Dec Corn Big Bullish News

I sent a Tweet out at 7:40am ET this morning "Dec #Corn #Futures looking bullish this morning. If it still looks bullish at the close I'll probably go long.".

Dec Corn Futures started popping yesterday but didn't close over the 8ema. Today at 12:00pm ET we had a high impact crop report. The "Acreage" and "Grain Stocks" reports. I use the following link to see what reports are coming out:

https://www.usda.gov/media/agency-reports?start_date=06%2F29%2F2020&end_date=07%2F03%2F2020

As a technical trader I try to give very little weight to what the report says, and give much weight to how the market reacts to it. I've seen markets go up on good news and down on good news as well as going down on bad news and up on bad news. So the market has taught me its not the news, its the reaction that matters.

Yesterday and the day before formed an Bullish Engulfing candle pattern with Oversold Stochastics. Today we broke through and closed above all of the Moving Averages we follow, except for the 200sma. And we did it on very high volume.

Also, the candles from 6/8/20 through today form a Scoop pattern. Here's a description of the Scoop Pattern:

https://candlestickforum.com/identifying-candlestick-patterns-stock-market-graphs/

Even though the last Corn trade failed, this setup looks like a good one and we have to enter the market with a long position. You have to accept some trades will fail, even if you have a methodology with an edge and a positive expectancy, and your execution is flawless.

However, I am a little concerned about how the market went down before bullish news and the market popped the day BEFORE the report. Read between the lines here. Farshtey?

So, I decided to risk less by using a Call Option or a Mini Contract. I decided to use a Mini Contract to avoid Theta decay and Implied Volatility Crush. This setup looks very strong to me, so I'll take the higher risk of a futures contract vs an option. The symbol for the full $50/point contract on my IB TWS platform is ZC. The symbol for the $10/point mini contract is YC. (Also, I'm spread a little thin with additional trades in wheat and natural gas. I'm not blogging the wheat trade because its very similar to the corn trade but the setup isn't as good. I'm not blogging the natural gas trade because I never traded natural gas before. If you're curious, both trades are long.)

I was filled at 350 3/4 on the Dec YC futures. I use the ZC chart even though I'm using the YC contract. The ZC contract has much more volume and is the "real" contract.
The target is the 61.8% Fib retracement at 373 1/4.
The stop loss is just under today's open at 333.

Risk: 350 3/4 - 333 = 17 3/4.
Reward: 373 1/4 - 350 3/4 = 22 1/2.
R:R 1.27:1 (Not so good. But it looks like a high probability trade and a relatively short term trade, like maybe 1-3 days. Also, I may increase the reward by adding contracts and/or extending the target to the 200sma.)

Dead man walking.

Number of zombie corporations increasing. If interest rates rise or their credit is reduced they will die. If zombie corporations fail expect unemployment to skyrocket.

US corporate debt approaching half of GDP - a new record. If consumer spending doesn't come back sufficiently, we'll have more zombie companies or bankruptcies.

Weekly Initial Unemployment Claims for week of 06-20-2020 still close to 1.5 million. What does that say about consumer spending, which is 70% of GDP?

Unemployment as of May 2020 is 13.3%. What does that say about consumer spending?

Largest public debt in world history. Enabled by a reserve currency backed by nothing that's fallen in value by over 96% since its inception.

Here's the government's US Bureau of Labor Statistics data showing you the purchasing power of the US Dollar has fallen by over 96% since its inception.

The Federal Reserve has the largest amount of currency, that it created out of thin air, than any central bank in the world and in history. Supposedly it will be reduced when the debt instruments it bought are paid back to the Fed. But the borrowers are in no condition to pay them off.

The US has gotten away with financial murder because of the demand for the US Dollar and the trust in the solvency of the USA. But we're not solvent and ironically our country's behavior is reducing the demand for our dollars.

The US has used its currency as a threat against other countries to coerce them to behave as we wish. The reaction has been for countries that don't want to be controlled by the USA to find ways around the need for the US Dollar. This is all documented public knowledge, not opinion. The result is diminishing demand for US Treasuries. So the Federal Reserve has taken up the slack by printing dollars, diluting the dollar's value, and buying US Treasuries. Then the US repays its debt with cheaper diluted dollars.

This has been working because of the confidence in the Dollar. But sooner or later the deserved confidence built through history will be lost when its realized today's USA is not the USA of the past.

There are volumes of more information on this situation. I can't know it all, and don't have time to explain everything I have learned, but its all out there, available for free on the internet from credible sources. Recommend spending some time on this.

Conclusion: The most likely way out of our abused runaway financial system is to scrap it and start over with a more stable system that will restore confidence. There will be significant volatility, loss of purchasing power held in US Dollars, and possibly hyper-inflation leading up to the reset of the current financial system. The central banks of the world that have started printing money at record levels will have to continue printing and printing until they break the system.

By the way, this was going to happen eventually. The trigger could have been a financial failure like in 2001 and 2008, or a war, or an environmental catastrophe, or any sufficiently large shock to the system. But it turned out the trigger for a collapse and a reset of the world's currency system, in my opinion, was a pandemic. The pandemic is not the cause, it's the trigger.

Dec Corn - Food for the Bulls Exit

Well, we're out of excuses. We have a continuation candle to the downside, we broke the lower trend line of the bull flag channel, we closed at the bottom of the candle on high volume, we're about to get a BB/KC Squeeze breakout, and stochastics are not even in oversold territory yet.

Chances favor more downside, and there's still a lot of value in the option. So we simply had no choice but to exit the position and monitor the chart for another opportunity to enter a trade.

Waited until the last minute before selling to provide the chance for a quick pull up, but it actually went even lower in the last couple minutes.

Sold the Dec 3.50 Call at 14:19:03 ET for 11 5/8 - 15 (6/1/20) = -$168.75 loss.

Dec Corn - Food for the Bulls Update 11

Not good. Gap down and run. No upper wick at all. Close below every Moving Average we use and near the bottom of the candle. This is all bearish and bad for our long position.

I try to leave fundamentals out of my analysis, but FYI from what I read, the major cause was a good weather forecast for this growing season. Plus last nights comments from the US Government re: China came out bearish but were corrected, but only after the Grains markets headed downward.

The "good news" is that we bounced a little off the lower Trend Lines and the Bollinger Bands and Keltner Channel. Price hasn't broken through the Bull Flag pattern, or gone lower than the low of the slow round curve we've been forming since April.

Its possible we'll form a Cup and Handle pattern, which would be bullish if we eventually break out of it.

Since we have some sources of support, and limited risk thanks to using an option, I decided to hold the position, although my rules clearly wanted to exit this trade.

Dec Corn - Food for the Bulls Update 10

Today's price action looks like bad news but maybe not. We did open with a small gap down followed by a drop straight down. No top wick on today's candle. And we closed below the 8ema. This looks bearish.

However, when combined with the previous candle, we did not form a candle sell pattern. Also, we bounced off the upward angled Trend Line and closed just above the 34ema and 20sma. But the best news is that its very typical, and even embraced by traders, when a breakout goes back and tests the resistance that price action broke through. Assuming of course, the retest reverses and continues in the same direction as the break through thereafter.

We should find out in a day or two if we're continuing up or down. Tomorrow, if we continue down, we could find support at the 50sma or the 2 lower trend lines below the 50sma. Its hard to say whether its better to close the position at that point or hold and see if the support works. We'll probably wait until the end of the trading day tomorrow and see where we close.

We could also get a doji candle tomorrow. If so, we'll have to wait until the next day to see what happens. Of course, if price goes up and closes up tomorrow, that's a no brainer.

Dec Corn - Food for the Bulls Update 9

Now we're cooking with oil! Popcorn anyone? In Update 7 I said "What we want is another breakout and a close substantially above the Bull Flag Trend Line.". That's exactly what we got today after 2 attempts failed earlier this week!

Notice the increasing volume all this week. And yet, every day, but today, resulted in a Doji candle. The battle between the Bulls and the Bears has been escalating all week but today the Bulls won. Yay for our side!

We closed above all the Moving Averages we use, except for the 200sma. We also closed above the Trend Line on high volume, as described above. These are bullish indications. I was so encouraged I almost added to the position, but being a Friday, and the fact we haven't seen confirmation yet, I refrained.

By "confirmation" I mean another bullish candle to confirm the breakout. After all , the next candle could gap down and continue down. That could also happen after a confirmation too but that would be unusual, and likely due to news.

So, thank you to the trading gods for my early Father's Day gift.

Dec Corn - Food for the Bulls Update 8

Today was very similar to 2 days ago. Initially price dropped down to the lower Trend Line and 20sma where it found support. It bounced off of support and rose all the way to hit the upper Trend Line exactly. Then reversed back down to close right on the 8ema, with a small body.

Today and the previous 3 trading days are all long legged Doji's on decent volume. This indicates an active but inconclusive battle between the Bulls and the Bears.

However, looking at the past several days you can see we're forming a Bull Flag pattern. I drew in the upper and lower Trend Lines to outline it. The expected conclusion to a Bull Flag is a break out to the upside. We did that yesterday, but got sucked back in like Michael Corleone.

Unless we get some significant news that effects the Corn market, I think the odds are generally in our favor for a break out to the upside.