Grain Spreads: Beans Hit 50% Retracement

Soybeans - iStock-1311291415


Soybean futures bounced around with no guiding story to keep the short-covering action intact in my opinion.  The zsk24/zsn24 futures spread garnered most of the activity with a high-volume session and a close that tied the contract low close near the 16-cent low, with a close at 15.4. cent carry. Spread volume was 54K. July beans today hit a 50% retracement at 1190, (high 1191) but then fell 10 cents failing at the 50 % Fibonacci retracement. That is key resistance now in my opinion. Another test and failure there could leave the door open for a move next week below 1160 with the possibility of the February lows at 1128 targeted again. July beans daily chart below. On the flip side, should we surpass and close above 1190, this market could trade up to 1210 and then 1222, possibly 1234. We have May option expiration on Friday, and then month end next week. Demand remains nonexistent to not much surprise, and the theme this week as been short covering in the grains amid a few bullish tidbits of news, but not enough in my view to alter the heavy supply side balance sheets. One thing that maybe holding prices is inflation. I don't see it going away. 3 percent seems more realistic now than the Fed's 2 percent preferred target. This nonsense about cutting rates is pure fantasy to me. Regardless prices could remain inflated for longer than most expect. When corn traded into the low 3.00 handle in previous crop years, it was deemed cheap. Under this new paradigm, corn in the low 4s and beans in the low 11s or high 10s may be seen as discount. Why? The Treasury apparently won't stop printing money. Other nations and economies are printing too, like China for example to shore up their stock market and distressed housing sector.  My best advice is to trade the charts using the aforementioned levels in July soybeans for example. 

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