- There is a lot going on Wednesday when we consider it is the last day of July, FOMC announcement day, first notice day for the August soybean contract, and the first day of the new positioning week for noncommercial traders.
- A number of markets are also in position to possibly complete technical reversal patterns on their respective long-term monthly charts, including the S&P 500 Index.
- In the Grains sector, national cash indexes continue to tell us available stocks-to-use are large heading into the end of another month.
As we wait for sunrise early Wednesday, we know that by the time the sun sets this evening a lot is going to happen across the market landscape. Not only is today the end of July, putting the focus on a number of possible markets in position for long-term technical reversals on their respective monthly charts, but it is also the day the US Federal Open Market Committee will make its latest announcement on the Fed fund rate. As discussed Tuesday, the Fed fund futures market continues to tell us the Fed won’t make a rate cut today, meaning the spotlight will be on what is said rather than what is done. Pre-dawn finds the US dollar index under pressure, weakening as much as 0.45 and sitting near its low at this writing. I also saw a news story about how the BRICS[i] alliance continues to work on convincing other countries to ban the US dollar for trade, with Zambia[ii] the latest on the list. The continued attempt at global economic (and political) destabilization by BRICS ahead of the next US presidential election ramps up the attention on the monthly close by the S&P 500. Heading into Wednesday’s session the index is down about 51 points for the month.
Corn: The corn market traded both sides of unchanged overnight on light trade volume, with contracts showing fractional losses as of this writing. The only thing we know for certain is that will change over the course of the morning ahead of intermission. As for today’s session, I could make the argument for both a Wild West type of Wednesday or a typical lazy King Corn kind of day. We have to keep in mind that being a Wednesday it is also the first day of the new positioning week for noncommercial traders. For the record, September corn was down 13.75 cents and December was off 12.25 cents based on Tuesday-to-Tuesday closes. This tells us funds spent the past week adding to their net-short futures position, taking a break from the recent short covering activity. The National Corn Index (ICY00) was calculated near $3.8050, putting national average basis at 8.25 cents under September futures, unchanged from Monday evening. As for new-crop, a look at Marley’s Weather Spirits[iii] shows some rain fell across Iowa and Illinois Tuesday (past), more rain is in the forecast for the US Plains and Midwest today (present), and the 6-to-10-day forecast now shows above normal precipitation for much of the US corn growing area (future).
Soybeans: It promises to be a fun day in the soybean market Wednesday. Not only are funds expected to be more active, it is also first notice day for August soybeans[iv]. This also means there are no price limits on the August issue from now until expiration. What more could you ask for? August responded by rallying as much as 21.25 cents overnight on trade volume of only 280 contracts. But enough about August. The National Soybean Index (ISY00) came in at $10.00 Tuesday evening, not dipping its toe below that big round number for the first time since October 19, 2020. At least not yet. I can’t explain why, but my Blink reaction[v] tells me the fact the NSI held $10 was important. Barring a miraculous rally by the September or November futures contracts, it looks like the NSI will be below its long-term downside target of $10.26 at month end. Speaking of the November issue, once we get through today and the calendar page turns to August, traders might pay more attention to the changed extended weather forecast. Also, at Tuesday’s close Nov24 was 82.75 cents below the June settlement with the daily limit being 85 cents. “So you're telling me there's a chance…”
Wheat: The wheat sub-sector was in the red pre-dawn Wednesday. At face value, I can’t come up with a reason for the three wheat markets to get excited today with the bulk of the attention on corn and soybeans. But that is exactly when wheat tends to do something extraordinary. Looking at the monthly charts for the various National Cash Indexes, I don’t see any reversals ready to be completed. Based on Tuesday evening’s calculations the SRW Index (IWY00) is 39 cents under its June settlement, the HRW Index (IHY00) was sitting 32 cents below, and the HRS Index (IPY00) was down about 31 cents. Could we see a 30-cent to 40-cent rally in wheat Wednesday? Absolutely. Again, funds are already short the market and it is the first day of the new positioning week. Will we see a 30-cent to 40-cent rally in wheat today? I have my doubts. Fundamentally none of the three markets have a reason to spark this degree of a move. It goes back to what I call the Wheat Reality: One bushel of wheat left over is too many. Based on Tuesday evening’s Cash Index calculations the available stocks-to-use figures heading the last day of July was 47% in SRW, 46% in HRS, and 44% in HRW.
[i] Brazil, Russia, India, China, South Africa and others that include Iran, Egypt, Ethiopia, and the United Arab Emirates.
[ii] I guess Zambia didn’t like seeing its Women’s football team lose to the US Women’s national team in the Olympics.
[iii] Past, Present, and Future weather maps.
[iv] The CME reported an initial 44 contracts delivered against the August issue this morning.
[v] Based on the Malcolm Gladwell book Blink. I highly recommend this book to folks looking at making a living hedging/investing/trading markets.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
