The US Dollar Index fell to new lows for the move this week, but seems to have found support at the 76 area. The Dollar Index is oversold and due for a correction, so a bounce from the 76 level looks likely. At this time I look for any strength in the Dollar as temporary and a selling opportunity.

The Natural Gas market has made a very strong recovery over the past 2 weeks, but ran into trend line resistance on Thursday. Follow through strength next week would be a sign of a change in trend, but I don’t think it is going to happen. The fundamental outlook of the market is more bullish than it was a month ago, but there is so much carry in the market that there is little reason to raise the deferred prices.

Trend: Short Term Up – Long Term Down
Sentiment: Freeze Scare

Corn futures touched limit higher on Tuesday due to the threat of freezing temperatures next week, but the market spent the rest of the week giving up those gains. The December corn was 1 ¾ cents lower by the end of the week.

Tuesday’s limit higher move is proof that a freeze could have a huge market impact, but if it doesn’t happen soon, it won’t matter as much. Crop development is still well behind normal. Illinois corn, for example, was reported at only 6% mature compared with 50% on average. An early end to the growing season would definitely have serious consequences. For now though, the forecasts are not threatening and as long as there is not threat of frost, there is little reason for concern and the market will continue to trend lower.

Action: I still like owning puts.

Trend: Short Term Down – Long Term Down
Sentiment: Just a follower.

There is still very little news that is impacting the wheat. The December KW has posted 2 reversals higher on the chart in the past 6 trading days, but there has been little, if any, follow through buying. In fact the December KW ended up being 5 ¾ cents lower for the week after being as much as 17 higher on Tuesday.

Export sales came in at 449,400 MT, which is right at the pace we need to see each week. Sales numbers like that aren’t going to encourage spec buying and aren’t going to cause any rush to secure supplies. We have plenty of wheat and haven’t gotten low enough to attract any additional demand.

The oversold condition of the market has been relieved and it looks like the wheat is ready to make another move lower. This time around we will probably see the December KW move down to the $4.40 level.

Action: There is at least 60 cents of downside potential in the July KW. Buying $5.00 puts and selling $6.00 or $6.50 calls should work.

Trend: Short Term Up – Long Term Down
Sentiment: Freeze and demand

The soybeans held gains better than the corn and wheat. The November soybeans finished the week 38 cents higher. The freeze scare provided most of the strength, but the fact that there is still such strong demand for soybeans allowed the market is stay positive for the week.

Export sales were down from recent weeks at 489,400 MT, but that is still nearly 50% more than we need each week. Next week’s numbers should be very good again and there isn’t no sign that the demand is going to stop any time soon.

The negative side is that even with the strong demand, it is going to be difficult for the market to move higher with harvest taking place. If there is no freeze threat more and more traders will be thinking about a higher yield estimate in the next report. The demand should create a nice post harvest rally, but in the short run I would plan on more weakness.

Action: November $9.40 puts are 30 cents and have over 30 days left before expiration. They should work nicely if you aren’t already covered.

Trend: Short Term Down – Long Term Down
Sentiment: Lower cash, very weak futures

Cash cattle lost 50 cents to 1 dollar, and the October LC lost about $1.70. Futures charts look bad. I can talk all day about how cattle on feed numbers are still below year ago levels, but it doesn’t matter. Retail beef and pork prices are still too high to spur demand and cause any excitement in the market.

The outlook is grim for the futures. Plan on further weakness. The December contract should find support at $83.85, but I don’t it will hold. Feeder cattle charts look better than live cattle charts because of the weakness in the corn, but one can’t expect consistent strength in the feeders without strength in the live cattle as well.

Action: Look for a move down to $82.50 in the October LC.