From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley
Similar to last week, many areas of the Commodity space continue to chop sideways below overhead supply.
Healthy digestion of recent gains makes total sense given the explosive moves since last summer and in many cases is much needed.
Given that sideways price action is the main theme across Commodities at the moment, one particular consolidation stood out this past week.
And that consolidation is in the Corn market.
Corn futures have ripped off of their March-2020 lows, taking out key multi-year highs along the way.
Earlier this year it broke above a key Fibonacci level and its 2014 highs, and is now taking a breather in the form of a potential 8-week Flag or Pennant formation. These types of consolidations often resolve in the direction of the underlying trend, especially in strong forceful trends like the one in Corn.
As long as we’re above those former 2014 highs the bias is in the direction of the underlying trend, and a breakout from the short-term consolidation could kick off the next leg higher.
Another interesting piece of information that supports a bullish bias in Corn is its Old-New Crop Spread.
When the spread is widening and the line on the chart is sloping upwards it indicates that the old crop carries a premium to the new, unharvested crop. This signals to producers a strength in demand and urges them to bring their crops to market instead of waiting for a better price.
This is the exact message the old-new crop spread sends to producers now. After tightening since the beginning of February, which just so happens to coincide with the recent consolidation in Corn on an absolute basis, the spread has begun to dramatically widen over the past couple of weeks as we head into the planting season.
Again, this adds the bullish bias, drawing attention to the tight consolidation in Corn.
Overall Commodities as a group, much like the Corn market, continue to digest gains within the primary uptrend.
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