Chicago Board of Trade Market News
Outlook: The December corn contract has spent the last week carving out a uniform consolidation pattern known as a pennant. A pennant is a technical chart pattern that normally implies that prices will resume the previous move, often after some effort is exerted by means of heavy volume. The current pennant would imply that the continuation in price direction is upward. However, the pole that the present pennant is attached to is not very long – about 35 cents. That short pole lessens the credibility of an assumption that will immediately continue upward. An additional dampening effect is that this technical formation is being created just as the U.S. corn harvest is coming into full swing, for a crop with conditions that are consistently rated favorably.
These facts, along with global competition, means that the required volume to move corn contracts higher may not occur without some additional support that helps diminish the confidence of traders with a bearish mindset. Fortunately, there may be some support from wheat contracts due to recent dry weather conditions in Russia and Australia, and from the soy complex if there are announced purchases by China. Such events can change mindsets to perceive sell-offs as buying opportunities. The outlook is that corn contracts may currently struggle to break out to the upside, but market perspectives will become increasingly bullish from this point forward.