The financial media is very fond of linking a given market's price action to other stuff that happened in the same day -- but seldom do they explain why. Take a look at this article posted by the Chicago Tribune explaining price action in Corn on Aug. 5:
…corn tumbled the most in 10 months, as rain and cooler weather in the Midwest improved prospects for crops.
Corn futures for December delivery fell 29.4 cents, or 5 percent, to $5.55 a bushel. The percentage drop was the most since Oct. 2. The price has declined 30 percent from a record $7.99 on June 27.
Corn prices have climbed 62 percent in the past year after demand for livestock feed and grain-based ethanol surged.
Quite a puzzle, these sentences. First prices fall hard "as rain and cooler weather improved prospects for crops" -- and second, this one-day action is part of a 30% decline in corn over the past five weeks.
But what about the first four weeks of that price decline, which included a shortage of rain and hotter-than-usual temperatures? Were those declines rooted in fundamentals too, and investors nervous about the quality of the harvest? Are we supposed to believe that prices fall on news of bad weather, and then fall keep on falling when good weather shows up?
Having one explanation for a drop Tuesday and another the Tuesday after that contradict one another in logic isn't just bad science, its a further complication in an already risky world. But the clarification of the Futures Junctures Service can help you tune out the pointless noise of day-to-day news and focus on where the markets are
really going. Learn more
right here.
And what about this entire past year, with the media drumbeat of how demand from livestock feed and grain-based ethanol "drove" corn's 62% price increase? Did demand from those industries vanish rapidly enough in the past month to drive corn down from a historic high? It seems like someone might have noticed something like that.
Bottom line: Playing "connect-the-dots" in the newsroom don't make it so. Prices this year in corn -- which at one point hit $7.99 a bushel, almost tripling since 2000 -- cannot be explained by "new industries" or "slightly more cooperative weather," especially when such gains are followed by a collapse of thirty percent five weeks later. Pretending otherwise reflects badly on one's sanity -- and it's dangerous to portfolios, too.
Clearly something else is going on. What is it? Simple: collective psychology. Corn prices move like this only when the market's participants act in concert. In the face of that, a little bit of rain is ... a little bit of rain.
Senior Commodities Analyst Jeffrey Kennedy understands the patterns of psychology that govern market trends. He uses the Wave Principle to identify those patterns, from forecasting the all time grain highs for this year (as Jeffrey did three years ago), to simply identifying today's price action. Daily Futures Junctures offers the best explanation for market behavior available today.
Daily Futures Junctures not only provides top quality forecasts, it also explains the rationales behind them. Get a real answer that isn't based on anything but what the market really is: collective psychological trends. Read more about the
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