COFFEE AND CORN
June 11, 2019
COFFEE: Two weeks ago our in-house model told us that Coffee reversed from a downtrend to an uptrend. After reversing to an uptrend September Coffee made a short term high at $108.60 on June 4. Hence from the low on May 17 to the high on June 4 September Coffee rallied $17.80. This $17.80 cents rally put the positive indicator above the 3rd standard deviation of the 196 week average. It was only the fourth time in 196 weeks that Coffee achieved a level above the Third standard deviation. While there is no reason why Coffee cannot go higher yet, it is my opinion that one needs to be careful when going long when Coffees long term indicator becomes so out of balance. Since then September Coffee has broken back to a low made today at $99.85. This will adjust our in-house model to having both the negative and positive indicators within the first standard deviation of the 198 week average. So what do we know?
We know that according to our model September Coffee is no longer out of balance. Our model also tells us that September Coffee is in a confirmed uptrend. It tells us that in order to reverse the trend to bearish we need to close September Coffee at or below $93.85 on Friday. It also tells us a close at or above $108.85 on Friday the ignition to higher levels may be lit.
Recommendation: Look for levels to buy. Those with a greater appetite for risk look to buy at $101.25, and those that are more cautious look to buy at $99.20, and those with the big marbles step in at some point with an at the market buy order.
CORN: The Corn market has been a humdinger that is for sure. We have gone from projected over abundance to a time of major production uncertainty due to weather. We have seen projections of 92 million acres planted and projected yields of 176 bushels an acre to some suggesting planted acres could be as low as 81million acres and yields as low as 160 bushels an acre. From the low on May 13 to the high on May 29 July Corn rallied ninety-five cents a bushel. This ninety-five cent rally put the positive indicator for Corn above the sixth standard deviation of the 194 week average. This is the first time in 194 weeks that Corn exceeded the sixth standard deviation of the positive indicator. Even though July Corn set back 22 cents from the May 29 high on Friday last it still remains above the second standard deviation of the 198 week average. So what do we know?
We know that Corn is in a confirmed uptrend. We know that Corn can go higher at any time but our model remains somewhat upside out of balance. We know that it will take a close at or below $3.49 on Friday to reverse the trend to bearish.
Recommendations: It is my opinion when a fundamental influence like weather impacts a market one needs to be careful as to how closely one follows technical indicators when looking for reversal points. The Feeder Cattle market of 2014 comes to mind as a great example. I am not yet convinced however that the market is fully accepting the projections being tossed around by private sources. Should I be correct we should see the positive indicator come back into balance before getting long. Ergo I recommend looking to buy December Corn between $4.14 and $4.22, pick your poison.
My name is Lee Gaus if you have any questions or comments you can call me at 1-877-304-1369 or email me at [email protected] . If you have a commodity you would like me to take a look at just drop me an email and I will be happy to accommodate.
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