Market Monitor

By Marlin Clark

Don't ask—I don't have a clue

I feel like I should just put a recording on my phone. It would be like going through the McDonalds drive-thru, where the two-way now starts with a recording. "Would you like to try our blah, blah, blah…" My message would say, "If you are calling to ask what the market is doing or going to do, I don't have a clue!"

This would be because, after the last few days, I really don't. Oh, I have had some rationalizations and some impressions and some occasional opinions. But, after The market made new highs, crashed the limit on corn, came back the next session with a near-limit move, then crashed overnight again, I give up.

This is no longer about the weak dollar or the dollar rebounding. It is not about hunting for a market level based on revised crop sizes. It is not about rationing demand, producing gasoline with five percent more ethanol content, or about the election. I don't know or care if there are machinations from Washington contributing to the general increase in prices. I hear the talk of a move to $4 gas a way of putting cap and tax in effect in a practical way without law, and I am unmoved.

Just give me a break. Just let me watch the market float to some kind of equilibrium. Just let things go back to some kind of stability where I can kid myself that I can make sense of the price movement.

The most cogent thing I have heard recently is that market-moving trades are entering the pits these days of a size that we did not used to see. A large number of huge trades are becoming normal. Over time, they have no effect, because the market determines price, not the traders. As we look at the short-term, however, the effects of large trades can be disturbing and confusing.

Look at December corn futures. Friday October 7^th saw a high of 5.02-1/2. Before the open the next day USDA revised crop production numbers. We were quickly up the 30-cent limit. The next trading day, Monday, we gapped (left a hole on the chart) to 5.55, then made a 5.73-1/4 high. The next four weeks of trading got us higher most days, but not by much. We made a contract high last Tuesday the 9^th at 6.05. It lasted about two ticks, and I never saw it. The close was down nine cents for the day, after the explosive, blow-off high, at 5.76-1/4.

After the high we traded down three days to 5.34. As this was going on, the talk was of a rebounding dollar. Friday we put in a low of 5.34, and were down the 30-cent limit. Monday we were up 21-1/2 and had a higher high than the day before. Now, on Tuesday in the early, overnight session, we are down nine cents again.

Talk about volatility. This is the volatility of a yo-yo. At least with a yo-yo, you know what will happen when the string gets unwound at the bottom. At this point we could be destined to break the string and make a new low, or to raise the hand with the yo-yo to a new high.

In the process, we have come close enough to filling the report gap on the chart that the market will be satisfied. This is a formation that either gets filled or makes an island top. Now, it looks like it is filled. The chart is free to continue lower, or to consider the last month an interesting interlude on the way to another leg up.

In the meantime, producers have to make decisions. The easiest one is to talk yourself into believing that these prices are higher than you ever expected. Reward them with heavy sales.

Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.