personally thought that it was over done, and due for a nasty correction on a surprise either in the 1) weather or from 2) yesterday’s USDA.
The fact is that trend followers are in the drivers seat, and for now I don’t see that changing. Are we over extended? Yup. But markets can do interesting things. After yesterday’s info giving us a 135 million bushel carry in new crop beans; even despite bigger world stocks, we are looking at a potential supply issue depending on how the harvest goes. Pod weights are lower; While the delta had great yields, eastern Iowa and western IL have suffered with a dry August. A wet spring was helpful, but August has hurt yields. We won’t know the true extent til harvest, and that’s why the spread on corn beans has doubled.
That being said: I am a seller the first time up between 1409, risking 15 cents of heat to catch a correction.
Long term, bean dips should be taken advantage of, however; I like selling into new highs, with tight stops, looking for corrective flushes lower on lack of follow through.
On the corn; If we take out yesterday’s low, we should test the 3 year low at 4.45.
I still like Dec Dow rallying to 15,500 once again, and Dec Gold; If you can buy at 1300 or 1295 level, looking for a relief rally.
That’s it for Friday.
CER