Back in the 1970's, when I started studying marketing, I spent a lot of time learning various technical systems. The first and easiest for me to understand were bar charts. I eventually found seasonals more to my liking. However, I still watch bar charts to try to find indications of the possible direction of price movements.
Watching the charts has been fun for the past few months with so many commodities in easily defined uptrends. That situation has changed in the recent past. Precious metals are favorites of speculators because, in the past, they have made huge moves. Today, both gold and silver futures have retraced much of what they gained earlier in the year. Crude oil and gasoline have held their gains pretty well, probably because demand is less elastic. We all need to drive our vehicles! However, natural gas has lost about half of its value since December 2005.
The chart of the December corn futures has some interesting features. Prices gapped higher on March 31 by $0.06 cents per bushel. That is a huge jump for corn futures. Prices will usually try to fill a gap. That happened in the corn market on May 8. The low of that day was below the low on March 30, by less than a cent. From there, prices rallied strongly. Market comments were that grains would follow energies higher, since a big part of demand is because of the advent of biofuels.
The positive chart picture didn't last long however. This week corn futures took a plunge with the close on Thursday below the March gap. Unless the price recovers quickly, the March gap and May challenge will become resistance to further price rallies.
I never know how much faith to put in chart analysis. In the 1970's, one market advisory service published a book showing the predictability of different chart formations. In other words, how often you can expect prices to go the anticipated direction after a certain chart formation. In marketing, there is no sure thing. I wish I had a book telling the predictability of chart formations as I do for seasonal moves.
One analyst I follow was saying last week that he is solidly in the bullish camp for corn prices. His theory is that ethanol driven demand will magnify the effect of any weather problem. This week he points to the technical picture on corn futures and says that the outlook is grim unless some new bullish factor shows up. If the experts are confused, how can we out in the country be any better?
My experience with seasonal trends tells me that the corn market could be putting in the early summer low right now. Whether it was yesterday or is still ahead is a guessing game. If the market can bounce today and close above the lows from March 30 and May 8, the outlook is still positive. Even if prices go lower for one or two weeks, odds are very good for a rally later in the summer.
Rain is predicted for my area today and tomorrow. If it happens and how big the area is are more important to the corn market right now than any technical picture. A big change in fundamentals will trump a clear technical picture every time!