A Technical Look at Grains

[Steven Vincent]

What are the long term prospects for Corn and the grains complex?  Without knowing anything about the current fundamentals of the market, my take is neutral to bearish.

The monthly chart of Corn is showing a series of RSI divergences and a rising wedge pattern:

I wouldn't consider the current chart to be a good setup from either side of the market.  An upside reversal of the current downtrend accompanied by a break of the upper wedge rail and a higher high in monthly RSI might be a bullish signal.  A monthly close below the lower rail and the 50 month exponential moving average as well as a lower monthly close might be a strong bearish indication.

The weekly chart of the Grains ETN shows a bearish rising wedge pattern following a steep bear market.  Generally this pattern indicates a correction of the prior decline with lower lows to follow:

Like the Corn chart, the general grains market appears to be in a spot where there is no clear setup to trade at this time.  A close through the lower rail and the 200 week EMA might be bearish, though the trader would want to wait for a retest of the break before shorting.  Note the lower weekly close likely this week with RSI confirming the new low.

Soft Commodities ETN is a firm downtrend and appears poised to break major support:

There's a bullish RSI divergence on the weekly chart but that could quickly evaporate on a strong break of the support zone.

If I were already short from near the highs, I wouldn't see any current reason to cover my position in any of these markets.  I also would not be interested in starting a position from either side of the market at this time.

In spite of QE Infinity, there are apparently no inflationary pressures at work here--at least not yet.  One wonders if these charts are an indication that the Fed pixie dust has lost its mojo and whether deflationary pressures may be seen across all asset markets going forward.