December 29, 2009

 

CBOT Soy Outlook on Tuesday: Down 4-6 cents in market correction

 

 

Chicago Board of Trade soybeans are expected to open 4 to 6 cents lower Tuesday as the market corrects lower amid a lack of supportive news, analysts said.

 

In overnight trade, January soybeans were down 6 1/2 cents to US$10.22 1/2 per bushel and March soybeans were up 6 1/2 cents to US$10.31 1/2.

 

The market surged late in Monday's trade which reflected "what can happen when the few remaining traders line up on the same side of the market in thin holiday trade," Farm Futures said in a morning commentary. The late surge prompted technical buying as the market moved above moving averages, analysts added.

 

Late Monday gains are "starting to become predictable," Benson Quinn Commodities analyst Kim Rugel said in a commentary.

 

A correction is likely in both soybeans and wheat, which also surged Monday, analysts said.

 

Closes above the 20-day moving average crossing at US$10.40 1/2 would confirm that a short-term low has been posted, while opening the door for a possible retest of this month's high crossing at US$10.83 in early-January, technical analyst Jim Wyckoff said.

 

If March renews this month's decline, the 50% retracement level of this fall's rally crossing at US$9.86 1/2 is the next downside target, Wyckoff added. First resistance is the 20-day moving average crossing at US$10.40 1/2. Second resistance is the Dec. 17 gap crossing at US$10.59 1/2.

 

First support is US$10.16, the technical analyst said. Second support is last Tuesday's low crossing at US$9.93.

 

Managed money accounts sharply reduced their CBOT soybean long positions in the week ended Dec. 22, the Commodity Futures Trading Commission said Monday.

 

The disaggregated commitments of traders report showed that managed money cut 33,978 contracts from their long positions and added 10,180 contracts to their short positions, leaving them net long 68,386 contracts. This was during a period in which front-month January soybeans swooned, falling 64 cents and dipping below US$10.

 

Analysts say that continued strong demand from China has been underpinning the market recently.

 

In other markets, Soybean futures rose on the Dalian Commodity Exchange Tuesday, tracking the Chicago Board of Trade in the absence of other clear directional cues.

 

The benchmark September 2010 soybean contract settled up RMB27 or 0.7% at RMB4,023 a metric tonne.