So are we down at the ankle of another leg up in the crop markets?
It’d sure be nice if there’s another surge in prices coming before Christmas. And I must admit the end of the downdraft in the main ag markets and the surge upwards yesterday – held onto today – have made me hopeful. I’ve been waiting for another leg up, and this might be it.
Let’s look at the always exciting corn chart to see what the dominant crop of the North American grain markets is showing us:
If you draw a line under the lows on that chart, the recent selloff found support at that level – which is bullish. It’s a shame the previous gap-up was closed, but let’s give ourselves the luxury of ignoring that because it didn’t plunge through that level and stay down, which would have been bearish. (The nice thing with chartography is that you can always disregard signals you don’t want to see.)
Moving averages also appear to support the notion that the rally isn’t over, and perhaps another leg up is starting.
Here are a couple of 20 day moving averages slapped onto the chart:
It was worrisome when corn prices fell beneath the moving averages and turned the averages down, but fortunately we’re back above them, and previously in this rally prices have slipped beneath the waves only to re-emerge in the next leg-up.
How about canola:
Same thing. Whew!! Maybe we’re done with bad news for a few days.
Wheat’s happily bullier in recent days too, with worries about hard red winter wheat crops and reports of terrible harvesting conditions in Australia buoying general wheat prices and high quality wheat prices.
So here’s a scenario for you: the recent selloff has given the market the blood it was demanding after the most recent leg of the rally. As Christmas approaches everyone gets cheerier and prices of everything – crops, commodities, equities – finds it has lots of optimistic room to run upwards. That momentum carries on past post-New Year’s Eve hangovers and into the middle of January. Then after some bad USDA news, or a slump in Chinese demand or demand projections, or some Black Swany event, the commodities complex crashes and burns.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
I don’t know if that’s going to happen. But if that scenario I just invented happens to be true, it will allow me to be cheerily optimistic as we go through the Christmas holiday season, and then comfortably return to my habitual bearishness come the third week of 2011.
But regardless of whatever happens in mid-January, let’s hope this first little rebound from weakness is the next stage of the ongoing rally and not just a blip.
