Grains At Bottoms of Daily Cycles

The timing of the wheat put sale earlier this month had as much to do with cycles as anything else.  Wheat was at a mid cycle low which was very near the contract low.  Sentiment was excessively pessimistic, which typically occurs at major bottoms.  Wheat was at a 6 year low.

The green arrows on the chart below indicate cycle bottoms.  These occur regularly every 25-30 days.  We were at day 27 Friday, which means you should have anticipated a bounce at the very least.  That would be the worst time to sell grain but a reasonable time to employ bullish strategies such as selling puts.  When prices are near major cycle bottoms or well below major moving averages, or at excessive bearish sentiment, you employ bullish strategies.  You could have used the same strategy Friday that we used back on December 7 and still collected a nice premium.

Corn

Remember, we used wheat as the vehicle for corn because wheat was a lot more bearish than corn was at the time, and wheat sentiment had reached bearish extremes.  The sentiment levels for corn were not that extreme.  Corn cycles are nearly the same as the wheat cycles.  Friday should have marked the bottom to the corn cycle.  I expect corn to continue grinding higher which means the timing of the next peak of this cycle will be near the January 12 WASDE report.  If prices can move significantly higher....lets say near the $4.00 range, I hope to get some corn sales made.  That is only 17 cents from where prices are chopping around today.

Soybeans

As with corn and wheat, soybeans are also beginning a new daily cycle, but also a new intermediate cycle. The slide in bean prices the past couple weeks have re-set sentiment to extreme bearish levels, which as you know, is the fuel major rallies need.  Soybeans did not make a new low durring the past cycle, so I believe the bull market is still in tact.  My soybean sales presently stand at 20%, but I will be recommending more sales once prices reach the $10.40 level again.

The Dollar.

​There are probably 3 big movers that will drive this market.  Burdomsome inventories, lower oil prices (more on that in the next post), and the strongest dollar we have had in 15 years.  I know I have been forecasting a lower dollar for months now.  Despite the dollars strength, grain prices have moved higher.  This dollar bull market is growing very tired.  In the chart below, I only used two of the oscilators I follow to show that the dollar is growing tired, but many other oscilators show divergences as well.  If prices can pull back to their average around 96-96, it will be very bullish for grain prices, at least near term.

The chart above also shows how extremely stretched above the 200 day moving average the dollar is.  The more extreme prices move in one direction, the more severe the move will be in the other direction.  This will have a positive effect on grain prices.

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In Closing....

​I know what the sentiment out there is.  I know most farmers are scratching their heads right now about how they are going to make any money this year.  I know we have large inventories, and I know they are getting a lot of rain in South America.  These things have already been baked into the price, yet prices are still well off their lows.  There will be some opportunities to get some prices locked in at levels which are profitable.  Don't allow your personal sentiment to drive you into making a bad decision.  Fear and greed will do that.