Today is day two of the correction. After rallying for 10-days we experienced a key reversal on Monday. That is a higher high, lower low and close at the bottom of the trading range. Today’s lower gap opening does give technical support to the belief that a trend change is taking place.
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If you look on the chart you will note on 5/28 we saw a sharply lower opening which was followed by a 6-day sell off. The total sell off was in excess of 38 cents. If this current break would repeat this pattern, we could see on Monday the March 2011 contract trading close to $3.60 and Dec corn to the $3.50 level.
The problem we have with this level of bearishness is next week’s Actual Acreage report. If the market were to sell off with this much intensity, it would be difficult to see a bearish follow through. So as a bear, I want a retracement towards the end of this week. In fact I would love to see Monday’s highs tested which would develop a great double top formation. This I believe would put bears into a much better position for the eventual decline in July and early August towards the $3.15 to $3.30 price level.
If we have a lower opening and start to move positive by mid-day I believe this will give some bulls hope that the current correction was only correcting an overbought condition rather than a trend change.
In summary: we are holding all short positions for the Aug/Sept lows, we are simply wanting a retest of Monday’s highs. Remember, as bears we want to entice a new round of fresh bulls into buying this market so we can feed on their equity as we move lower in July on confirmation the crop yield is going to remain above 163.5.
LONG LIVE THE BEAR!
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