Today the equity markets fell dramatically on auto industry news, some large banks reporting less profits than in January and February and on technical overbought reasons. As we wrote about last week, the equities were becoming overbought. We targeted 7450 as a major support area (basis June DJ Futures contract), the market did fall below that area today to 7381 and then closed above it at 7480.

After we received a buy signal on March 10th, we received a sell signal today. As the market is still looking overbought we could easily see the June DJ fall to the 7240 area as the next major support area. If the market continues to sell off we could see it test the lows of 6417 on March 6th as we have a major support of 6500.

We are finding initial resistance at the 7530 to 7590 level and a major resistance level of 7740. We believe the market could go lower to sideways before basing and attempting the next leg up.

March witnessed a rally in the grain markets that coincided with a depreciation of the dollar and a very strong rally in equities. Since last week the grain markets were getting a bit overbought. On March 24th we received a sell signal in wheat, followed by a sell signal for soybeans on March 27th. Today March 30th we received a sell signal for corn. Keep in mind movement of the dollar, weather and plantings and perception of moving out of a recession will all factor into the grain markets over the next few months. The markets are also waiting for the USDA report due out on March 31st. The anticipation will be for increased acreage especially for soybeans.

Corn (basis the May 09 contract) has resistance at $3.90 and initial support in the $3.73 to $3.70 level. If the selling continues we could see corn in the $3.56 to $3.33 level, thus testing the recent lows earlier this year before it rallied.

Soybeans (basis the May 09 contract) has resistance in the $9.35 to $9.45 level and is currently sitting at its initial support of $9. If it breaks this area we could see soybeans in the $8.65 support level and possibly try to test the recent lows around $8.40

Wheat (basis the May 09 contract) in the  $5 range is sitting at an initial support level and is testing the recent lows of $4.9850 from March 3rd. If it breaks this level the next support level would be $4.76 to $4.62. Ultimately we could see wheat in the low $4 to $3.70 range.

The equity markets have had a great rally from its lows over the past few weeks. However this rally is starting to look a bit overbought. We had an initial target at 7750 basis the June Dow Jones futures contract. It did exceed that pricing. The next level of resistance is the 8100 to 8300 and a longer target of 8900.

As the market is overbought we may see the market drift towards it support levels before moving higher. There is support between 7783 to 7750 and down to 7690 and major support near the 7500 level. If the market falls below 7450 we could be looking at some more downside.

After selling off earlier this year the last few weeks have seen a little rally from the lows. Late February oats signaled a start of a rally, followed by corn, wheat and soybeans in early March. This rally has several possible components. 1) As we enter the spring planting season, grains have a tendency to bottom. 2) In recent weeks the market participants are cautiously increasing confidence that the American economy may be starting to stabilize, or at least less fear of a falling economy. Thus greater demand for commodities. 3) Talk that China's economy may be starting to bottom is also supporting not just grains, but several commodities. Export demand is always a strong factor in pricing grains. 4) The last several weeks have seen a falling dollar and this equates to increasing overseas demand for commodities. 5) Another level of support has also been seen in the recent rally of the Australian $ and the Canadian $.

The grain markets may be getting a little tired. They are nearing selling signals and will either find support in the next couple of days or begin the next leg down. Basis the May contracts, corn has major support in the $3.85 to $3.79 range. Soybeans has major support in the $9.37 to $9.30 level. Wheat did signal a short move yesterday and is breaking major support levels and would need to break above the $5.63 resistance level to find the next bull market.