November 25, 2008

Chicago Board of Trade March corn futures last week produced a bearish downside breakout from a five-week-old sideways trading range on the daily bar chart. Prices notched a fresh contract low of US$3.52 1/4 on Friday (November 21).

Despite a short-covering bounce on Monday, serious near-term technical damage has been inflicted in the corn market and the bears have the solid near-term technical advantage. The next major downside price objective for the corn bears is the US$3.25 level in March futures.

For the corn bulls to regain upside near-term technical momentum they will have to produce a close back above strong psychological resistance at US$4.00 a bushel, basis March futures.

Near-term technical support for March corn is located at the contract low of US$3.52 1/4 and then at US$3.50. Resistance is located at US$3.70 and then at US$3.75.

From a longer-term technical perspective, nearby corn futures prices have produced a big V-Top reversal pattern during the past 12 months, as prices have hit a fresh 14-month low. The next longer-term downside target for the bears is the July 2007 low of US$3.08 1/2.

Importantly, look for corn and the rest of the grain futures to closely monitor and follow the key outside markets - crude oil, the value of the US dollar and the US stock indexes. On days when crude oil and the US equities are higher and the greenback is weaker, look for stronger corn futures prices. On days when crude oil and equities are weaker and the dollar is stronger, look for corn futures to see selling pressure.