The only market that stood out to me at Tuesday's close was natural gas aka the Widow Maker, with its roughly 4% daily gain.
Otherwise the commodity complex reinforced two ideas I've held: The Wilhelmi Element and Technical Analysis is largely a myth.
Don’t Miss a Day: From crude oil to coffee, sign up free for Barchart’s best-in-class commodity analysis.As for the Grains sector, the bottom line is US fundamentals are not bullish as we near the midpoint of November.
Today was one of those days when I walked away from the quote screen shortly after posting Morning Commentary, was updated on what markets had done up to intermission when I went on RFD-TV before the open, then didn’t look at the quote screen again until this afternoon. In other words, after decades of talking about it I’m living more and more by the Wilhelmi Element – The only price that matters is the close. Daily ebbs and flows, highs and lows, none of it means anything. Where did the market close? And if daily closes aren’t your thing, wait to whatever day brings the end of the week and or month and take a look then. What about technical analysis? It’s generally a myth, particularly in this day and age of algorithm driven trade when most of the programs don’t include classic pattern analysis. How about fundamentals? Eventually they will win out (Market Rule #6), but day-to-day, week-to-week, month-to-month they don’t have to. Is Random Walk Theory the correct answer then? Probably not. Not when markets are so easily manipulated. There isn’t anything random about that. As I’ve said before, the next school of market analysis should be geared toward figuring out what makes algorithms move. Or, just sit back and wait for the close.
The corn market closed higher Tuesday. Why? Because it did. Sure, the BRACE Industry will make up a lot of reasons this afternoon and evening, but here’s a tip: The talking heads have no idea. What do we know about corn this afternoon? The December issue (ZCZ25) closed 2.25 cents higher, back above the round number $4.30 on moderate-at-best trade volume of 183,000 contracts. When the closing bell rang, Dec25 had lost 0.25 cent to both the March and May issues. Given there wasn’t much going on in spreads, it looks like much of the support came from the noncommercial side (aka Watson; aka algorithms). Was there a fundamental reason for Watson to be buying Tuesday? Not that I can tell at this time. Recall the National Corn Index lost fractionally to futures Monday evening meaning basis, the cornerstone of commodity markets, weakened last night. Given the rally in futures today, the spotlight again shifts to what merchandisers do with cash prices and what it means for the next Index calculation tonight. What am I expecting overnight through early Wednesday morning? I’m going to go out on a limb and say corn will post a narrow trading range on light trade volume.
The soybean market closed lower Tuesday after posting a solid rally to open the week. Was the session interesting? I have no idea, I didn’t watch it. Was it entertaining? See my previous answer. Did the close tell us anything at all? Well, maybe. The January issue (ZSF26) finished 2.75 cents lower for the day after losing as much as 10.75 cents over the course of the session. This alone hints at a light round of noncommercial short covering, possibly day trades, heading into the close. However, the carry in the January-March futures spread strengthened by 1.5 cents indicating commercial interests were putting pressure on the market through the close. Why? It’s possible the recent rally in the market has created cash sales by US/North American producers leading to some hedge pressure from merchandisers. If so, we would expect national average basis to stay steady to weaken as well. Keep in mind the National Soybean Index firmed fractionally in relation to futures Monday night. Is there anything going on technically? I’ll ask again, what difference does it make? I could say January’s daily chart is showing an upside-down flag pattern with a horizontal flagpole. What does that tell you?
The wheat sub-sector closed mostly higher. As I look at the quote screen, the questions that comes to mind come from Pink Floyd’s song Comfortably Numb, “Is there anybody in there? Just nod if you can hear me. Is there anyone home?” What do I make of Tuesday’s session for the three wheat markets? I’ll give you three guesses and the first two don’t count. Ready? Nothing. Absolutely nothing. December HRW (KEZ25) closed 3.25 cents lower and lost the same amount to the March issue, the spread closing at its strongest carry, 15.5 cents, since October 30. The December SRW issue (ZWZ25) closed 0.25 cent higher and lost 1.0 cent to March and 2.5 cents to May. My Blink reaction to today’s close is commercial traders were selling winter wheat. Is anybody surprised by that? Anybody? Bueller? Let’s see where the National Cash Indexes come in later this evening. Heading into today’s session, both continued to run below previous 5-year low end of November figures and below previous 10-year average end of November numbers. Based on the Law of Supply and Demand, both winter markets are fundamentally bearish. End of story. December HRS (MWZ25), as well as the March and May issues, finished with a gain of 5.25 cents.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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