Fri Jul 3, 2015 07:56 AM CDT
It's a three-day holiday weekend, the 4th of July weekend, when those of us in the U.S. are reminded again of all the hardships our founding fathers faced in establishing this great country. Parades, fireworks, patriotic music, and familiar quotes are seen and heard everywhere. Generally speaking, it's great, and couldn't come at a more opportune time for those of us watching the grain markets.
A journey up the mountain starts with a single step.
The last two weeks have been explosive, to say the least, in all three major grains. We've seen technical resistance levels go by like sign posts on the interstate, and a USDA Quarterly Report take up its usual 15 minutes of fame. As I've watched developments in the markets these last couple of weeks, I was reminded of a few other famous quotes we might want to keep in mind.
"A journey of a thousand miles begins with a single step." - Lao-Tzu
Some will point to this week's action in grains as the first step of a long-term uptrend, expected to take corn back into the $5.00 range and soybeans back above $11.00. But in reality, and as those of you familiar with my analysis on DTN know, that first step actually began at the end of October 2014. It was then that both corn and soybean futures posted bullish key reversals on their respective monthly charts, while the DTN National Corn Index (NCI.X, national average cash price, intrinsic value of the market) completed a 2-month bullish reversal on its monthly chart.
As has been discussed countless times since, both markets found themselves in classic Elliott Wave uptrends, meaning three waves up and two waves down to complete the pattern. Wave 1 ran from the end of October through the end of November in soybeans, and December's close in corn. Since then both markets have been slowly sliding back to their respective starting points as Wave 2 lasted through winter, and spring, and into early summer. Along the way there have been many conversations, questionings if the journey had really begun, or if it was just an illusion. But as June came to an end and the Wave 1 peaks were seen only in the rearview mirror, it was confirmed Wave 3 had actually begun. All because of that first unfathomable step taken at the end of last year's record large harvests.
"That's one small step for (a) man, one giant leap for mankind." - Neil Armstrong
Though the single step that began this journey occurred at the end of October, the giant leap was seen in June 2015. Noncommercial traders have clung to their net-short futures position in corn and soybeans like a drowning man to a lifesaver. Until the combination of record June rainfall and USDA reports had come to pass.
Regarding the rain, there is a map on DTN showing total accumulation for the month of June that brings to mine the artist formerly and once again known as Prince's song "Purple Rain." The entire Midwest, and parts of the Southern U.S. growing areas, were shaded at least purple (much above average rain), with some so dark a hue they were almost black. All the while we were told, "This is no 1993." These folks were right. In 1993 the rivers flooded, wreaking havoc. In 2015 everything between the rivers -- particularly the Missouri and the Mississippi -- has flooded, potentially wiping out millions of acres of crops.
When USDA's June 30 Quarterly Stocks and Acreage Update reports were unsealed, the markets finally leapt higher. No so much because the reports were bullish, but because the last chance at a continued bearish view of supply and demand had floated away. By the end of the day soybeans had traded more than 50 cents higher, corn had rallied about 30 cents, and even wheat had posted a strong double-digit rally. When we come back from the long holiday weekend, grain markets could be off in leaps and bounds, sights set on far distant and recently unthinkable price targets.
"It isn't the mountain ahead that wears you out; it's the grain of sand in your shoe." - Robert W. Service
When I updated my Technically Speaking blog on DTN with monthly analysis of the grain markets this past Wednesday, I immediately received messages questioning my sanity (and not the for the first time, I might add). Corn futures with a target price of $5.20 with the NCI.X between $4.63 and $4.90? Soybean futures near $12 and the DTN National Soybean Index targeting a range between $11.49 and $11.93?! Impossible! But then again, so was a move above the December highs just a few short weeks ago. To some.
In my reply to those sending me messages, I pointed out that these are long-term targets, and the full Elliott Wave pattern had to be considered. It's possible that some of these targets may not be reached until sometime in 2017. Some could be hit sooner, allowing us to reset our sights. The key is that there are going to be twists and turns along the path up the mountain, times when grains appear to grow weary from the climb or the pebble in their shoe. But most likely they will press on, fully aware that any black swan that hasn't drowned this year could change the route.
And finally, songwriter Randy Newman once gave us this sage piece of advice: "Beware, beware, beware of the naked man."
Darin Newsom can be reached at darin.newsom@dtn.com
Follow him on Twitter @DarinNewsom
It's a three-day holiday weekend, the 4th of July weekend, when those of us in the U.S. are reminded again of all the hardships our founding fathers faced in establishing this great country. Parades, fireworks, patriotic music, and familiar quotes are seen and heard everywhere. Generally speaking, it's great, and couldn't come at a more opportune time for those of us watching the grain markets.
A journey up the mountain starts with a single step.
The last two weeks have been explosive, to say the least, in all three major grains. We've seen technical resistance levels go by like sign posts on the interstate, and a USDA Quarterly Report take up its usual 15 minutes of fame. As I've watched developments in the markets these last couple of weeks, I was reminded of a few other famous quotes we might want to keep in mind.
"A journey of a thousand miles begins with a single step." - Lao-Tzu
Some will point to this week's action in grains as the first step of a long-term uptrend, expected to take corn back into the $5.00 range and soybeans back above $11.00. But in reality, and as those of you familiar with my analysis on DTN know, that first step actually began at the end of October 2014. It was then that both corn and soybean futures posted bullish key reversals on their respective monthly charts, while the DTN National Corn Index (NCI.X, national average cash price, intrinsic value of the market) completed a 2-month bullish reversal on its monthly chart.
As has been discussed countless times since, both markets found themselves in classic Elliott Wave uptrends, meaning three waves up and two waves down to complete the pattern. Wave 1 ran from the end of October through the end of November in soybeans, and December's close in corn. Since then both markets have been slowly sliding back to their respective starting points as Wave 2 lasted through winter, and spring, and into early summer. Along the way there have been many conversations, questionings if the journey had really begun, or if it was just an illusion. But as June came to an end and the Wave 1 peaks were seen only in the rearview mirror, it was confirmed Wave 3 had actually begun. All because of that first unfathomable step taken at the end of last year's record large harvests.
"That's one small step for (a) man, one giant leap for mankind." - Neil Armstrong
Though the single step that began this journey occurred at the end of October, the giant leap was seen in June 2015. Noncommercial traders have clung to their net-short futures position in corn and soybeans like a drowning man to a lifesaver. Until the combination of record June rainfall and USDA reports had come to pass.
Regarding the rain, there is a map on DTN showing total accumulation for the month of June that brings to mine the artist formerly and once again known as Prince's song "Purple Rain." The entire Midwest, and parts of the Southern U.S. growing areas, were shaded at least purple (much above average rain), with some so dark a hue they were almost black. All the while we were told, "This is no 1993." These folks were right. In 1993 the rivers flooded, wreaking havoc. In 2015 everything between the rivers -- particularly the Missouri and the Mississippi -- has flooded, potentially wiping out millions of acres of crops.
When USDA's June 30 Quarterly Stocks and Acreage Update reports were unsealed, the markets finally leapt higher. No so much because the reports were bullish, but because the last chance at a continued bearish view of supply and demand had floated away. By the end of the day soybeans had traded more than 50 cents higher, corn had rallied about 30 cents, and even wheat had posted a strong double-digit rally. When we come back from the long holiday weekend, grain markets could be off in leaps and bounds, sights set on far distant and recently unthinkable price targets.
"It isn't the mountain ahead that wears you out; it's the grain of sand in your shoe." - Robert W. Service
When I updated my Technically Speaking blog on DTN with monthly analysis of the grain markets this past Wednesday, I immediately received messages questioning my sanity (and not the for the first time, I might add). Corn futures with a target price of $5.20 with the NCI.X between $4.63 and $4.90? Soybean futures near $12 and the DTN National Soybean Index targeting a range between $11.49 and $11.93?! Impossible! But then again, so was a move above the December highs just a few short weeks ago. To some.
In my reply to those sending me messages, I pointed out that these are long-term targets, and the full Elliott Wave pattern had to be considered. It's possible that some of these targets may not be reached until sometime in 2017. Some could be hit sooner, allowing us to reset our sights. The key is that there are going to be twists and turns along the path up the mountain, times when grains appear to grow weary from the climb or the pebble in their shoe. But most likely they will press on, fully aware that any black swan that hasn't drowned this year could change the route.
And finally, songwriter Randy Newman once gave us this sage piece of advice: "Beware, beware, beware of the naked man."
Darin Newsom can be reached at darin.newsom@dtn.com
Follow him on Twitter @DarinNewsom
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