Dollar, corn & meal bottoms

May 19, 2016 11:00 AM

The Cycle Projection Oscillator (CPO) is a technical tool that uses complex algorithms to filter multiple cycles from historical data, combines them and gives a graphical representation of their productive behavior. The CPO methodology employs proprietary statistical techniques to obtain cyclical information from price data. Other proprietary frequency domain techniques are then employed to obtain the cycles embedded in the price. 

In the CPO charts, the green line represents the detrended market price and the red line indicates the CPO projection (the bar charts shown above the CPO show the market’s trading in real-time). 

The blue lines above and below the projection line represent a two-sigma move and indicate overbought and oversold territory.

U.S. dollar index

The CPO had projected the U.S. Dollar Index to bottom out sometime in early March. Instead it continued to sell-off in March putting it extreme oversold (outside the two standard deviation band) territory. This is fortuitous if you are following the CPO because it is projecting a major upward reversal, which may have begun in mid-April. The CPO expects the dollar to rally through the spring and summer, taking out the double top resistance formed in December before leveling off at the end of the summer. 

Corn

Corn futures have been bottom bouncing in a narrow range between $3.40 and $4 since coming off of last summer’s highs. The CPO is projecting that to end this spring with a sharp rally that may already have begun in April and could challenge last summer’s high. While the CPO shows a sharp rally in corn this spring, it expects  corn to reverse lower nearly as sharply as we move into the heart of the growing season. Mother Nature may have something to say on that. 

Soybean meal 

The CPO may have been a little premature in setting an early 2016 bottom for soybean meal, but the move projected by the CPO is well under way and as opposed to corn and the dollar, the CPO is expecting soymeal to remain in an uptrend through most of the summer, peaking in August before turning lower come harvest time. Soymeal set a six-year low in February and may have considerable room on the upside.

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at johnrawlins@msn.com. @cpopro1. You can reach John at johnrawlins@msn.com.