If you are around me very much speaking about markets, you may have heard me mention that the bread and butter of professional traders is purchasing assets at extremely oversold levels, and dumping them at extremely overbought levels. Back on April 21, I made two posts where I tried to make the case that the grain complex was at a bottom. (I urge you to go back and re-read) I was not attempting to create a bullish outlook, but really trying to point out that the market was at a place where it was likely running out of sellers. The pendulum had finished a massive swing to the downside which revealed itself on a chart.
This up and down motion in the market creates cycles. Any item that is trade-able creates cycles. Trading cycles are a recording of when traders believe something is oversold or over bought. On a chart, prices can look jagged and all over the place, but on a calendar, it looks more like this.
In a market that is consolidating, the price range narrows, but the cycles remain intact.
In the April 21 post, the grain ETF JJG was at the bottom of the cycle just in time for the weather market to begin. There would have been a lot more traders ready to enter the market long at that point. The biggest mistake I see farmers make selling grain is giving up at the bottom of these cycles or getting greedy at the tops. The emotions that lead to the greed or fear at cycle tops and bottoms lends itself well to selling at the bottom. The JJG chart below shows the bounce off the trend line which has produced the rally over the last month. (JJG is the corn, soybean, and wheat ETF I use as an index)
Whether you are a fundamental trader or a technical trader, you have to recognize the cycles you are in or the professional traders will steal your lunch money. We are still early in weather market trading, so we need to keep on our toes and be prepared to act quickly. At some point in time, the market will focus on fundamentals again. June 10 is the next WASDE report, which is only 6 trading days away. I suspect the market will bounce around randomly providing opportunities and missed opportunities until then.