January Technical Overview

Each month, the Almanac presents a Technical Overview of the markets, similar to the one shown for CBOT Wheat for the Corn, CBOT Wheat and Soybean markets. This Technical Overviews are designed to highlight pertenant information for the trader at a glance, such as the typical behavior of the market, as well as particular tendencies they should know about, such how volatility behaves as well as average monthly gains and losses.

March CBOT Wheat

The Technical Overviews are not the only price based studies presented in the Almanac. The Almanac offers grain futures traders over 60 different seasonal tendencies which have historically been 80% accurate (no guarantee they will work this year, as the past does not have to repeat itself), as well as highlighting different opportunities in spreads market.

Here is an example of a study showing the tendency for the grain futures to rally in the spring during the planting/heading stages of development.

One of the common themes throughout the Grain Trader’s Almanac is that prices tend to reflect risk! When the risk to a crop is great, prices tend to rally. This is known as building a “risk premium.” During the spring months of planting and winter wheat heading, the risk to the crop is great. Is it any wonder that the spring/early summer months tend to see rallies?

The table below shows the performance of the July futures from their winter lows to their spring highs. Though the table is a bit miss leading, in that it is impossible to know where the winter lows or spring highs will occur, it is none-the-less instructive to show the power of Spring Rallies.

	July Corn			July Soybeans			July CBOT Wheat
	Nov – Feb Low	Mar – Jun High	Change	Nov – Feb Low	Mar – Jun High	Change	Nov – Feb Low	Mar – Jun High	Change
2001	223 ˝	233 ľ	10 Ľ	450 Ľ	488	37 ľ	279 Ľ	299 ˝	20 Ľ
2000	209	258 Ľ	49 Ľ	465	582 ˝	117 ˝	256 ľ	286	29 Ľ
1999	215 ˝	240 Ľ	24 ľ	465 ˝	515	49 ˝	257 ˝	307	49 ˝
1998	267 Ľ	289	21 ľ	656 ˝	684	27 ˝	334	359	25
1997	259	320 ľ	61 ľ	668	902	234	328	459	131
1996	325	518 ˝	193 ˝	686 ˝	847	160 ˝	405 ˝	636	230 ˝
1995	232 ˝	285	52 ˝	559 Ľ	618 ˝	59 Ľ	330	452	122
1994	270 ˝	297 ľ	27 Ľ	638	732 ˝	94 ˝	310	345	35
1993	225	239 ˝	14 ˝	562	654 ˝	92 ˝	311 ˝	320 ľ	9 Ľ
1992	257	285	28	563	637	74	315	395	80
1991	241 ˝	268 ˝	27	576	623 ˝	47 ˝	262	305	43
1990	243	298	55	578	671 ˝	93 ˝	342	355 ˝	13 ˝
1989	270	288 ˝	18 ˝	740	804 ˝	64 ˝	372	422	50
1988	189	354 ˝	165 ˝	540	1099 ˝	559 ˝	279	405	126
1987	154	202 ľ	48 ľ	477	604	127	239	316 ˝	77 ˝
1986	225	243 Ľ	18 Ľ	497	563 ˝	66 ˝	251	298	47
1985	273 ˝	285 Ľ	11 ľ	582	623	41	324 Ľ	342	17 ľ
1984	320 Ľ	361 Ľ	41	720	899	179	322	375 ľ	53 ľ
1983	243	323 ľ	80 ľ	577 ˝	673	95 ˝	328 ˝	380	51 ˝
Average Spring Rally	50			116 ľ			63 ľ

Data compliments of www.geckosoftware.com Past performance is not necessarily indicative of future results.

On average, July Corn futures have rallied 50 cents (21%) from their November to February lows to their March to June highs. Over half of these rallies exceeded 40 cents. July Soybeans have rallied on average 116 ľ cents (20%) from the winter lows to the spring highs in the last 19 years, with 6 occurrences exceeding $1.00. July Wheat futures have posted an average gain of 63 ľ cents (20%) from the lows of winter to the highs of spring, exceeding the 50 cent barrier 9 of the last 19 years.

Though some years tend to see a distinct lack of a spring time rally – like last year as “Mad Cow”/Hoof and Mouth disease, bumper South American crops, and large beginning stocks all served to lessen the risk associated with the crop, most years tend to see some type of risk premium built into prices. With 2002/03 beginning stocks expected to be much smaller than last year, traders and hedgers should be aware of the possibility for a spring rally.

The Almanac contains over two dozen different studies, highlighting different tendencies ranging from the "February Break", the Spring Rally, the September and December Barometers, as well as highlighting the general trading pattern of the Grain in great detail.