Why do you care?
The big news in the markets on Thursday was in the stock market. It was not just the 552 point rally that was important. More significant was the 911 point trading range with the close at the high. It constituted a classic technical key reversal. A key reversal is one of the most reliable technical signals.
Key reversals come at the end of a big run, in this case down. Typically the price makes a new low, followed by a close higher than the previous day's high. This rally was made after some very negative news. That is also a good sign. Yesterday's low was roughly equal lows on October 10 and October 27. If it holds, it will constitute a triple low, also a very reliable technical signal. A quick analysis of the charts shows that the only criterion missing from a true key reversal was the lack of big trading volume. This could be a warning sign that the rally was just short covering. Big volume and new buying would have made yesterday's action even more impressive.
The next few days will be very important. Even with a negative day today, if the price can avoid making a new low below the triple bottom, it will be a positive indicator.
Farmers are not nearly as dependent on stock prices as they are on grains and livestock. Why should we care about the stock market when it is the price of commodities we sell that determine our income? One broker told me, earlier this week, that grain traders are not looking at fundamentals for price direction nearly as much as they look at the general economy. His point was that there is little hope of a rally in grains as long as stocks are in the tank. Negative psychology takes all prices down, even if there is no direct connection. Grains have moved in parallel to the general economy, during the most recent plunge. A rally in the stock market should buoy the agricultural commodities as well.
This week harvest delays have been a big factor in basis in the western Corn Belt. I drove to Mead, NE on Wednesday of this week. I was surprised at the amount of corn still in the fields. Farmers there pointed out how much the corn basis has improved in the past few days. With the price down and so many bushels still to be harvested, farmers are not selling. In Nebraska, 58 percent of the crop is harvested compared to 85 percent normal. In Monday's report North Dakota farmers have harvested only 23 percent. If I were a farmer in that state, I would really be concerned about finishing up before spring.
The weather here has been cold and damp since Monday afternoon. We have not had a big amount of precipitation. However, there has been rain every day. It just never clears up! At least here in Cass County our corn is dry. The further west you go the wetter it is. So far, the market has assumed that the corn will get harvested with little loss. Time will tell if their assumption is correct or if there is a yield shock ahead when the final production numbers come in.