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Corn's Rally: A Testament to the Power of Third Waves
Elliott wave patterns foresaw recent gains in grains before they took off

By Nico Isaac
Mon, 04 Apr 2011 15:30:00 ET
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Last week, the corn market seemed to have stepped in a puddle of radioactive green goop, going from no-bulk to the Incredible (grain) Hulk. On March 31, corn prices rocketed from a three-month low to a three-YEAR high.
 
As for why -- well, according to the mainstream experts, said "green goop" came in the form of the bullish March 31 US Department of Agriculture report on planting intentions and surplus stock supply. Here, the following news item digs up the details:
 
"Corn Rallies To Highest Since 2008 As Stockpiles Drop. A planned increase in sowing in the US will fail to rebuild global inventories drained by stronger demand. The USDA report is still driving the market." (Bloomberg)
 
There's just one flaw in such cause-and-effect logic; namely: The recent run-up in corn began BEFORE the March 31 USDA data was released. To connect the grain's rise to the report now reflects the belated nature of fundamental analysis to rationalize trend changes that have long since been underway.
 
As for anticipating the latest upturn in corn before it occurred, Elliott wave analysis could have been a better guide. In EW's March 25 Daily Futures Junctures "Weekly Wrap-up," EWI's chief commodity analyst and long-time Futures Junctures Service editor Jeffrey Kennedy first alerted subscribers to the upward potential in corn's near-term future via this compelling close-up (some Elliott wave labels have been removed for this article):
 
 
In the video portion of the March 25 "Weekly Wrap-up," Jeffrey talked viewers through the Elliott pattern underway in corn and said:
 
"We're currently working an expanded flat second wave. If this is indeed the case, I'll be looking for a pullback early next week (no later than Tuesday) back to 660, and then at that point a reversal higher"[ in wave three.]
 
Elliott Wave Principle -- Key To Market Behavior offers the description below of wave three "personalities":
           
"Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series."
 
The price action needed to confirm a third-wave rally in corn increased on March 28. That afternoon, Jeffrey Kennedy turned the spotlight on the grain in his March 28 Daily Futures Junctures and wrote: We're now looking "for other technical evidence that corn is indeed about to rally beyond the February high of 744 ¼."
 
Now that corn has soared above its February high, the big question is: Will the grain continue to gain?
 

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