Corn, Beans and "Outside Markets"
By John Booth, Archer Financial Services
How often have we all heard that market direction at the Board of Trade was influenced by "outside markets?" Not just the Dollar Index, but also the stock market indices, precious metals and others. Part of this is due to Long Only ETF trading, in addition to the traditional funds.
ETF participants, it seems, are interested in being long commodities, based upon the assumption that demand, lead by China, will continue unabated and will lead to inflation. Add the ethanol element and Corn is King!
Regardless of the publicity and hype, all bull markets eventually run out of steam. Take a look at the Continuous Commodity Index weekly chart.
The Continuous Commodity Index (CCI), represents the ninth revision (as of 1995) of the original Commodity Research Bureau (CRB) Index. The Index consists of seventeen futures contracts.
Continuous Commodity Index - Weekly Continuation
As you can see, the first technical sell signal took place in the week ending May 13, 2011 and has been bearish since then. My downside first targets of 5.20 for corn and 10.80 for beans are very likely to be met. Over time, these markets, I believe, will be much lower than these targets.
Corn Futures - Weekly Continuation
Soybean Futures - Weekly Continuation
All charts provided by APEX
Recent price trends make it clear that commodities are bearish. Fortunately, we can seek profit on the short side. Long or short, it is critical that all positions are protected with trailing stops.
Feel free to contact me regarding other markets; Yen, Orange Juice and Eurodollars. Send me an email at john.booth@archerfinancials.com.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.
