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Blind as a Bat

Published on Monday, January 14, 2019

My kids have begun teasing me in the last year that my arms aren't long enough - small print seemed to have gotten smaller in 2018.  There is an old expression that speaks of the condition...blind as a bat.  That also describes the condition of the market without the flow of key report data for the market to evaluate.  Now that we have passed the planned release date of the January WASDE report and many other weekly numbers, many wonder when that information will come forward.  In the meantime, market participants are flying blind.

However, that is not to say that we lack something to watch and follow.  In such an absence, technical (chart) discussions rule the day.  As news has become more silent, so has the corn trade.  Corn has continued to wind tighter inside of a shrinking range, or what the market refers to as a pennant formation (illustrated below by the tightening red lines around the green price bars).  In any pennant formation, prices are confined only for so long before a "break-out" occurs.  Re-opening of the gov't, issue of key reports, South American weather, trade discussions with China, etc may all be causal in helping it move outside of this, but for now the market holds on.

Notice also that the market is overbought (illustrated by the intersecting yellow and red lines near the bottom of the chart).  Using this tool (Stochastics), traders analyze when a market may be changing directions.  Notice the correlation between a peaking market and the peak found in the Stochastic indicator.

Soybeans are experiencing a slightly different pattern.  They are caught inside a "trend channel" that has been headed higher for some five months.  As the market has moved higher, waves of selling have taken the market back lower, but each time to a low price that was higher than the last low price.  The movement from low to high and high to low has been strikingly similar, thus establishing the upward trend inside a seemingly fixed channel.  Notice also that their stochastic indicator appears to be at a peak.

The bottom line is that current chart formations suggest short term pressure to be realized.  How they are then supported when visiting the bottom trend line inside the pattern will be key to future discussions.  If the trend line is broken, further downside would be expected.  With $4 corn futures in play, selling opportunities exist for 2019 that should not be ignored.  The same is true as we evaluate near $9.50 levels in soybeans amid bulky global supplies.  Contact us to sort through strategies prudent to your operation.  

Best Regards,
Mike North

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