Technically Speaking

In my blog last Wednesday (Dec Corn's Immovable Object) I talked about the difficult Dec corn has had with its 20-day moving average. Time after time it would bang its head against this resistance, only to succumb and move lower again. That is until Monday, October 21.

For the first time since September 3, Dec corn is looking down at its 20-day moving average at the close, albeit through a microscope. The close of $4.44 is only the smallest fraction above the calculated average of approximately $4.43 3/4 (red line, top chart), yet above it is, indicating the contract may finally be moving into the minor (short-term) uptrend daily stochastics (bottom study) has been indicating since establishing a bullish crossover on October 4.

The trick for December corn now is to find noncommercial traders willing to cover short futures position, providing enough strength to the market to move toward its initial price target of $4.86. This price marks the 38.2% retracement level of the downtrend from $5.73 1/2 (high of June 3, 2013) through the recent low of $4.32 (October 14).

While it seems a stretch to think the Dec contract could make this kind of move during harvest, we need to keep in mind that daily volume remains low so only minor noncommercial short-covering interest could lead to a sizable rally. And let's not forget that the soybean market remains in a major (long-term) uptrend, supported by a bullish long-term commercial outlook, that could spark increased buying interest in corn as well.

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