Turn-around Tuesday may bite us in the behind today.
Here, a few minutes before the open of trading Tuesday, Aug. 3, I am looking at the charts and thinking we will at least take a pause in the market action that has given us new highs in corn, beans, and wheat.
I cannot escape my notice that the big gains during the day Monday that capped off a few days of frantic trading did not hold.
By the close, the prices were actually lower, and posted technical warning signs.
A couple of definitions would help here. When we look at the charts, we are doing “technical” analysis as opposed to the “fundamental” analysis of studying supply and demand.
One focuses on the appearance of the charts, one focuses on whether the supply of grain or the perceived and anticipated supply is properly reflected in current and deferred prices.
Next, we frequently look for indicators that trends are changing. One is the “key reversal.” In this, the high is higher than the high of the day before, and the low is lower than the low of the day before. This is a very strong signal of a top.
Not so strong, but significant is the “outside day.” In this, the high is higher than the day before, but the low is lower than the close of the day before.
An outside day
Monday showed us an outside day in the September and December corn contracts. The December corn closed at 4.06 3/4 on Friday. Monday, it traded a range of 4.03-1/2 to 4.18, and closed at 4.18.
The lower low, higher high, and close below the previous close makes it an “outside day.”
The November beans had a remarkable range, but managed a close above the previous day’s close. The close Friday was 10.05. It traded Monday between 10.01-1/4 and 10.29-1/2. It closed at 10.10, though, above the previous close.
Still, the move felt negative, and there seems to be follow-through on the Tuesday overnight trading.
All the grains are lower going into the day session Tuesday. As this is being written, the market has opened, and prices are not as bad as the overnight closes. However, December corn is down 2 cents at 4.02, November beans are down 3 at 10.07, and the September wheat is off 4 at 6.89.
This market has been following a weird combination of weather, supply of wheat, and outside markets. The combination has made it hard to make sense of any daily move.
Wheat has dominated, with a move of $2.69 up since the end of June. That move has been steady and dramatic. This is the first break, and we are watching it closely.
There is an ebb and flow to the markets that seems to result in changes of direction frequently on Tuesday. That pattern is holding today, but we don’t really know if the trend is changing until it has for a few days.
That can be frustrating, but the successful futures traders don’t follow the same rules as cash grain people. Futures traders follow the markets. Producers and users are always trying to anticipate.
The weakness overnight is accelerating as this is written. Corn is now down a nickel, beans down 11, wheat down 16 cents.
We will be able to explain all this in some reasonable manner that may or may not be true when the day or the week is over.