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Normally, there are rules technical traders follow. Example when Open Interest (OI) goes down but the market rallies, this is a bearish sign. This maybe true at times, but the real diagnoses is who is getting out of positions to cause the OI to go down. In looking at the CFTC COT data, one can see that Long Funds are buying and Short Funds are getting out. Commercial positions are less important, in a sense that are offsetting a cash position with futures; or vice versa. Nevertheless, Long Commercials exited 33869 positions, Short Commercials increased 2000 contracts and was the main reason for the drop in the OI. Without studying the money flow completely, one may have traded the corn incorrectly.
The FL was a new all-time-high in contract size. The previous record was back on 02-19-2008, oddly enough the time before record was 02-19-2007, a year earlier. Counter seasonal action for sure, as corn tends to make lows in Feb. In 2007 and in 2008 the Fund Longs and Commercial Shorts simultaneously made all-time-highs in Feb, but in 2008, along came the index funds business and put crimp in the Commercial Short's muscling the market lower. Needless to say the CS's bailed hard causing a 5 month rush to all-time future price highs in July of 2008.
Currently, the CS's stand at 811750 and the previous all-time-high was 970152. It will take approximately 7 weeks at the current post-report pace of 22675 contract per week average to make new all-time-highs. This would be around the week of Oct 22nd. My experience tells me that corn tends to have fundamental price adjustment periods. Global conditions change and basically the prices are to cheap. As in all things in our universe, velocity, momentum and mass are relative. Momentum (price) has gone up 135, mass (angle of accent) is 2x1, velocity (time) which equals 45 market days. Currently, the market has made highs Monday, the 7th which is 48 market days. 09-18-2010 is the next major market time is Jupiter 360^ Uranus. This is 55 market days from low and a Fibornocci timing. If the market goes straight up into this the high should project spot corn going to $4.90. If the Monday highs are good, look for 3-day pullback and 3-day rally for a secondary high or double top. Last possiblility would see a 6-mkt day sell off and 6-mkt day rally, with the 6-day break being the P&T pivot.
TRADING IN COMMODITY FUTURES OR OPTIONS INVOLVES SUBSTANTIAL
RISK OF LOSS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
RISK OF LOSS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
