Technically Speaking

Corn Downtrend vs. Soy Strength

The $31.59 corrective high in December soybean oil is now arguably the most important technical level in this market. A break of that level would render the prior price action from recent highs as corrective. (DTN chart)

March Corn Futures:

March corn remains locked in a persistent downtrend, which has been the dominant technical feature since mid-October. The contract has been below all major moving averages since Nov. 8 with the nearest being the 50-day moving average at $3.91 vs. $3.76 spot price. Momentum indicators are offering nothing in the way of potential divergences, a somewhat troubling factor considering prices are nearing the Nov. 27 correction low at $3.73. Considering the Volume Point of Control (VPOC) is just above at $3.78, there can be a case made for prices continuing to be sticky around current levels. The VPOC is the point where the most number of contracts have changed hands in the life of the contract. A weekly perspective of March corn doesn't offer any other technical clues, with prices needing to recover back above the $3.84 3/4 corrective high from Dec. 2 in order to flip short-term trends higher. One could go deep in the weeds with an Elliot Wave Count on this contract, but suffice it to say, the present downtrend will continue with support eyed at the September lows around $3.65 until or unless a corrective high of decent magnitude can be reclaimed.

January Soybean Futures:

The short-term trend in soybeans has been turned up with the most recent corrective effort, only much work remains to turn intermediate and long-term trends higher. Momentum indicators have turned higher, supporting the most recent effort. It would take a continuation of higher prices while momentum wanes to raise red flags about the current correction. The VPOC for the January soybean contract lies all the way up at $9.34 1/2, so that level won't come into play for quite some time. That said, the 100- and 200-day moving averages are resting at $9.07 and $9.13, respectively, which is also a fairly heavy area of concentration for previous volume. If January soybeans can keep moving higher through retracement level resistance, we would expect selling pressure to intensify between $9.00 and $9.15. As always, momentum indicators such as stochastics will be useful tools for identifying even short-term divergences from price, which could give clues the rally effort is stalling.

January Soybean Oil Futures:

Similarly to soybeans, January soybean oil has enjoyed a smart rally the last several sessions. The strength the last several sessions is coming close to taking out the Nov. 20 corrective highs at $31.59. If spot prices can recoup the Nov. 20 corrective highs, it would render the entire sell-off from the Nov. 5 highs to the Dec. 2 lows a three-wave corrective affair and warn of a resumption of new highs above $32.17. Much work remains between spot prices and the $32.17 highs, and until the January contract takes out the $31.59 corrective highs, this is just conjecture. However, the Nov. 20 corrective highs are now arguably the most important technical level in this market in our opinion. Momentum indicators are strong and not suggesting any sort of divergence from price at the moment. Most of the volume in this market has changed hands below spot prices, leaving less areas of natural resistance as prices climb.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

(BAS/CZ)

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