Corn is Hinting that Inflation is Dead….or About to Explode

• Posted by Greg Harmon
• on August 23rd, 2011

I have used Corn, as measured by the Teucrium Commodity Trust Corn Fund (ticker: $CORN), as a proxy for wealth, energy costs, and inflation among other things (see post below). But the ratio chart of $CORN to the iShares Barclay 20+ Year Treasury Bond Fund (ticker: $TLT) seems to be speaking to me. Take a look below. Since December the ratio has put in a top and started to move

lower. A Rounded Top pattern. Notice as well the change in character of the Relative Strength Index (RSI) as it moved from mainly being above 50 in bullish mode to being mainly below 50 in bearish mode, right at the top at the end of April. Rounded tops can take a while to play out and this one is already moving it its ninth month, but is printing consistently lower highs. If it breaks below the support line at 0.41 look for a move lower to support in the 0.34-0.36 area and then 0.30 below that. This would signal a move from $CORN into $TLT, meaning a drop in Corn prices and an increase in Treasury Bond prices, or a strong move lower in inflation. Under 0.41 and Corn says Inflation is Dead.

But this chart can also be viewed as a bull flag like above. The move higher from August through to the top would create a Measured Move (MM) to a ratio of 0.66 if it were to break the flag higher now. This presents quite a different scenario. A move over about 0.49, breaking the flag, signals a move from $TLT into $CORN, or meaning a rise in Corn prices and fall of in Treasury Bond prices ans rising yields, or a move higher in inflation. Over 0.49 and Corn says Inflation is Exploding. So which is it going to be?

Corn is the Rosetta Stone of the Markets and Economy

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