Weather and Outside Money Flow To Direct Corn Markets Next Week
Early on Friday morning, it appeared that fund selling was active once again. That selling took the July futures contract under the first chart support level, which then worked back above that level when the selling slowed. Looking back at Thursday's selling, we see that open interest increased by 22,000 contracts showing new sellers which many will be quick to attribute to fund activity.
Friday's noon weather maps continued to suggest active rains in the six- to 10-day outlook. Rains during that time frame have been in the forecast since Wednesday with little market reaction. If there were any changes in the noon update, it was increasing rains in the 11- to 15-day time frame. A combination of funds wrapping up their buying for the day along with these maps could have caused the move back to flat where July actually spent most of the day.
If Sunday night's maps are just as wet as in Friday's forecast, we can at least expect support in Sunday night trade. Once the day session starts Monday, it will become a combination of weather maps and seeing if funds return with selling once again. Short-term, we need to factor in fund activity equally with weather forecasts to determine direction next week. Long-term, we still have to figure that weather forecasts will determine the longer term direction of this market.
- Bulls will be looking for Friday's weather forecast to continue into Sunday night suggesting slowed planting reports going forward.
- Bulls will need funds to move back to the sidelines, eventually funds will need to cover current short positions but that could be quite some time down the road.
- Monday's five-year average planting pace will be 16%. Bulls will want to see the planting pace come in at any amount under that level.
- Funds are by far still the #1 factor on the bearish side, even if Friday's COT report shows them adding to shorts there will likely be much more room before reaching record shorts of 229,000.
- Bears were likely happy to see recent lows taken out Friday and will want to see fall/winter lows of 357 1/4 taken out as well.
- If those lows are taken out the next (and last), chart support will be contract lows of 340 1/4.
Rich Nelson | Allendale Inc. | 815-578-6161
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