There are two forces at work in the grain futures market: fundamental forces, that is supply and demand issues; and technical traders, those who use charts to track price performance and predict the future. Rob Brennan is a technical market analyst at the CBOT who uses charts to analyze where prices will go. After new crop corn hit a high of $8.40 on August 21, prices have moved lower. Brennan says the charts suggest corn prices are about to turn higher, “I see support at $7.37 ¼ and again at $7.30.” He said there are a lot of short positions in the market that have been pressing prices lower. But, longer term, he sees prices moving back to the $8.00 level, “With so many people on the short side, when this market turns there will be a lot of fuel to keep squeezing these shorts and we could go and test that $8 mark.”
He does not see this kind of volatility in the soybean market, “I am on the sidelines on soybeans right now.” He sees support in the soybean market at the $15.50 and suggests that, if the market is pushed that low, it would be a great opportunity for livestock feeders to buy and hedge off some of their feed costs for next year. Most commercials interest in the market are fundamental traders, but commodity funds that dominate the volume of the market are strictly technical traders. This gives market action a decidedly technical influence.
As for wheat, he sees the market as range bound, “We are stuck in about a 70 cent trading range. ” He sees rallies being supported technically up to the $9.05 area and support on the downside around $8.83. He said, right now, the wheat market is trading sideways, “And the longer a market trades sideways, the more extreme the breakout.” He recommends saying on the sidelines in wheat and wait for a market direction to be defined.
Brennan also sees a bearish chart in the cattle futures. He told HAT, even as far out as the April contract, prices are not looking good, “It is going to be a grind up to $137.60 and after that my next target point would be $139.57.” He said he would not be in a rush to get into a long position in cattle.[audio:https://www.hoosieragtoday.com//wp-content/uploads//2012/09/chartwrap-.mp3|titles=The Charts Say Corn Prices Will Recover]
Listen to the complete interview with Rob Brennan in the audio section of the Hoosier Ag Today Smartphone app.