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Oats know WHAT, exactly?
If you've been around agricultural commodity futures for a while, you've probably heard the old adage, "Oats know where corn goes." Cryptic? Yes. However, before high-frequency computer trading and before the trading world was as volatile and international as it currently is, traders used to watch other indicators in order to determine commodity price direction. Back then, this adage was one of those indicators. So what does it mean? Movement in the oat market was viewed an indicator for the direction the corn market would ultimately take. The idea is that oats are more of a pure market – not influenced as much by fund money or noncommercial traders.
While the correlation cannot be truly perceived as gospel, it is something that traders keep an eye on. After the recent $1.00 sell off, many are now hoping that corn futures find support in the $4.00 price area. While corn futures are chugging lower, as of this writing, oat futures are quietly moving higher. Some traders are hoping that maybe corn is close to a bottom. For now, $4.00 is solid technical and psychological support for corn futures.
We wanted to bring this to your attention, because many traders, producers and bloggers have been repeating this adage about oats lately. In fact, they are saying it with great passion, like one doing a rain dance on parched soil. Everyone is hoping oats knows something that could bring corn prices higher, so missed pricing opportunity can be regained.
On a weekly chart, oat futures tested the long-term uptrend just weeks ago, and support held, leaving the uptrend intact. Now, corn futures are testing long-term support levels. Many are writhing in angst to know if the long-term uptrend will hold intact as well.
We'll have to wait and see if oats know . . . or not.
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