Tuesday, June 26, 2012

The record heat wave that has engulfed the U.S. this spring has propelled the grain complex sharply  higher, but July Soybeans, for one, are just inches from testing key resistance in the form of a Hidden Pivot at 1502.50 (see inset) and the major structural resistance represented by early May's 1512.50 high.  A close above the former would suggest buyers are about to make short work of the latter.  It could also be predicting a long, hot summer that would take a heavy toll on the already parched farmland of America's bread basket. Want to try Rick's Picks free for a week? Click here.

Suspiciously, yesterday's $21 rally fell an inch shy of the 1589.90 threshold where I'd said the week would be off to a good start. Buyers could well muster the requisite push today, but the fact that they missed on the first try portends a struggle to move this vehicle significantly higher. Most  immediately, that means the 1598.10 midpoint resistance shown could be a rally-stopper. If not, its 'D' sibling at 1637.60 would become an odds-on bet.

Silver did what we asked of it yesterday, surpassing an 'external' peak at 27.005 to generate a little bit of heat on the lesser charts. However, just to make sure it's not playing us, let's raise the bar today to 27.980, where bulls would effectively refresh the impulsive energy of the hourly chart (as they should if this rally is fated to go anywhere). Strictly speaking, they deserve the benefit of the doubt anyway, since Monday's thrust exceeded no fewer than one internal peak and three closely spaced externals. Also strictly speaking, the July contract would trip a buy signal on any booster-stage rally of at least 24.125 cents from an as-yet-unformed point 'C' low.

Yesterday's plunge somehow avoided the finale of its projected fall to a 1296.25 target, but that could be remedied shortly. In any case, a rally back up to the 1314.00 midpoint would be a short -- one to be initiated via camouflage, as is our practice whenever we leverage midpoint supports and resistances for trading purposes.  If 1296.25 should fail as support, you can put Hidden Pivots aside and assume that a test of early June's lows near 1260.00 impends. _______ UPDATE (11:24 a.m. EDT):  The futures rallied precisely to 1314.00. Since a chat-roomer reported initiating a short there, I'm going to establish a tracking position for your further guidance, that assumes an initial position of four contracts. If you haven't taken a profit yet, do so now at around 1306.50. Tie the remaining two contracts to a stop-loss at 1316.25. _______ UPDATE (2:27 p.m.):  We exited on the stop-loss for a theoretical gain of perhaps $250/contract.  We'll continue to look aggressively for opportunities to get short in this presumptive bear market because: 1) we can, usually painlessly even when we are "wrong"; and 2) we don't want to miss the avalanche when it comes, as it surely will.