On March 1,2010 CK posted a high at 392. One month later on April 1st, we had fallen to 343 1/2.. A 48 1/2 cent haircut. We then based for about 8 trading days, failing to have any follow through at that point. In response to what ever rumor you can conjure up about Chinese interest, short covering rally, etc. etc. what we have seen, if you look at the charts, has been a 38 percent retracement of the down move. A failure to extend lows, has chased out weak shorts who sold the corn in the hole in anticipation of bearish numbers for the USDA planting intentions on March 31st, and then again on April 9th. Fundamentals have turned into “funny mentals”. Next stop on the rally monkey is 1/2 way back at 367 1/2 and then 373 1/2 for a 62% retracement. I think we could jam up there in short order, just prior to the expiration of May puts, on April 23rd. We will most likely rally into expiration, and then if history is a to be learned from, my opinion is that after that expiration, we will have a downdraft. Once the market has corrected sufficiently, unless Chinese buying truly does materialize, then the funny mentals will revert to fundamentals.
Producers who do not take advantage of this rally could be left holding the bag once again, cursing the speculators for their own reluctance to take advantage of price rallies to do marketing.
As for the beans, perhaps we have a different story. On January 5, 2010, SK posted a high at 1078. On Feb 2, 2010 we posted a low at 911. Indeed, it looked like time to call the police after a 1.67 downdraft. From a technical point of view, the chart looks more like a classic basing pattern since then. 994 1/4 and 1014 loom as targets above for the longs to salivate over.
The recent increase in open interest in both corn and beans suggests that more than the knee jerk explanation of ‘short-covering’, perhaps we are seeing the beginning of the bull market of 2010.
We are currently in the driest April in years. New crop beans, SX look poised to rip through the 967 and then the 983 levels. If tomorrow’s open interest shows another gain, like I imagine it will, this could be the type of action to give perma bulls a warm fuzzy feeling. Is it too early for talk of weather scare? I doubt it..
Also, the bull spreading early in with old crop/ new crop has had its flush. Perhaps, like Dustin Hoffman in the old movie “The Marathon Man”… There’s a scene in the movie where Lawrence Olivier is torturing Dustin Hoffman for information. He repeatedly asks him, Is it Safe?… Its looking more and more like indeed its safe to be bullish beans.