A commodity index that we follow made a weekly-scale bottom extension in late December, arguing that declines are over. We have been optimistic about crop commodities for some time and this index signal obviously encourages that view. These commodity indices are usually heavily weighted in favour of energy, particularly crude oil due to its great importance in the world economy and indeed crude oil made an identical signal, as shown in the second chart. Other components in the composition of these indices are important too, particularly grains and this offers an opportunity.
The third chart shows that Corn made a daily scale compression (ringed) from which it broke up and then revisited yesterday – this is invariably a good chance to buy a market as the uncertainty about direction out of a compression has already been resolved (it broke up) and this return to the compressed area offers a good place to buy with limited risk. In such circumstances the price should hold at or within the compressed area so a protective stop may be placed just below it. The low of the compressed area is 374 3/4. Buy Corn now.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
