|
NW Indiana | This might be long but I hope it is worth the read. I will try to explain my thoughts over the years and plug it into what Jpartner has been saying and maybe this will help explain things in a way you can understand. So lets get this clear again, the market is a representation of the psychology of all those involved(keep in mind it isn't equally weighted). So what do charts represent and how can they be predictable to what is going to happen? Well to understand you have to first remember those lines aren't just a pretty picture but they are actual trades that took place. So at that point in time one person decided to be long while agreed to be short. So lets talk short term for a second, say the last two days. The gap up Sunday on beans was significant and it isn't because it makes a nice blank spot between the lines. A gap represents and "oh wow" moment that everyone is saying we weren't expecting that, other words the game has changed a bit. So we have a nice trade yesterday and close strong. Today we actually tested that gap and failed to fill it, but what does that mean. It means there was some fortunate people that got long below 1030 and some unfortunate people that got short at those levels. Why is that significant? Because as of the close the long is feeling pretty good and the short is feeling not so good. So each one is looking at certain levels that changes their plans, that is what is referred to as resistance or support. The long would likely get nervous if the gap fills because they would think "hmmm that oh wow moment didn't turn out" so they would sell to offset their position driving the market lower. On the flip side the new short today is probably looking at today's high or maybe 10.50 saying if breaks that I'm out. Or maybe even higher to some of the levels we reached this past winter and says if it reaches those levels I'm out. That is why certain levels are so significant, it is actually a predictable level of what it is going to do to the traders psychology.
So many are questioning how jpartner can say the price is so predictable. Well it is simple, humans are very predictable. We are creatures of habit, don't believe me? I bet your wife could tell me what time your alarm clock is set for. I bet she could tell me what you will be doing 20 minutes after you get up. I bet she could tell me you will be at the coffee shop for 42 minutes. Understand? The significance of her predicting 42 minutes at the coffee shop is that it likely will be within 39-45 minutes, so not an exact science. Likewise a chart is not an exact science but it did predict things pretty close. It predicts when someone will psychologically do something for many reasons. Take the 4.50 corn area, why is it such significant resistance? Because for a couple years now several have gotten burned not selling that level. So everyone and there brother is waiting for that level to pull the trigger. If we break that level all of a sudden you have a bunch of shorts that have to cover creating the next target, which is also predictable.
So long term how can jpartner say price was determined months ago or how could the 2012 high been known? Well this is a bit of where we differ, I truly believe there is fundamental reasons for all these swings. Jpartner either doesn't know or he doesn't care, I believe the latter. So lets take the bull run from the 2004 lows to 2012. The 2004 lows were significant because it gave so many the belief that there has to be other uses for this product, "It is too cheap". So starting in 2006 we starting using more, and more..... This created a long trend of trying to keep up with growing demand, what was going to stop that growing trend. It took a psychological shift in everyone's thoughts. That shift was prices that no one thought was achievable. All of a sudden we develop into a new way of thinking, hence a new price range. 2004 was too cheap, 2012 created too much supply. A possible new use for corn was put to the waist side because of fear from the levels achieved in 2012. Understand? It is all psychology it is not just lines on a paper, those lines represent peoples thoughts. Jpartner would say price determines this stuff, I would argue this stuff determined price. It is the argument of the chicken or the egg. In the end I think I could get jpartner to agree the fundamentals caused the price but then he would say he doesn't care that he can project it based on the charts, that is fascinating.
So Jpartners comments on beans back in February how can I relate that to a fundamental cause? So he says the chart poked thru a certain level that caught his attention. I relate that timeframe and think of the amount of farmer sales that were made during that time. Not only did we sell a ton of the old crop but a fair amount of new crop got priced as well. The reason that is significant and what jpartner likely seen in the charts on a wave is that amount of coverage already in place allows for that much more of a run later without sales(welcome to july). So was this predictable? His little comment of the poke changing the projections well you be the judge.
So to give another example of jpartners thoughts I will actually use a future prediction. He has made the comment that if we fail to reach certain levels that it is bad and likely will make us go even lower in the long run. Ok how can I relate that to a future unknown fundamental. What I could extract from that would be if this opportunity doesn't give farmers the chance to make some very profitable levels that it will determine the sustainability during the next run off lower prices. Maybe during that time we grow a truly impressive crop vs trend(2004 like). With that many bushels to sell and so many not in a financial position to hold with no sales the fire sale begins. It turns into panic selling as the banker calls. Everyone gets the mind set its going to $2 hurry up and sell. This creates a long term bottom(noticed how I used 2004?)
I wish I could expand more but it is hard with trying to keep it to a couple paragraphs. It boils down to it is psychology and that humans really are predictable. You are likely doing the same thing you were last night, or last week at this time or heck even last year at this time.
I have zero training in marketing. I took one psychology class in college and got a C(long story). But I am smart enough to know that I have never learned anything from speaking, I have learned a tremendous amount by listening. There is a ton of valuable information out there if you are willing to listen. We are fortunate that some are willing to bring some of that information to this forum, you just have to be willing to listen. | |
|
Let me try to explain....
