Elliott Wave vs. Mother Nature … to decide corn prices.

Quote

“Growth for the sake of growth is the ideology of the cancer cell.” -Edward Abbey

Of Interest

China’s manufacturing growth weakens as new orders drop (Bloomberg)
US manufacturing contraction feeds fear of global slowdown (The Telegraph)
Heatwave threatens US grain harvest (Financial Times)

Commentary

Mother Nature can really whip you. We’re not talking about a hurricane, or a tornado that drops your house on a witch – we’re talking about a drought that has wreaked havoc on the US corn crop. Bottom line: It doesn’t pay to bet against the weather. Corn prices have gone ballistic in the last two weeks as supplies are hurt and further threatened by a heat wave. But the move in corn prices is primarily due to traders running away screaming “Auntie Em! Auntie Em!” … rather than jumping on any prospects for a sustained bullish uptrend. The short position in corn futures has shriveled up, accounting for 75% of the decline in open positions; the Reuters chart above shows the rising price relative to the falling open interest. What’s the next move?

Action

Elliott Wave analysis identifies an expanding wedge as a consolidation pattern to help predict future price direction. This weekly chart of corn, with the expanding wedge I’ve drawn in, suggests five waves of consolidation may be in and corn prices could fall significantly lower. Without fresh buying interest soon, in the face of a gloomy global economy, the fall could come fast.