December 24, 2008

CBOT March corn futures are presently in a pause, or narrow-range trading, after the recent corrective bounce from the contract low of US$3.05 1/2 scored on December 5.

The recent quieter price action has also produced a "collapse in volatility" on the daily bar chart, which does suggest a bigger price move is on the horizon. A collapse in volatility occurs when the price bars on a daily chart get noticeably smaller on at least three successive trading days. Markets tend to fluctuate between periods of higher volatility and periods of lower volatility. The recent lower volatility does portend at least a brief period whereby price volatility increases.

While the collapse in volatility phenomenon does warn of an impending bigger price move, the direction of that price move is not forecast by the phenomenon. Traders have to look for other technical clues to try to determine the direction of the next bigger price move.

The daily bar chart for March corn does show prices are still trending lower from the late-June contract high of US$8.16 a bushel.

Near-term technical resistance for March corn is located at US$3.90 a bushel, at US$4.00 and then at last week's high of US$4.02 3/4. Chart support is located at Tuesday's low of US$3.77 3/4, at US$3.75 and then at US$3.70.