Morning Futures Roundup

Bean Demand in Question

   Fundamentals
Soybeans have become a victim of their own success, dropping sharply after making highs in the upper $17 range. Prices have fallen back by over two and a half dollars since making those highs over concerns that elevated prices could hurt export demand. The anemic economic data from China, a major importer of US grain, coupled with some firmness in the US Dollar could negatively impact export demand. The holiday this week in China makes gauging demand difficult, as many businesses remain closed.

The dry growing areas in parts of Brazil and Argentina have seen moisture, easing early concerns of possible drought conditions. Many bulls are hoping the sharp drop in prices might stimulate demand. The 14% decline in prices could be seen as excessive by a good contingent of traders who noted overbought market conditions and funds lightening-up positions ahead of next week's USDA report drove much of the recent selling pressure, not fundamentals.

   Technical Notes
Turning to the chart, we see the November Soybean contract breaking through several support levels after pulling back sharply. The most notable of these support levels can be seen at 1600 and 1570. There is additional support at 1500, but the next significant support level can be found at 1400.

Yesterday's price action formed a long legged doji, which hints that the market could reverse in the near-term. Prices closed on the 100-day moving average yesterday. This could be seen as significant, as failure to hold the moving average might suggest that prices could pull back even further. On the flipside, the 100-day moving average could provide support for Beans and slow the recent selling pressure.

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About Mike Zarembski

Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.