Technically Speaking

Outside of a couple of short-lived splashes, the March corn contract has not strayed outside of its trading range between $4.20 and $4.40 since early November 2013. There was the wave higher following the release of USDA's November supply and demand reports before the waters calmed again. Then came the fall over a few rocks leading up to the January 2014 round of government numbers, before bobbing back to the surface and continuing on its merry way. Thursday's close of $4.29 finds the March contract comfortably floating near midrange.

Not much is expected to change in the near future. Daily stochastics (second study) are neutral to bullish, but also nearing the overbought level of 80%. Since the beginning of this sideways trend, stochastics near 80% have led to a round of selling taking the contract back toward the low end of the range.

On the other hand, commercial traders continue to grow more bullish. The carry in the March to May futures spread (bottom study, green line) has been whittled back to only 6 1/4 cents as of Thursday's close. This is the smallest carry this spread has been at since May 31, 2013 (not shown on the chart). Continued buying interest by commercial traders could, at the very least, result in a test of the high side of the trading range and pull stochastics above the 80% level.

At that point it is possible that increased cash sales lead to a strengthening of the carry in the March to May spread again (a more bearish view of supply and demand), a weakening of the basis (price difference between cash and futures, not shown), and ultimately a swing lower in futures price. Still, don't look for this gently rolling stream to bust out of its banks any time soon.

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