It is hard to get a handle on where markets are going these days. The easiest method, with the least recriminations when you are wrong, is to look in the rearview mirror.
Volatility and outside markets are confusing things right now, but the charts give a fairly clear picture. Grain prices have been jerked around by weather-driven harvest delays and the mood changes in the markets because of them.
The price of gold and the (related) value of the dollar against other currencies has meant more to the market some days than supply and demand.
Chart analysis, or technical analysis, is an attempt to predict where we are going by looking at where we have been. There have been clear signals on corn and bean charts lately, but that does not necessarily guarantee the future.
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 4.2412 on Oct. 23, then 4.25 on Nov. 18. Monday, we got to 4.2014, 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.
The March corn futures are way above the pre-harvest low of 3.1512 on Sept. 8. The slow harvest, and a reduction in the predicted crop size was part of that. Outside markets added the rest.
If we could, in fact, break through the resistance, the sky is the limit. The last high before harvest was clear back in June. Then we traded daily highs of from 4.78 to 4.82 for eight days.
Now, the soybeans. January soybeans have shown steady gains since the low of 9.51 in early November.
We traded an overnight high Monday/Tuesday of 10.74, a buck and a quarter higher in less than a month.
In the process of the last two days, we have broken through the old high of 10.58 made in the middle of August when we were worried the crop was in trouble. In between we had an August low of 8.85. So, we have broken the old high.
Now our objective is 11.05, made the 11th and 12th of June. Realistically, however, we can look at these three highs as forming a line of resistance.
If we connect them, we can argue that we are already topped out.
So, what kind of news can make a breakout? The delayed harvest can help, but the market is not reacting too strongly so far. We will know more in a few minutes when we open.
Monday, we learned that the corn crop was still only 79 percent harvested in the country, although Ohio is ahead of that. We should be done. There may be harvest losses, but local talk of yields in some fields as high as 265 bpa is not encouraging that idea.
Meanwhile, basis nationally is at a five-year low, at minus 55 the March. Imagine the basis if we had gotten the crop off fast!