Last week we looked at charts, trying to find signals of direction. Well, we know more about direction now.
Corn prices broke sharply on the Chicago Board of Trade this week for no particular reason I can think of. That should give you confidence that you are not wasting your time reading this!
Actually, the biggest reason I can think of is the one we looked at last week — technical analysis.
Last week, I said that sometimes the markets, in absence of fundamental supply and demand news, trades by looking at the charts. That seemed to be fulfilled this week.
Take a look at what I said: “Taking a look at March corn futures, we see that we are working on a triple top formation. This is a strong signal. It can mean that the overhead resistance, which is the line that connects the three tops, is getting stronger. It can mean that we need really big news to break through that line.
“On the other hand, it warns us that, if we do break through, we will make that the support line, and may trade strongly above it, with an opportunity to trade as high as the next high back on the chart.
“With March corn futures, that means that we have strong resistance to prices going higher at 4.25. We hit 4.24 1/2 on Oct. 23, then 4.25 on Nov. 18. Nov. 30 we got to 4.20 1/4, but also had 4.07 the same day. The overnight electronic session closed just below 4.18. So, we are making a run at the highs, and we are currently failing.”
Even a blind hog gets an acorn once in awhile.
Corn and wheat markets are sharply lower this week, with corn breaking 37 cents off the 4.21 1/4 Dec. 2 high, then recovering most of 2 cents overnight Monday night.
If you think about it, that means that, once again, we experienced that dreaded “Turnaround Tuesday.” We made the high Tuesday, and then went 9 cents lower the same day.
Also notice that we did not quite get back to the 4.25 double top area. We ended short, and that was a negative signal.
Now if we go back to the chicken entrails, err, March corn chart, we could see a support line that connects three lows before the recent break. Draw a line connecting the last three lows and you learn something.
The three successive lows were improving. That is, each low was higher than the one before it. We were 3.72 1/2 on Nov. 11, 3.79 on Nov. 9, and 390 1/4 on Nov. 24. Extend that line and you find we broke through what we hoped would be support when we went to 3.84 1/4.
Depending on your drawing, that is most of a dime below the line.
So, as we continue the technical analysis, we have to be discouraged about corn prices. Our best chance to sell corn just passed, and it was at an unusual time — while harvest was finishing.
Our next chance for news does not really come around until the January USDA Inventory Report.
If the yields in the country as a whole are like the ones around my home, the hope of the crop being smaller to help prices is gone.