I have been feeling for several days that grains might be overbought despite supportive fundamentals. Apparently, I'm not the only one. From grain analyst Vic Lespinasse yesterday:
Many traders, myself included, think we overdid it to the upside yesterday and we are due for a correction to the downside today. Frequently, when the market makes a big move on Monday, it gives back part of the move on Tuesday, the "turn-a-round Tuesday" syndrome.And today:
Crude oil and the equity markets are lower while the $ index is higher, a bearish combination for the grains. It is looking increasingly like the market is undergoing a technical correction after making eight month highs in several pits recently. The increasingly widespread thinking that prices are overbought and overdue for a correction, or at least a period of consolidation, is likely to make sellers out of many specs, either to liquidate longs or initiate new short positions, which could put a lot of pressure on the market today.from Arlan Suderman:
A couple of bearish manufacturing reports and a warning from Federal Reserve Chairman Ben Bernanke that U.S. deficit spending is contributing to higher long-term interest rates cast a bearish cloud over the equity markets this morning. Mortgage rates are going higher, which has equity traders concerned that rising interest rates may slow the recovery. Investors rushed to unwind positions while the dollar surged higher. The shifting winds provided incentive for traders to take profits on recent gains in the grain and oilseed markets.
Grain and oilseed prices tumbled this morning, although corn tried to hold on for a while. Little had changed fundamentally, but rather the difference between Tuesday and today had much to do with the flow of money. A sinking dollar and confidence in the equity markets led investors to pump massive quantities of cash into the grain and oilseed markets in recent days. A surging dollar and renewed concerns in the equity markets caused some of the money to pull back. Now we'll have to monitor end users to see how anxious they are to take advantage of the price break.
