Tipsy markets still looking for direction

corn harvest
Corn harvest (Farm and Dairy file photo)

When a retired woman and her brother moved in next door a few years ago, Squeeze and I had them down for dessert and chit-chat. As we got acquainted, I discovered that the woman was actually a rocket scientist who designed the guidance system for the Sidewinder missile.

Right here on Howard Road. Who’d a thunk it!?

Shortly after that, I found out she was not only my intellectual superior, but also better at trivia. She won the “who knows the best Winston Churchill story?” by telling this one: Winston Churchill, known to drink more than a little, was at a party, where he was approached by a disapproving dowager.

“Sir!” she exclaimed, “You are drunk!” “Madam,” he answered, “you are ugly. But in the morning, I’ll be sober!”

Market swings

I remember this for a reason. It is not hard to compare recent price moves on the Chicago Board of Trade to the alcohol levels of a drunk on a bender. The market went on a toot last week, then went home and sobered up.

After the hangover, the market started to drink again, and posted non-driving alcohol levels once again. At the end of the week we had a rally which posted gains of 25 cents on December corn futures, and 45 cents on November soybeans, depending where you start the bender.

The soybeans actually gained $1.65 after the low of $8.68 on March 2. The big days, though, were recently.

We gained 18-1/4 cents on April 13, 28-3/4 on the 19th, and we had a blow-off top, what the technicians call a key reversal, on the 21st. That day the November futures got as high as $10.23-1/2, then closed at $9.98-1/4.

Bean prices

Chart-wise that day represented a clear turnaround, since the beans put in a higher high, then closed below the previous close. The signal held true, as beans followed the next day, Friday, by losing an additional 15-1/2 cents.

Monday, the drunk came back to the gin mill, to the tune of a nearly 15-cent gain. This Tuesday morning, April 26, we are up another three cents to about 23 cents below the high.

Following the corn prices is a similar trip into the barroom gutter. We had a low on December futures of $3.64 on April 1, that was followed by seven sessions that were mostly higher.

Then, we posted a 9-3/4 cent gain on the 13th. That was followed by five higher days, then we made a high April 21 at $4.09, but we turned around and closed nearly a dime lower than the previous close, at $3.93-1/2.

We traded a range of 16-1/2 cents in the process, and put in a key reversal. December futures spent April 22 with a hangover, down an additional 12-1/2 cents, and closing at $3.81 after a $3.80 low. We traded a range of 13-1/2 cents.

More gains

Monday, however, we set up the drinks again and gained six and three-quarters for the day. As of April 26, so far, we are still drinking, with a two and a half-cent gain to $3.90-1/4.

The emotional turmoil of the last few days was predictable. Ask any elevator buyer and he or she will tell you that the rally started with a lot of cash sale targets by the farmers, then the targets hit, then the new targets were pulled near the top as the farmers worried they were selling too cheap.

In the trade we call these “Cancel if close (C.I.C.) orders.” Then, prices crashed and producers complained that we didn’t go ahead and execute the targets they had cancelled (like we know what is going to happen).

Now, farmers’ emotions are stirring again, along with their mixed drinks. A nice bounce is either the first sign of a return to the top and further gains, or it is the bounce a basketball makes when you let it go and stop dribbling.

Finding the floor

The bounces get shorter and the ball settles to the floor. I myself am looking for the floor, but I don’t know just where that is.

Any wild move is followed by dispassionate analysis that looks for fundamental reasons for the move. Those fundamentals are weak in this case.

We can make excuses for how this started, having to do with political events in Argentina and the crop estimate being reduced in Brazil. Neither of those factors, in my mind, should have caused moves of this magnitude.


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