Bottom Line: Markets are technically sideways until there is new information to guide them.
It is fairly interesting that if you pop up a bean, wheat, or corn chart, they present wide sideways trading formations at the top of an extended run higher, which can become toppy if we settle under key support lows. The formations at the moment are more suggestive of wide trading ranges that the markets are content to wait in while the crops continue to grow. While questions remain as to how much corn has been planted, where the yields actually are, and how much prevent plant we have going, we have to play these ranges:
Dec corn: $4.20 - $4.65/$4.70
Nov beans: $8.90-$9.50
Sep wheat: $4.95 --$5.40
While all present possible head and shoulder tops, (which would lead to a further sell-off if confirmed), none of them will be confirmed as such until they break their necklines, with a 3% close underneath. Necklines are in red at the bottom of the formations. Until all necklines are broken, head and shoulders tops will not be confirmed and should not be traded as such.
For head and shoulder tops to work, fundamentals have to match the formations, which is really at the heart of the matter here. The uncertainty of corn and bean production for new crop is extremely uncertain. The August report may go a long way towards some type of clarification. Plus, failed head and shoulders tops give twice the trade possibility to the upside, should a breakout occur over $4.70 Dec corn, $5.50 Sep wheat, or $9.50 Nov beans. However, the topping action in all these markets is now keeping the market rallies in check, as they are rather neutral to bearish in nature.
The December corn chart started its top first, but failure to remain symmetrical with left and right shoulders (and no break of neckline) negated the pattern. The November bean chart is heading into a possible top, but with August weather still left to go and crops in question, it is uncertain whether that chart comes to a conclusion either. Sep wheat has the best symmetry for a top, and has been the leader to the downside.
Confirmed head and shoulders tops mark a major reversal of trend. One may read about them, and granted corn, beans, and wheat have potentially topping formations, but in order to trade them, given what is out there about the crop size, best to be patient and play current ranges until prices break below the red necklines.
NOVEMBER BEANS
DECEMBER CORN
SEPTEMBER WHEAT
TAGS – Feed Grains, Wheat, Soy & Oilseeds, North America