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The Ted Spread

RSS By: Ted Seifried, AgWeb.com

Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.

Is December Corn Predicting a Rally?

Feb 26, 2013

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.   

I feel like a broken record saying markets were mixed again today, but that has really been the story for weeks now.  It seems like when the soybeans are up the corn and wheat are down, and when soybeans are down corn and wheat are up.  So, what do we make of this?  I'm not sure there is much to take away from this aside from some seemingly small but potentially important observations.  Today's trade did not seem like much in the way of predicting market direction but December corn may have just given us a clue.

New crop corn has been under significant pressure since the beginning of December.  This has come from growing sentiment that a decent crop on this suppressed demand works out to big ending stocks and in turn sharply lower prices.  Drought bulls have had to give up the gun to some extent because of the wetter weather pattern (it is currently blizzard conditions outside my window).  And, South America has a big crop that will help bail out the tight world supplies.  But some of us have been talking about this and trading this for a while and our numbers have grown as the prices have continued to come down.  So, the question is when and where can we get a bounce even if it is just a bounce to sell?

CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie

From a technical perspective December corn may be telling us that this over due bounce could be starting soon.  There is a chance that the overnight lows in Dec corn may be the lows for a little while.  Today we had a technical event that could be predicting a near term bottom.

If December corn had made a new contract low today would have been called a key reversal.  But, because these were not new contract lows we have to say that December corn has a sweeping outside up day.  For my money I think we can look at this as having similar weight as a key reversal because this is the lowest December con has traded since June 22nd of last year.  So instead of new contract lows we made new eight month lows (to the day), and to me this carries almost as much weight.  Now it is important to note that  December was on its own in doing this, July did not make new lows last night, and that front months are typically used for technical traders but I think it is an interesting development that comes at an interesting time when a lot of guys are scratching their heads looking for a clue.

I certainly would like to get more corn hedged for next year as the prospect for a 2 billion bushel plus carry over could mean sharply lower prices but i would really like to see a bounce to sell higher new crop corn prices.  For now my plan is to wait to see if this almost key reversal can spark a rally before I sell any more new crop or 2014, 2015 ect...  If we break 550 again however I may have to get more aggressive.  Give me a call if you would like to talk about your marketing strategy or ideas for new crop and years to come.  Have a great day, and I hope the snow suits you well if your in it.

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December Corn Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have corn near $7.00 and soybeans near $14.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Please check out my Blog at: http://tedseifriedfutures.com/

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

Futures, options and forex trading is speculative in nature and involves substantial risk of loss.  This commentary should be conveyed as a solicitation for entry into derivitives transactions.  All known news and events have already been factored into the price of the underlying commodities discussed.  The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION

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