wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 5, Orleans, Massachusetts
(October 2, 1997) CORN: SHORT TERM–Fund selling and harvest pressure. Fund selling has been aggressive and massive, which suggests that they, at least, see more downside. Long term, the grain stocks figure is supportive, both in terms of numbers and in terms of the fact that it emphasizes that demand is still fairly strong. El Nino fever is growing. Recently, a purchase of at least 20 million bushels of corn was believed to be an El Nino hedge. I've been banging the El Nino drum for a long time now, but don't get caught up in the idea that every rally is being caused by El Nino. This is probably something to tell the reporter when he or she calls. For the here and now, harvest pressure should keep a lid on rallies. Longer term, I am very bullish on corn and suspect that 300 plus is in the cards. The corn is not there, and the demand is. However, that may be basis the March or May contract. Stay long-term bullish. But for now, the charts are suspect, and traders should expect more selling.
RESISTANCE–Resistance basis December is near 262, 264, 266-268, 272-274, 278-280, near 286, 289-290 and 295.
SUPPORT–Support remains near 258, 252-255, 248.
RECOMMENDATION–Aggressive traders might sell December corn on rallies to near 260 with stops over 268, looking for the mid-low 240's, possibly lower. Be alert for another reversal near 255, but I suspect that there are plenty of stops under that level, and the floor will be gunning for them. If bullish and aggressive, consider buying December with stops under 255, but the 260-264 level may cap the rally. Conservative traders should wait for signs of bottoming, as a move to the low 240's, upper 230's appears possible basis the charts. Option traders might buy March or May calls on weakness for the long haul. May 280 calls are cheap. Experienced option traders might buy March or May calls and sell December calls for the time premium.
M. Steven Morgan
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