Well, it’s been an exciting first week of trading. It appears as though the markets are beginning to stabilize after a summer of extreme volatility. However, questions over the strength of the US dollar and and a tremendous amount of product yet to be harvested means we are not out of the woods yet. The only thing that remains certain, the next nine weeks are bound to be exciting!

What went right

On September 12 I took a sort position on five December corn contracts at a price of 773.75. I chose to go short on corn for a variety of reasons. The first reason was purely technical. The daily price had fallen consistently since August 22^nd, from its peak price of 840. I saw the trend and felt good about it. The second reason was more fundamental. After news of drought hit in June, corn prices skyrocketed. I felt as though the market had over reacted. I had known from past experience that news of a disaster will result in an initial shock followed by a moderate recovery with price eventually stabilizing above the original price, holding all else constant. It appears as though we are approaching a period of stability; however, another shock could send the market spinning. For future trades I will be paying special attention to policies coming out of Eastern Europe and to the strength of the US dollar, two factors i did not consider when taking this position. I closed my position on September 17 by taking a long position at a price of 756 for a realized gain of $4245.

The road ahead

Corn prices seem to me stabilizing between 757 and 740. It could be an ideal time to take some day positions, protected with stop orders. Wheat prices continue to be volatile with a moderate upward trend since the 19^th. There appears to be an established floor between 860 and 875 with a ceiling around 925. The market has operated within this band since mid-August. I know of no reason to think that the market will move out of this zone in the immediate future. The soybean market is extremely bearish. With harvests coming in I expect to see stabilization within the market to mirror what is occurring in the corn and wheat markets.

Cool sources of information

 This, http://futures.tradingcharts.com , is the coolest site I have found for futures data. This site is updated down to the minute, complete with caned analysis and relevant headlines. Each commodity has options to view price data as monthly, weekly, daily, or hourly, in bar or candlestick form. On each chart page, contract specifications are laid out in a clear and concise manner. Recent news headlines are posted along with their time of publication. Analysis is auto produced by observing and commenting on trends in the moving averages and other common indicators. As a friendly word of caution, take these analyses with a grain of salt, they are produced without consideration of any fundamental market forces. The site is easy to navigate and easy to use even by traders with little or no experience. I highly recommend this site all members of the MFRE team as a solid starting point when analyzing any commodity.  I plan to use this site heavily throughout the remainder of the project.

Posted: 09|23|12 at 9:57 pm. Filed under: Uncategorized.
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