There was considerable weakness in the stock market this week. The Dow Jones fell to 9430 at one point on Friday, which is the lowest level since the 4th of September. The break in the market is far from catastrophic, but it does look like we are due for an extended correction. Trend line support will come in around the 9200 area, so I would look for a move down to at least that level.

The Dollar Index is also trying to correct. Lately, when the Dollar has been weak, the stock market has been strong, and vice-versa, so seeing a correction in both of these markets at the same time would fit that pattern.

Trend: Short Term Up – Long Term Up
Sentiment: Failure to hold gains

After a firm start to the week, the corn market was weak on Thursday and Friday and ended up being ½ a cent lower. The losses could have been bigger considering the size of some of the crop estimates we have seen. Many traders are expecting USDA to raise their record high yield estimate even further in next week’s supply and demand report.

The chart looks like the corn will trend lower going into next Friday’s report, which makes sense considering how bearish the report could be if USDA raises the yield again. A move down to $3.25 or lower looks likely next week.

There are some news stories about poor test weights and disease problems, but the trade doesn’t seem to be concerned with those reports. The focus is on harvest activity and the probability of a record yield.

Action: Owning $3.20 or $3.30 November or December corn puts is a good idea heading into Friday’s report.

Trend: Short Term Down – Long Term Down
Sentiment: New lows

The December KW posted another reversal higher this week, which is the 4th in 16 trading sessions. As will all of the other reversals, there was no follow through buying and the December KW finished the week by making new lows.

There is very little positive news to report. Export sales were more than adequate for the second week in a row at 538,200 MT, but that isn’t a big enough total to get speculators excited and it isn’t enough to use up all of our excess supplies.

The quarterly stocks report showed we had more wheat on hand than expected at 2.215 billion bushels and production was increased in the small grains summary to 2.220, which was also more than expected. Like I said, there isn’t much positive to report. The fundamentals are negative and the trend is down. Plan on lower prices.

Action: Sell calls. Buy Puts. Sell futures on rallies.

Trend: Short Term Down – Long Term Down
Sentiment: Huge demand, huge crop

Production expectations seem to be increasing, which put pressure on the market Friday. For most of the week the market was stuck in a trading range, but the market fell apart on Friday and the November soybeans ended up about 40 cents lower for the week.

The charts look bearish now since the market fell through trend line support and reached the lowest level since mid July. Unfortunately it looks like the November contract will be headed down to the $8.00 area. It probably won’t drop that far next week, but it could if USDA raises the yield estimate to 44 like Informa is looking for.

The news is far from all bad in the soybeans. Demand is still outstanding. Export sales this week were huge again at 1.38 MMT. Soybean oil sales were also huge at nearly 200,000 MT for the old crop and new crop combined. With demand like that we could eventually work through a large crop, but in the short run great demand is not enough to offset the harvest pressure.

Action: $8.60 November puts are less than 15cents and would be good to own through the report.

Trend: Short Term Down – Long Term Down
Sentiment: Lower cash

There is nothing positive to report about the cattle market. Cash cattle were lower and the boxed beef was lower, which meant the futures were lower.

The charts look terrible. The December LC are testing the contract low. Perhaps that will hold. If it doesn’t, the next downside objective would be $81.25

Action: Sell futures are rallies.