Grain prices today collapsed to near limit down almost across the board. This chart for wheat shows the daily chart on the left and the 15 minute intra-day chart on the right. Note the huge downward spike on the daily chart that occurred right at market open today. The dotted line at the bottom of the upper panel of the 15 minute chart represents the exchange's maximum permitted downward move for today. The large ETF DBA began an immediate sell-off when the stock market opened this morning, confirming the bearish market sentiment for grains one hour before the grain futures trading began trading at 9:30 am CST. I often look at this and other ETFs during off-market hours to gauge virtual market sentiment. This also works after the stock market closes because if ETF traders continue to sell the ETF after the grain market closes at 1:15 pm CST, it is likely that the futures will continue to sell off when trading resumes at 6:00 pm CST.
This chart is typical of grain prices throughout the entire spectrum. Corn and soybean prices also have either touched or are very close to limit down today. This is one reason why I always abide by Phantom's Rule #1 and keep extremely tight stop loss orders. If a trade isn't making money, I exit very quickly. I exited my soybean trade late last night that I initiated during the day session yesterday. When soybean prices collapsed about 1:30 am EST last night, my stop loss order was activated and I exited the trade with a modest profit. Corn and wheat prices were both soft during evening trading, which was a red light to me. Since then, grain prices have gone straight down! Crude oil prices also showed even greater weakness, putting additional pressure on the bio-fuel grains, corn and soybeans.
The USDA released a crop report this morning that was bearish for grains, with the USDA announcing greater than expected acreage plantings for spring 2009 for both corn and soybeans. Wheat was slightly bullish because the USDA estimated fewer acres planted in wheat (although they also increased the estimated end stocks due to lower feed demand) , but the price chart indicates the fervor of the sell-off today, with wheat plunging in sympathy to the other grains. Now, we will begin building a new base and I will look to find a bottom and reenter the market. If prices continue to drop this week, I will consider a short trade. I will trade weather conditions for the rest of the winter, as well as acreage updates for the next 3-4 months.
