From the June 01, 2011 issue of Futures Magazine • Subscribe!

Tech Talk: Déjà vu in corn?

Any discussion of this year’s grain market automatically will be focused on corn. In addition to exciting fundamentals, it also offers a very clear technical picture. The weekly continuous chart in "Is history repeating itself?" shows a clear uptrend. Support will not be tested until the $7 per bu. level. To change the bullish chart view, we would need to see a high volume breakout below the March low. Bulls will need to be careful though. There was only one week that closed above the 2008 highs of $7.65. The market would like to see that psychological point taken out by more than a 3¢ higher close.

A lot of interest also occurred because of the similarity with the 2008 corn market. During that time, a 48-week rally (A Lucas time series number, 47, plus/minus 1) was seen. Corn rallied 248%, from just over $3 to just under $8, in that time. As of early May, the rally has been going on for 44 weeks and has totaled 242% from low to high. Several technicians have been suggesting a similar objective to the rally in 2008. That would imply am approximate target of $8.04.

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If you subscribe to W.D. Gann’s research on squaring price and time, there are some interesting synergies involving the length of the rally, 48 weeks; the highs and lows of the previous rally and the differential in price of the highs and lows.

Another point that must be made is that fear is typically a bigger market mover than greed. What took 48 weeks to build in 2008 only took 23 weeks to dismantle! Be respectful of liquidation price declines below support. The current rally hits 48 weeks, roughly the time you will see this the last week of May, so stay alert.

Rich Nelson is a director of research for Allendale Inc. You can reach him at rnelson@allendale-inc.com.

About the Author
Rich Nelson

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

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