Ugly!

Agriculture.com Staff 01/05/2007 @ 9:43am

Sometimes coincidences amaze me. A group I work with at the research center in Ithaca, NE had a marketing meeting scheduled for Thursday morning.

On the agenda was a class by Dr. Darrell Mark on charting. Farmers attending the meeting wished they had scheduled the meeting for a week earlier because the corn charts were looking really ugly for about a week before the break on Wednesday and Thursday. If we would have been watching closely during the holidays we would have seen the signal that a decline was imminent.

I have watched charts for 25 years, but have never really used them to trigger sales. They are useful in getting an indication of market moves if you understand them and if you act when you see the sign. The current corn futures chart will be a textbook example for years to come-unless the market surprises me and turns back higher after this wash out is over.

My working knowledge of charting is limited to gaps, double tops and bottoms and retracements. The corn charts shows distinct breakaway, measuring and exhaustion gaps. In a big rally there are usually three gaps, as there were this time. The chart also shows two tops at almost exactly the same levels. Double tops are another reliable sign of a market running out of buyers.

For individuals wanting to sell corn, there are two possible approaches. One is to sell now, rationalizing that the price is still good and anticipating further erosion. The other is to wait for a retracement that will probably come in the next few days or weeks. Retracements usually gain back 50% of what was lost, before heading lower again. It is too early to know how far this recent washout will take the market down or how much the retracement will be.

I also watch moving averages as a sign that the trend has turned. At this point, none of the moving averages have turned lower. However, by nature they are lagging indicators and will never turn fast, even using short duration averages. I know of at least one other technical system that indicated a turn in the corn market was coming. Any technical indicator will only be correct in anticipating the direction of prices a percentage of the time. They need to be applied with some common sense and good money management judgment.

I was not inclined to sell at this time of year because spring usually brings higher prices. Sometimes it does not pay to stick to seasonal trends when other technicals indicate a top might be in. It will be interesting to see which turns out to be correct this time.

(Note: For the past week I have not been able to post on any of the talk pages. I do not know what the problem is but I am working on it. For those of you waiting for a response, I have not forgotten. I will eventually figure out what is wrong....Soyroy.

Sometimes coincidences amaze me. A group I work with at the research center in Ithaca, NE had a marketing meeting scheduled for Thursday morning.

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