COMMODITY REVIEW AND OUTLOOK

195 Route 6A, Suite 6, Orleans, Massachusetts

(December 18, 1997) SOYBEANS: As the market is a bit oversold, good exports could encourage a good rally. Excellent growing weather in Brazil and weakness in Asian economies remain a negative aspect with which the market has to come to terms. Signs of either renewed or dwindling demand from Asia should be treated with respect. Good demand is the only reason we have stayed at these levels, and if it appears to be declining, the downside could be considerable. A problem in the Rio Grande do Sul, Brazil's prime soybean area will be treated as a significant problem if it occurs. Traders would be advised to keep an eye on South American weather reports. If there are any production problems, demand could push prices quite a bit higher. Don't forget, a huge crop was grown here, and one is being planted in Brazil. In addition, India reported a gain in production of about 30% over last year.

RESISTANCE–Resistance basis January remains near 690-695, 700, 705-707, 712-714, 724, 726-728, 733.

SUPPORT–Support basis January beans remains near 687, 680, 675, 660, 648-654, 639, 630, 623.

RECOMMENDATION–Choppy action seems to be the name of the game for the time being. If January beans close convincingly below 687, it will suggest that a trend is developing that could send the beans to at least the 650's, possibly mid-low 620's. Be careful of reversals in these areas. Watch for buying near 675 and especially in the 650's to be potentially aggressive. Aggressive short-term traders might buy January beans at current levels, and/or if more conservative, sell January beans on rallies to the mid-upper 690's, lower 700's with stops of 5-10 cents or over 715 or 730. Option traders should buy puts on rallies. Unless we can take out the 712-714 resistance area and hold, the prospect of lower prices still appears likely. Taking out 714 implies a test of the mid-720's.

M. Steven Morgan

Consensus National Futures and Financial On Line Index

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