Canada Markets

December Corn Pushes Higher on Weather

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December corn rallied for the third straight session although finished near the lower-end of Wednesday's trading range, testing several technical resistance levels. The first study shows the stochastic momentum indicators have yet to reach overbought territory signaling the potential for a further move higher. The lower study shows the Dec19/Mar20 spread that remained unchanged on Wednesday, although has strengthened or narrowed 2 1/2 cents so far this week. (DTN ProphetX chart)

They say that prices climb a wall of worry, or by one definition, "a market uptrend that occurs when there is significant uncertainty about its sustainability." Perhaps one of the most bullish markets to watch given planting delays faced is new crop corn.

Wednesday's market action resulted in a 10-cent gain in new-crop December trade only to see gains pared to a close that was only a penny higher than Tuesday's close.

Since reaching a contract low of $3.63 3/4/bushel in Monday's trade, Monday's trade resulted in a bullish outside reversal bar formed on the daily chart, with the session's range both lower then higher than Friday's range. The move higher on Monday was followed by Tuesday's bullish gap higher along with a breach of various levels of resistance. Meanwhile, Wednesday's trade saw a breach of resistance at the contract's 50-day moving average at $3.88 1/4/bu., the 100-day at $3.94/bu., the 200-day at $3.96 3/4/bu. along with the 50% retracement of the move from the contract's $4.24 high to the May low reached at $3.63 3/4/bu., calculated at $3.94/bu.

In the end, despite a bullish weather pattern that may lead to further planting delays, the July contract gained only 1 cent while holding above the contract's 50-day moving average for the first time since March 28. While not shown, investors or noncommercial traders hold close to the largest net-short futures position of corn held on record, as of May 7 data. This can be viewed as a bullish feature for this market should this group have a change of heart and head for the exits.

As seen on the lower study of the attached chart, the December/March futures spread remained steady this session at minus 11 3/4 cents, while over the week this spread has narrowed by 2 1/2 cents to its narrowest level seen since late March. The second study shows that stochastic momentum indicators have yet to reach overbought territory, while are currently at levels reached earlier in the month. This signals the potential for a continued move higher prior to reaching overbought territory.

Various levels of technical resistance lie between $3.94 and $3.97/bu., while the ultimate test for this market may be the $4/bu. level, a level of psychological resistance, as well as retracement resistance at $4.01/bu.

Cash basis in Ontario remains steady from last week's close at $1.00 to $1.60/bu. over the nearby July contract. One Chatham Ontario bid followed on ProphetX is shown at $4.78/bu. on Wednesday, just $.04/bu. below the $4.82/bu. high reached on Feb. 6 which is the highest cash bid noted on this chart since Sept. 4, which was also within 2 cents of the highest bid for this location reported this crop year. The three-year average for this date is $4.64/bu. on this chart.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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