Sunday 27 January 2013

While most eyes remain fixed on gold and silver, and the stock market, to a
lesser extent, the Fed having driven the little investor away, we take a fresh
look at the corn market. It has been some time since we last visited grains,
and corn deserves some attention. What do traders in PMs, S&P, Natural Gas,
Notes, or Corn have in common? To them, nothing. Being chart-driven, for
us all charts are the same. An opportunity is what we look for, and it matters
not from which sector that opportunity arises. Nor does not matter what the
underlying product is in any chart. We are equal-seeking opportunists.

We reference this as a short-squeeze clinic because if it can happen in corn, it
can happen in any market, [and does!]. This analysis also conveys why the best
source for information comes from the market itself. Starting with the monthly:

This chart is bullish for several reasons. There are consistently higher swing highs
and higher swing lows, the essence of a trending market. The higher the time, the
more pertinent and reliable the information. Price rallied to the last swing high in
just 3 months. Since that high, the correction lower has taken 5 months, or almost
twice as long to retrace only half the gain, another characteristic of a trending market.
Where price stopped is also important.

A horizontal line is drawn from the last large bar down, followed by an equally
large up bar, the first of the three bar rally to highs. The solid portion of that axis
line covers the then failed highs and the gap between rally bars 1 and 2 leading up
to 3. The remaining portion of the horizontal line is dashed to show how it extends
into the future, six months before price came back to retest that level. It is an axis
line because it acts as resistance to the left and then becomes support to the right,
and this same line shows up on three different time frames, attesting to its validity.
The decline also stopped just under a 50% retracement. In futures, there are
different contract changes that account for “wiggle room” in some price areas. In
horseshoes, this would be a “leaner.”

In all events, the market is sending an important message. When it shows up in all
three time frames, then we have ourselves a trade potential, with an edge. Edges are
good, in fact, preferred.

CH M 27 Jan 13

To read entire article and charts, click on http://bit.ly/XJby6u