From 1937 2012 corn declined an average of 67% from major peaks to major troughs (1937 – 1940, 1948 – 1960, 1974 – 1986, 1996 – 2000, 2008 – 2009). we are currently ata decline rom 2012’s major peak. Theoretical Entry Strategy: Buy corn when it declines 65% from its most recent major peak. ! Corn declined an average of 60-70% from a major peak, and subsequently rebounded to a new ! high five out of five times since 1937.
Historic probability of profitability when buying at major the! 65% retracement, and selling the position at the previous peak has been 100%. Exit Strategy: Maximum risk exposure is the difference between entry price and ! previous major trough. We conclude that since 1937, all major declines in corn have stabilized at ! a harmonic rate of 60-70%. Additionally, corn has never declined past its previous major trough ! in 150 ! years! MICHAEL MARANSLICHT 1 0/1 /2014 12 Chart B Magnified Harmonic analysis from 1 983 – 2014 Chart B shows a magnified version of Chart A from 1 983 – 2014. By magnifying the three previous decades we have a better picture of our most recent major troughs and bases.From 1983 – 1 987 corn went from 3. 60 per bushel to 1. 40 (61 % decline), from 1996 – 2000 corn went from 5.
20 to 1. 70 (67% decline), from 2008 – 2009 corn went from 7. 60 to 3. 05 (60% decline).
Strategy: We are currently at a 63% price decline (currently priced at $3. 4 per bushel) and projecting a 2014 bottom of 65% – 69% off its major peak in 2012. This projection brings us to an entry price target of 32. 70 to $3. 00 per bushel. The entry strategy is to scale in (slowly accumulate futures contracts/ buy shares of corn funds/buy call options) once the price target is reached. The means of accumulation depend on price and risk tolerance). Risk Assessment: Based on historical price declines for the past 150 years, it is unlikely that corn will decline exceedingly below its previous trough of $2.
90, and highly unlikely to decline further than its 25 year trough of $2. 0 per bushel. Chart C Seasonal cycle analysis from harvest period to planting period Chart C is a seasonal analysis of corn since 1987. The vertical lines represent the mean harvesting period (first three weeks of October).The vertical lines also represent a systematic entry level (the buy date; October). The arrows end where the long position closes (April or July). Theoretical Entry Strategy: Buy corn during early harvest (at the vertical line) and sell corn (where arrows end) at the beginning of planting (April) or end of planting (July).
From 1987 to 2014, the probability of profitability is 74%. The positive sign indicates a profitable investment. The negative sign indicates a losing investment. We conclude that corn tends to bottom during harvest, and tends to rise during planting.Chart E Long term dollar cycles since the end of Bretton Woods in 71′ Since 1971 the US dollar trends from peak to trough/trough to peak for about 7 – 8 years.
The US dollar has been in secular decline since 1985. Approaching several areas of key resistance Conclusion For this analysis to be invalidated, the following must happen: A 70 year harmonic pattern must be broken. A 150 year base pattern must be broken. A drought must be non-existent or global warming needs to “slowdown. ” Weather must be perfect, again.
Farmers will have to continue producing record crop below the cost of roduction.Additional input If you like gold, love corn. The trajectory of the US dollar is likely to be the most critical of all key determinants for corn, and for all commodities for that matter. The next two years are extremely relevant to interpret the US dollar’s probable direction. Cycles do not last forever, however, a cycle’s harmony and consistency offers an excellent proxy to determine probability.
There is usually a much greater implication if a long term harmonic cycle is broken; such as secular shifts in price and/or far more volatility.