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On display, last Friday was a near textbook example of what will often occur in a market that has become lopsided with speculative positions. We can use all sorts of analogies such as the boat was listing too far to one side and we needed to throw some of the weight overboard to keep from capsizing or you can only stretch the rubber band so far before it snaps back, at which point someone is going to get stung, but the end result is the same. Managed speculative money continued to pile onto the short side of the corn market like lemmings racing for the cliff and in the process, had set a new record short position, because…well, it is common knowledge; there is just too much corn. The problem is that this is common knowledge and if everyone already knows, it has already been factored into the price structure. Now, tell me something new. Of course, as much fun as the turn-around was to witness on Friday, in the overall picture, it would appear to be little more than a hiccup, but every time we bounce back from pressure, it not only unnerves the bear but moves us another step closer to turning long-term indicators positive. As I have commented many times in the past, one of the major (potential) benefits that I believe exist in charting and technical analysis it that we will see shifts occurring in pattern before the information becomes evident in the fundamentals. Sometimes we just need to remove the blinders of preconceived “known” factors before we can see it and that at times can be a challenge.
Grain and soy markets have not witnessed much if any follow-through this morning, which would seem to verify the Friday reaction was primarily pre-weekend, pre-holiday short-covering. Now that we have entered Thanksgiving week, and realistically the holiday season for trade, there is potential to witness more of the same, but I suspect it will come in fits and starts. With lower volume, we could see a volatile day here and again but overall and considering we have tracked generally lower into this week, I would favor potential strength into the end of the year but suspect the potential for a major trend reversal is not in the cards just yet.
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