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Spread
Chart of the Week
by: Steven A.
Mitchell
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If you missed last week’s corn spread here’s
another. After channeling within a $400
range for about four months this seasonally
indicated spread anticipates a combination
of two scenarios that may take place over
the summer months. First, pricing pressure
on the September contract during the growing
season anticipates a possible carryover in
old crop supply. Second, weather uncertainty
during potentially hot, dry growing months
puts the December new crop at risk.
Therefore the seasonal period lasts into the
first week of August (bright green area on
the chart). Additionally, the spread is very
reliable historically over 25 years,
although returns are usually modest. This
year may be different. With talk of late
planting due to spring weather issues and
more acres possibly devoted to soybeans than
corn as a consequence, the new corn crop may
give bulls a pleasant surprise in August,
especially if weather concerns persist. Keep
in mind that First Notice Day for the
September contract is August 29th; and with
TnT Pro you can put your reminder right on
the chart. Presently, the spread has already
broken out from its channel and appears
somewhat overbought. Therefore, traders may
want to await a pull back to support before
entering positions.
All traders should understand that trading
in the futures and or options markets is not
for everyone. All traders should understand
that there is substantial risk of loss when
trading futures and or options. All traders
should carefully evaluate whether trading in
the futures and or options markets is
appropriate for them, as such trading is
speculative in nature. When trading futures,
traders may sustain losses which may exceed
their margin deposits. Option purchases may
result in the entire loss of premiums paid
for such options. Past performance is no
guarantee of future success.
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