Holidays are upon us!
Dec 14, 2009
Over the years, I’ve seen both boring and very aggressive markets but one thing is for sure—many traders choose to take a break during this time period.
Thin trading during this time does allow for some unexpected price movements. The market should find very solid overhead resistance at the $4.20 to $4.25 level basis the March contract. The big concern that will start to develop for the first couple of weeks of January is the realignment by the big index trading funds. I’ve been hearing of some big numbers but frankly it’s sometimes difficult to separate the “hype” from reality. I feel there will be some index buying as they realign their portfolio but its been talked about for so long that I believe many are not going to be caught off guard.
In fact, I would not be surprised if many people try to sell a bullish price bounce. We do know there is a big crop out in the bin. Granted there is still some corn to be harvested in the Northern Corn Belt but overall the crop is going to get harvested. The issue is how much crop loss will be eventually seen due to low-test weight and late harvest. My estimate is it will be some place between 150 to 250 million bushels. This coupled with the increased potential ethanol usage we will eventually need 13 billion bushels of production and frankly a 1 million to 2 million increase in acres will be needed this spring.
In summary: I really like selling the March contract above $4.20 but I don’t expect until the first of the year and right before the January USDA Supply and Demand report. I would not try to participate in any type of short term speculative buying strategy for the potential fund buying event expected the first of the month.
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