by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)
Corn Farmers got the highly debated Pro Farmer Tour crop report. I know nothing of the crop side, so I leave that up to the farmers and the USDA. I do have a busy $ZC_f chart with lines that price has been respecting. From time to time I share what I see on this chart with my farmer gang. Because of a somewhat free market, whether I know them personally or not, (I know a few real ones from twitter) they supply me the corn. I love to eat corn. Although I pay for my corn, I like to do a little free technical analysis of the price of corn. Sort of as a tip. I love analyzing price, so it’s nothing to me. For them, they can use it as a different perspective on their hedging activities. Hopefully it helps some of them.
Anyway, the $ZC_f chart is a great chart to zoom out on. The day to day action along with all the info we get on a daily basis, on top of the “big crop reports,” can have price action looking chaotic. Qe makes all prices look a little chaotic, but that’s another post. The $ZC_f weekly chart clears things up for me, though: it looks like price is holding up pretty well, and it could go higher. Here’s a weekly $ZC_f chart, the zoom out:
That’s a higher low followed by a higher high. Even the big crop report couldn’t take out the lows. To add to that; a Fibonacci support area held, along with a trend line! This is good looking price action.
What’s funny from a macro view is this: if you put a Dollar index $DX_f up next to this chart you see a big move begun in corn three months after the Dollar took off to the upside.
From June 2014 to January 2015 the Dollar went up against the basket of currencies included in the Dollar index $DX_roughly by 18%. In currency term that’s huge! But corn went up 30% from September to December of 2014! This is significant because it says for some reason while the Dollar was going up so was corn. Corn is priced in Dollars. All things equal, the Dollar and corn should move inverse (in opposite directions) of each other.
But all things aren’t equal.
They Never are.
$ZC_f had two monster weeks in June of this year. Here’s a closer look of what they looked like:
Those two weeks erased 27 weeks of losses. That’s strong action that’s telling you a lot. The price action after those two weeks tells you even more. Price dropped hard, but put in a higher low. A closer look at the five weeks after the two strong June weeks is constructive:
Price retraced nearly the whole thing. Whoever wanted to sell or buy in that range got their chance to do so. Price held up and looks like it wants to go higher, or sideways. price isn’t shy. If it wants to go down it will go down. If it wants to go higher it will do that also. Right now it looks like corn bears have thrown everything they could the market and we still have a higher low. I wouldn’t be surprised if $ZC_f tried to get back above $400. The macro picture with the Dollar side of the corn trade is coming into focus also.
The Fed has been threatening a rate hike since the end of Qe. The more unstable China looks, the more unlikely it is the Fed will get the data it needs to pull the trigger. People are expecting that the heavy handed measures of the Chines government will save the market. But I think that’s wishful thinking. China has the type of problems that aren’t fixed with market intervention, but with lower prices. The old saying goes: low prices are the cure for low prices, and vice versa. This has doubt of a Fed hike creeping into the price of the Dollar in the form of a little weakness. This could lead to more weakness and give a boost to not only corn, but the whole commodity complex. It’ll be uneven. Some commodities will get a bigger boost than others, for various reasons.
All things won’t be equal, corn looks like it could get a bigger boost than most, because it has already exhibited more bullish price action than most. I don’t know what the future holds, but that’s what I get from looking at the price and the market overall.
Thanks for reading!
And I hope this helps someone!
- Featured image credit: Randy Uhrmacher