There was a lot of fear leading up to Thursday's USDA report which turned out to be for naught. Excessive pessimism in the corn, soybean, and wheat markets all proved to be the fuel the grains needed to post strong rallies today.
The biggest surprise came with soybeans. My fear was that price might break support below 9.80 on the November contract. Instead, we had a very nice bounce. That said, I don't think we will get $11.00 soybeans that easily. The obvious target for soybeans would be $10.43, the previous contract high. At that point, we have a double top and we should probably make another sale. I would like to see the CCI make a sell signal and the optimism index reach overly optimistic levels when prices reach that level.
Corn received a much needed lift today. Corn broke well above its 200 day moving average, as well as its downward sloping trend line. The explosion in the wheat market did not hurt it any either. I think there was enough bearish sentiment in the corn market that it will have no problems getting to $4.00, although we will probably have to deal with a sell signal on the CCI soon.
Speaking of wheat, it is on a roll after the report confirmed winter wheat plantings at the lowest level since 1909. The puts I recommended selling on December 7 are working as expected. I expect we will keep the entire 35 cent credit we collected, applied towards the corn marketings.
Anybody growing wheat should probably consider selling some wheat near the 200 day moving average as we should be triggering a CCI sell signal around that time.
The dollar appears to be throwing in the towel finally. The dollar is on day 25 of a cycle which normally lasts 28-40 days, so the daily cycle is in decline. There are likely another 3-12 days of decline remaining before another daily cycle begins. Because the 3 year cycle is due to bottom sometime this summer, we will also need a lower intermediate cycle.
The dollar chart below shows two trend lines. The downward sloping line is the daily cycle line. When the price trades above that line, it will be confirmation that a new daily cycle is beginning. The upward sloping line is the intermediate cycle line. The price will need to move below that line to confirm the beginning of a new intermediate cycle. I think once this current daily cycle bottoms, we will get a bounce which will break through the downward sloping daily cycle line, confirming the beginning of a new dollar cycle. The next dollar cycle however will be left translated (it will peak early) and move lower below the intermediate cycle trend line before bottoming. This will probably be a scary event, but should provide a lot of support for commodities through the end of February.
I have been saying for weeks now that oil is due for a yearly cycle low. Rather than post another daily chart, I wanted to show the weekly chart which gives a bigger picture. Nearly all the major indicators I follow are saying to sell. First, just the timing of the cycles say we are due for a yearly cycle low (red arrows). Sentiment readings are just now falling out of excessive pessimism. The RSI has just passed below overbought levels, and the stochastic readings are crossing into bearish readings. There is still time to short oil, and that is the safest trade out there that I can see presently as it pertains to agriculture. All the other trains have left the station.