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BRIAN HOOPS

By Staff | Jul 23, 2010

One of the most reliable, but underutilized seasonal indicators is commonly referred to as “The Voice from the Tomb.” This seasonal indicator has been nothing short of amazing during the last 10 years or more that I have been aware of it.

First, let’s determine what a seasonal indicator is. It occurs at consistent times of the year and results in similar price activity during those times.

It is referred to as “the tomb” because of the story behind it. The short version of the story is as follows: Years ago, there was an extremely wealthy wheat speculator. After his wife died, he raised his three children by himself and dedicated his life to them. However, his children were lazy and they thought they would inherit all the money. He believed his children were wasteful and grew to believe they took him for granted.

When he died, he left nothing to the children; all his money went to charity. All he left them in his will were dates of when to buy and when to sell wheat. He further ex- plained in his will that if the children would only follow the six sell signals, they would have the fortune they always thought they were going to have.

The six signals occur throughout the year and follow a strong seasonal pattern for wheat. In the last year, the signals gen- erated by “the voice” have been highly reliable for the wheat market, as five of the last six signals have proven to be profitable, an 83 percent winning percentage.

It needs to be stressed that no trading system or seasonal study is 100 percent accurate and this seasonal pattern is not guaranteed to make you profitable. You still have to find your own entry and exit points and always use sound money management decisions; this pattern should be used as a guide for trading.

Here are the key dates for wheat:

  • Jan. 10: Sell March wheat.
  • Feb. 22: Buy May wheat.
  • May 10: Sell July wheat.
  • July 1: Buy September wheat.
  • Sept. 10: Sell December wheat.
  • Nov. 28: Buy March wheat.

Even fewer people know there are also key seasonal dates for trading corn and I have them listed below as well as placed them on the chart.

Here are the key dates for corn:

  • March 1: Buy May corn.
  • May 10: Sell July corn.
  • June 25: Buy September corn.
  • Aug. 10: Sell December corn.

CORN ANALYSIS

Corn closed the week $.11 1/4 higher. Last week, the USDA reported two private corn sales of 152,400 metric tons each to an unknown destination. There are producers who report concerns about this year’s crop, but many producers know they expect to have their largest yields ever.

Last week’s crop progress report showed national good-to-excellent ratings were 73 percent, 2 percent higher compared to a week ago. Iowa is rated 71 percent g/e, Nebraska 86 percent, Minnesota 88 percent, Illinois 65 percent and Indiana at 62 percent. 9 percent of the crop is rated either poor or very poor. Last year’s ratings were 71 percent g/e and 8 percent p/vp.

This year’s export profile is now at 1.964 billion bushels versus the USDA forecast of 1.95 bb.

Strategy and outlook: Hedgers have sold a portion of the 2010 crop when December futures traded above $4.50. The next sales objectives for corn producers has been met when corn traded between $3.80 and $4.

SOYBEANS ANALYSIS

Soybeans closed the week $.26 1/4 higher from last week. Last week, the USDA reported a 238,000 mts bean sale to an unknown destination and 116,000 mts to China.

Also, the NOPA June soybean crush was reported at 126.2 million bushels, just marginally above market expectations of 125.8 million, and compared to May crush of 127.8 million and year ago crush of 133.1 million.

The range of ideas for June crush was 124 million to 128.3 million. The June NOPA crush was down roughly 5 percent from last year and was actually the lowest June crush since 2005. NOPA crush implies Census crush for June of around 131 million to 132 million bushels. Based on that, July to August Census crush would need to total 248 million bushels to reach the USDA’s 2009/10 total crush estimate of 1.745 billion bushels, reflected essentially unchanged crush from July to August last year.

The USDA reported crop ratings of 65 percent g/e, down 1 percent from last week. Iowa is rated 69 percent g/e, Illinois at 62 percent, Indiana 62 percent, Minnesota 83 percent and Nebraska at 80 percent. 11 percent of the crop is rated p/vp. Last year, 66 percent of the crop was rated g/e and 8 percent was rated p/vp.

This year’s export profile remains well ahead of last year’s record pace at 1.478 bb versus the USDA’s forecast of 1.46 bb.

Strategy and outlook: Producers have sold 2010 crop when November futures traded above $10.30 and at the $9.87 level. The next sales objectives for producers have been met when November traded between $9.45 to $9.62.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

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