WEEKLY ZC #F (ZC N9)

LEVELS TO WATCH
(* indicates a support/resistance level that has been broken)

R3 = 495’0

R2 = 482’2

R1 = 460’2

S1* = 430’0

WEEKLY PIVOT = 407’2

S2* = 407’0

WEEKLY CLOSE = 399’2

S3 = 383'4
S4 = 360’2

Last week we wrote: “Look for a move down to S3 over the next few weeks”.  It appears that we will see S3 coming soon as good weather and extremely weak technicals appear to be dragging us there.  How we react if and when we get there will be quite critical, since we are in the midst of strong seasonal weakness and bearish fundamental news.

Seasonals state that corn is historically weak from now until early October. 

WEEKLY ZS #F (ZS N9)

LEVELS TO WATCH
(* indicates a support/resistance level that has been broken)

R3 = 1336’6

R2 = 1288’2

R1* = 1237’0

S1* = 1206’0

WEEKLY PIVOT = 1203’0

S2* = 1188’4

WEEKLY CLOSE = 1179’0

S3 = 1158’2
S4 = 1064’0

Last week, we said “the July beans continue to maintain much of its technical strength, and while ‘it’s not easy being squeezy’ (ie, a squeeze might not happen), it still remains in the realm of possibility.”  While the soybean market has come off sharply and now broken 2 significant support levels, we still find old crop strength, with N/X having its highest weekly close at 173.  Keep a close eye on this market after First Notice Day, as there still is potential for major upmoves.  Meanwhile, the technicals and the CSWTRADER rating have crumbled, and the seasonals indicate that we may have topped for the summer; we are likely going to stand aside and watch for a reaction at S3 early this week. 

Seasonals say beans are historically weak come the end of June.

WEEKLY ZW #F (ZW N9)

LEVELS TO WATCH
(* indicates a support/resistance level that has been broken)

R3 = 748’2

R2 = 709’0

R1 = 647’0

S1* = 602’0

S2* = 572’4

WEEKLY PIVOT = 564’6

WEEKLY CLOSE = 555’2

S3 = 531’6
S4 = 498’6

Last week, we wrote “The market is likely to hit some support around S2, but with major sector weakness, a move down to the heavily traded S3 area shouldn’t be ruled out.” July wheat not only hit S2 last week, but blasted right through it, and is now on its way down to S3. The technicals in this market are extremely weak, and perhaps one more push lower, even below the $5 mark, is in order.  Based on the market fundamentals, I would consider being a buyer at S4, but only once the market has a 4 handle.

Seasonally, wheat prices tend to be neutral over the summer months, and then move sharply higher after spring wheat harvest in August.

TRADE RECOMMENDATION - DECEMBER SOYMEAL (ZMZ9)
Synthetic Short

Margin (subject to change) = $1,800 / synthetic.
Desired Risk = $900 / synthetic.  Exit on a close below -15.
Desired Profit = $2,100 / synthetic.  Exit on a close above 15.

Call your broker and tell him you are doing an option trade:
"Buy 1 December Soymeal 280 put, and sell 1 December Soymeal 330 call, at 6 cents premium to the sell"

This is a synthetic short position in the December meal, which appears to have technically broken down last week.  We do this rather than short the outright futures, because of the option skew between the call and the put (the call has a higher IV than the put) and also because it allows us to put $600 in our pocket, while giving us a range of profitability at expiration from 0-335.  Use the futures targets below as your basis for profit taking.
 
Futures targets
T1 = 301.90
T2 = 294.30
T3 = 282.10 

TRADE RECOMMENDATION - DECEMBER OATS vs DECEMBER CORN (ZOZ9 / ZCZ9)
Futures Spread

Call your broker and tell him you are doing a futures spread:
"Buy 1 December Oats, and sell 1 December Corn, at 185 or better premium to the sell"

Margin (subject to change) = $1,100 / spread.
Desired Risk = $650 / spread.  Exit on a close below -198.
 
Futures Spread Targets
T1 = -164'4
T2 = -152'6
T3 = -138'6 ($2,312.50 / spread)