History Doesn't Repeat, but It Does Rhyme

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These same resources have given our readers gains of over 400% in 2008!

The market opened sharply lower, falling 7 cents, but not limit down. In other words, the market gave me--and anyone else who was long--a chance to get out and save our skins prior to a limit down move. But instead of trading lower from the open, my assistant told me corn was beginning to trade higher. It felt as if a cloud was lifted, and my nervousness disappeared. I told him to place a stop on our entire position just below the opening price of $270.

I continually checked in that day, but the stop was never hit. When the market traded higher, I knew we were safe. As it turned out, that $270 low registered because of the bearish news. And it wasn’t challenged for the rest of that year. It was a significant low that held up for years and served as the springboard for one of the biggest bull moves in history. By the next year, because of crop problems in the US and globally--China turned from the largest corn exporter in Asia into an importer--corn prices had doubled.

December 1995 Corn

And this all started with the bearish August crop report.

Now let’s turn to this year’s report, which was released Tuesday. It was considered very bearish, and the market traded to new seven-month lows, down to $505 in early trading.

December 2008 Corn

A bullish sign was hit as soon as the market crossed above Monday’s closing price of $517. The market closed higher that day, up the 30-cent limit on Aug. 13 and rose another 19 cents the following day. But Friday the market was down 27 cents.

Is this action setting up the classic "test of the lows" before the next major bull market begins? Time will tell. Remember that history never repeats, but it certainly rhymes. I’m planning to flash a new corn buy signal for Futures Market Forecaster subscribers if the market action confirms my opinion next week.