Monthly Dairy Technical Commentary August 19, 2015 CME Class III Milk Futures Range contraction continues for Class III Milk as it continues to correct the September 2014 through January 2015 downdraft. The trend appears in the process of turning higher for a larger corrective advance. Open interest picked up during July rally, while the market has logged trade (3-weeks) above downtrend line resistance drawn from the September 2014 high. The positive price action puts corrective retracement targets in play. Meanwhile, Class III Milk has a competing force in play, with the possibility that the January through June rally is a bear flag pattern. If that is the case, trading volume should pick up as prices trend lower to downside targeting at the 14.94 area. Resistance for Class III Milk comes in at 17.72, then an initial corrective retracement target at 18.48. The positive view hold until the market can muster a close below 15.79.
CME Class IV Milk Futures The breakdown in Class IV Milk in early August into 12.68 was enough to satisfy a wave 5 decline off the January 2014 high (with a target of 12.39). Open interest has been able to stabilize and turn marginally higher during the latest rebound and that is supportive for the bull camp. Extremely oversold slow stochastics indicator that are ripe for at least a corrective rebound. With the 5-wave decline showing evidence of completion, we now look to an initial upside retracement targets at 16.95. Prior to that, Class IV Milk has swing high resistance coming in at the mid-may high of 15.53.
CME Nonfat Dry Milk Futures A breakdown from diagonal triangle gave way to further price erosion below long standing support at the 82.00 level. Expanding open interest during the slide below that support level fuels a bearish bias. However, extremely oversold slow stochastics indicator and the MACD indicator flashing a bullish momentum divergence hints at a corrective bounce. Upside price action in early August indicates that the market is ready for a corrective bounce. This view gains credence on a move and close above downtrend line resistance at 84.20.
CME Dry Whey Futures The descending triangle pattern in Dry Whey from December 2014 into May 2015 has a downside target coming in at 30.95. The mid-august decline to 31.425 could be enough to satisfy that target and turn attention to a corrective rebound ahead. Given the extremely oversold technical conditions and a bullish divergence on the MACD indicator, it is likely for a near term corrective bounce back toward gap resistance at the 35.50 to 34.825 zone. This resistance zone also coincides with a downtrend line resistance drawn from the January 2015 high, which adds importance to that level. A close back above 35.50 would put an initial upside retracement target in play at 46.10.
CME Cheese The cheese market registered a number of weekly closes above downtrend line resistance, which is a supportive force. That combined with a turn up in the slow stochastics indicator suggest that there is more upside potential ahead. A cluster of resistance overhead comes with the mid-june swing high of 1.8330, a late November gap zone at the 1.8410 to 1.8350 zone and an initial Fibonacci Retracement (38.2%) level at 1.8344. While there appears a bear flag pattern in play- or corrective advance from the September through January downdraft, recent action in the cheese market favors a challenge of 1.8330. A move back below the July swing low of 1.6570 would put the bear flag pattern back in play. This 1.6570 level also corresponds to a prior resistance during the April advance, which lends credence to that bull/bear pivot zone.
CME Butter The butter market is also indicating that it has more upside work to do to correct the September through January downdraft. There have been three shows of strength off the mid-july low (183.50) including a bullish reversal week (7/24), a gap and go higher open (week of August 14 th ) and upside breakout action above 211.00 swing high resistance (week of August 21). The turn higher in the butter market brings a 61.8% Fibonacci corrective retracement target of 243.75 into focus. Uptrend channel support comes in at 190.30. ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of HighGround Trading Group is strictly prohibited.