Published on: 07:50AM Jul 24, 2008
Everyone is going on vacation now with their kids and many are going to the amusement parks to ride the roller coaster. Anybody in the bean and corn market did not have to leave home all we had to do was watch the market today. The gap lower opening could have been the signal for the final margin call liquidation cycle. Since we are nearing the end of the month and some very strong 18 to 21 day counts down off the June highs, one has to assume the bears are getting ready to bank some profits and move to the sidelines.
While it’s not an absolute rule, I’ve seen many times when the market has these types of severe unexpected breaks, the bull holds off through the correction on the argument it just can go lower. Once the market bounces (as we anticipate short term) the trader is relieved and believes he or she has survived the correction. Then after the initial 3- to 5-day profit taking bounce the market starts to weaken and test or even make new lows. This is where the bulls psychological and financial position is at its weakest. This is essentially what creates the double bottom pattern in charts and set’s the stage for a long price recovery.
Please note that right now I would suggest the corn market is in a more likely stage to create a double bottom than beans. The beans have been much stronger because the stocks are tighter and the bean crop is more marginal.
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