Market Watch

by Pearce Financial, LLC
September 4, 2006

December corn finds near term resistance is at last week's high of $2.482. If the market tops this high look for it to tag the current major daily Fibonacci .382 retracement at $2.544 (as measured between the contract high of $2.88 and the current contract low of $2.334). Further resistance is at the August high of $2.66 (all-session chart) in confluence with the current major daily Fibonacci .618 retracement at $2.672 (as measured between the contract high of $2.88 and the current contract low of $2.334). If December corn clears this resistance level it might pop up to the July high of $2.844 (all-session chart) or even test the contract high of $2.88 (all-session chart). Near term support is at the daily August low of $2.334 (all-session chart). Further support is located between the August low of $2.166 on the weekly continuous chart and the major weekly Fibonacci .618 retracement at $2.156 (as measured between last year's low of $1.856 on the weekly continuous chart and this year's current high of $2.642 on the weekly continuous chart). Failure to establish support here could bring the market down to this year's low of $2.034 on the weekly continuous chart. Open Interest is sitting flat near the all-time high. The Seasonal index shows that corn should decline in September. Commercial interests are holding the smallest net short position in five months. Large traders are holding the smallest net long position since late March. Small traders are holding a sizable net short position.

December wheat finds near term resistance clustered between last week's high of $4.244 (all-session chart), the August high of $4.252 (all-session chart), and the current major daily Fibonacci .618 retracement at $4.30 (as measured between the contract high of $4.63 and the August low of $3.766). A strong close above this resistance area could clear the path for a return to the contract high of $4.63. If December wheat hits a new contract high it could be gearing up for a run to the psychological five dollar area. Near term support is at the August low of $3.766. Further support is at a major weekly Fibonacci .618 retracement at $3.40 (as measured between between the 2004 low of $2.824 on the weekly continuous chart and this year's current high of $4.33 on the weekly continuous chart). A break below it could allow the market to decline to this year's current low of $3.214 on the weekly continuous chart. Open Interest has been flat for two months now. The Seasonal index shows that wheat should move sideways in September. Commercial interests are holding the biggest net long position that they have had yet this year. Large traders are holding the biggest net short position in seven months. Small traders are holding largest net short position that they have ever had.

December coffee finds near term support at the current daily Fibonacci .618 retracement at 104.10 ( as measured between the contract low of 98 cents and the August high of 114.00). A break below this retracement could send coffee down to test the contract low of 98 cents. If December coffee makes a new low expect it to hit this year's current low on the weekly continuous chart at 93.50. Further support is at the weekly December low of 90.75. Near term resistance is at the August high of 114.00. Further resistance is at the May high of 119.70 in confluence with the current major daily Fibonacci .618 retracement at 120.25 (as measured between the daily January high of 134.00 and the current contract low at 98 cents). If the rally does not end here coffee may visit this year's current high on the weekly continuous chart at 125.90. The Robusta coffee (traded on the EURONEXT Commodities exchange in Europe) has been the coffee market to be in! This market has substantially outperformed the New York coffee market on a comparative basis. Robusta coffee has surged to the highest price since March of 1999, the market is in backwardation (front month delivery contracts are trading at a premium to deferred contracts), and the price structure has been very bullish: On the monthly chart, November Robusta coffee has only broken a previous month's low once in the last five months, it has made higher monthly highs for five consecutive months, and it has not closed below the monthly 18-bar Moving Average since October of 2004. On the weekly chart, November Robusta coffee has only broken a previous week's low once in the last five weeks and it has made higher weekly highs for five out of the last six weeks. On the daily chart, November Robusta coffee has closed above the 18-day Moving Average every day for over a month. Coffee traders should be long in the Robusta coffee as long as it continues to outperform the New York coffee market. Open Interest is at the lowest level since early May. Seasonally, coffee should be flat to lower in September. Commercials are holding the biggest net short coffee position since the beginning of May. Large traders (hedge funds) are holding the largest net long position since then. Small traders are neutral on the coffee market.

November orange juice may have made a significant trend reversal last week. After opening gap up on the daily and weekly charts, the market reversed and filled the gap the same day. This triggered a Gap & Fill sell signal on both time frames. After taking out the previous week's high OJ then closed below the previous week's low. This created an outside reversal down on the weekly chart. Additionally, the market closed below the 18-day Moving Average for the first time since late July. Near term support is last week's low of 177.50. If the market breaks it, traders may want to consider getting short and entering a protective buy stop to liquidate if it breaks to new contract highs. Further technical support is at the daily August low of 168.50 (November OJ has only broken a previous month's low once in the last twelve months) followed closely by an intermediate daily Fibonacci .618 retracement at 166.70 (as measured between the July reaction low of 153.50 and the current contract high of 188.05) and the weekly 18-bar Moving Average (OJ has closed below the weekly 18-bar Moving Average just one time since it closed above it in mid-September). Further support is at the July reaction low of 153.50. Near term resistance is at the contract high of 188.05. Further resistance is at the two dollar mark. If the market does not stop here it should take on the 1990 multi-decade high of 206.50. Open Interest is up a bit from last month. The %R overbought/oversold indicator shows that OJ is overbought on the daily, weekly, and monthly charts. Seasonally, OJ should decline in the first half of August and then rally for the rest of the month. Commercials are holding the biggest net short position since mid-May. Large traders are holding the biggest net long position since then. Small traders are neutral to bullish.