Corn and soybeans, currently below the cost of production for most farmers, have growers anxiously waiting for opportunities to sell their crops at a profit. While demand for corn and soybeans remains high, it's equally balanced by strong global supply. The relatively neutral equilibrium places farmers in a difficult position of selling their crops for a profit.
As long as North and South America's farmers continue harvesting huge amounts of corn and soybeans, numbers confirmed by the U.S. Department of Agriculture, demand is simply not strong enough. Record harvest represents huge supply injections into trends struggling to maintain cause building since 2008. Record crops can be both good and bad news in the Ag business. The good, lots of corn and soy to be sold on the market, is often balanced by the bad, record supplies on the market weighing on prices.
Investors, largely driven by emotions rather than discipline, tend to focus on volatility rather than the message of the market. This tendency prevents them from recognizing better opportunities in quieter markets.
Summary
The BEAR (Price) and BEAR (Leverage) trends under Q3 distribution after the seasonal high position corn as an aging bear opportunity. Q3 bearish setups of DI and CAP in July and September 2015 led (setup) the BEAR (Price) and BEARXO (Leverage) sell signal in the third week of November. Corn's performance since then, a decline from 21.91 to 21.01, has contributed to total bear profits since December 2012.
Price
Interactive Charts: CORN, CORN
A negative long-term trend oscillator (LTCO) defines a down impulse from 42.77 to 21.01 since the fifth week of December 2012 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression (white circles) within the CEC cycle generally anticipates this change.
A close above 34.92 jumps the creek and transitions the trend from cause to mark up. A close below 14.24 breaks the ice and transitions the trend from cause to mark down.
Chart 1
Leverage
A positive long-term leverage oscillator (LTLO) defines a bear phase since the third week of November (chart 2). This focuses the down impulse (see price).
A diffusion index (DI) of 1% defines Q3 distribution (chart 3). A capitulation index (CAP) of 19% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from extreme distribution (red dotted line) to accumulation and extreme complacency (red dotted line) to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). A rally under these trends, a sign of strength (SOS), would be bullish for corn longer-term.
Chart 2
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle defines strength until the first week of February (chart 5). This seasonal path of least resistance restrains downside expectations over the short-term (see price).
Chart 5