America's farmers are harvesting huge amounts of corn and soybeans, according to the U.S. Department of Agriculture (USDA). The numbers, if realized, are expected to reach 13.6 and 3.89 billion bushels of corn and soybeans. These impressive numbers, the third and second largest crops on record according to the USDA, represent huge supply injection into markets struggling to simply maintain cause building since 2008.
Investors, largely driven by emotions rather than discipline, tend to focus on volatility rather than the message of the market. This tendency prevents them from recognizing better opportunities in quieter markets.
Summary
The BEAR (Price) and BEAR (Leverage) trends under Q3 distribution as seasonal high approaches on the first week February position corn as a solid bear opportunity for months. Corn displayed bearish setups of DI and CAP in July and September of 2015.
Price
Interactive Charts: CORN
A negative long-term trend oscillator (LTCO) defines a down impulse from 42.77 to 21.72 since the fifth week of December 2012 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression (white circles) within the CEC cycle generally anticipates this change.
A close above 34.92 jumps the creek and transitions the trend from cause to mark up. A close below 14.24 breaks the ice and transitions the trend from cause to mark down.
Chart 1
Leverage
A positive long-term leverage oscillator (LTLO) defines a bear phase since the third week of November (chart 2). The bear phase focuses the down impulse (see price).
A diffusion index (DI) of 2% defines Q3 distribution (chart 3). A capitulation index (CAP) of 22% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from extreme distribution (red dotted line) to accumulation and extreme complacency (red dotted line) to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). A rally under these trends, a sign of strength (SOS), would be bullish for corn longer-term.
Chart 2
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle defines strength until the first week of February (chart 5). This seasonal path of least resistance restrains downside expectations over the short-term (see price).
Chart 5