The corn is popping!

While the vast majority of UK traders’ eyes are focused on currencies, UK shares/FTSE, gold/silver, very few are watching the US grain markets – and that is a big mistake.  While all spread betting markets are linked to their respective futures markets, not too many UK traders know that the whole concept of derivatives trading – aka the forward futures markets – started in the 19th century with the wheat futures market at the then new Chicago Board of Trade  in around 1848.

Wheat farmers decided they wanted a way to forward sell their crops on  contract before harvest when prices were usually better -and the futures markets were born as the idea spread to other commodities.  Now, there are hundreds of publicly traded futures markets – an area wide open for speculators like us to play in.

So let’s take a look at some of the first futures markets in the world – corn (aka maize).  Before the advent of financial futures in the 1970s, the US corn market was the largest futures market in the Western world – and it remains massive  and an ideal market for analysis using my tramline methods.

US crop production has been steadily increasing over the years from around 100,000 MT in 1960 to last year’s 380,000 MT – thanks in part to increased carbon dioxide in the atmosphere which acts as a plant food.  Of course, corn is produced in other countries and that overseas  output can have a major impact on US prices.  In the growing season, weather conditions can also have a major bearing on prices.

So with production rising rapidly in the last few years in response to the new demand for ethanol (fuel) production, prices have trended lower – much lower – as season ending stocks have been huge.

So this was the picture I saw back in October when I started getting interested in the grains

Corn had rallied to the $8.40 area in 2012 on the back of ethanol demand but as US frackers got busy, oil and corn prices fell together on perceived overproduction.  That is when the textbook five down started and finished in the $3.20 low in September 2014 on a large momentum divergence.  That decline represents a Fibonacci 62%, curiously.

Since then, the market has been forming a base and when the market fell back to match that $3.20 low in August last year and then recover, it appeared that a Double Bottom was forming.  If that was so, then the potential was huge for a big rally phase – a move well worth trying to capture.

And if the market could break above the major blue resistance line, it would be away to the races.  That is why I advised VIP Traders Club members to go long around the $3.60 level.

Here is the up-to-date daily chart:

The move off the second double bottom leg last August has been contained well within the textbook tramlines and the market has recently made it to the Fibonacci 62% resistance.  The upper tramline lies in the $4.10 area and that is my next target.

And if corn can pop up to the major trendline (which meets the upper tramline a few days away), that will be a major test of the rally.

But for now, corn is popping.

Also, I have a similar setup in Wheat and VIP Traders Club members are long there also from the $4.30 level (currently $4.75).

Apple keeps falling

Perhaps Newton was born around 300 years too early.  Instead of losing his shirt in the South Seas Bubble, today he might have discovered financial gravity in the Apple chart!

Friday’s close at $142 (a 10% decline off the $157 high) puts it almost testing the Fibonacci 23% support zone.

Remember, I covered Apple on 10 June and stated that I was looking for a downward correction well before it happened.

So far, the decline is in three waves and the shares could bounce up from here to put in a normal A-B-C correction to the rally.  The Fib level is at the $140 mark and that is where I shall be looking for signs of a possible turn back up.  Short term traders will want to lighten their shorts, I am sure.