Was “Turnaround Tuesday” A Fluke?

Maybe – in the grains anyway.

Last Friday’s USDA Crop Production Report was bearish by most standards as the feds predicted a record corn and soybean crop cor 2016.

Initial market reaction was bearish – for about 30 minutes.

Corn (ZC) plunged 8 cents to a new low for the growing season but then steadily rallied back to actually turn positive for the day. Beans (ZS) also dropped around 20 cents but also rallied back to finish positive.

Soybeans Continue Contract - Swing High Spike Low

Monday saw beans jump 24 – 27 cents and corn rallied 4 cents by the end of the day.

Corn Continuous Contract Swing High Spike Low

The perfect setup for “Turnaround Tuesday” - a sharp rally on a bearish report on Friday, another sharp rally on Monday to overbought conditions. BUT Tuesday, which by most technical standards should have sold off to correct the big rally, actually finished higher for the day in corn and only slightly lower in the soybeans. Fluke.

Have we seen the lows for the season? Perhaps, but not likely IF the USDA reports hold up through harvest. Remember, we have had two huge crops counting this year and a substantial stocks carryover so there is a lot of grain hanging over the market looking fore a new home. And, harvest pressure is a given in most years.

On the charts we have taken out the previous swing highs on Monday. The spike low, especially in the corn market, is an inviting low on which the bears have their eyes. If that low can hold we could be in good shape for a post-harvest rally. But don't get overexcited about a big run-up even though demand is stellar at this point even with a strong dollar.

Keep your knees bent and be ready to react if that low doesn't hold.