Fundamentals Rule

WE KNOW THE price direction for any commodity is based on market "fundamentals." Too, we often hear the word "technicals" associated with price activity. Fundamentals, in a nutshell, are supply and demand. They comprise items such as acreage planted, abandonment, rainfall, other weather variables,

yield, government program parameters, population, exports, domestic, relative value of the dollar, and the list goes on and on. However, it is difficult to get ones arms around fundamentals because there are so many, and at times, some appear to be contradictory. Yet, carryover is the key fundamental as it encompasses both supply and demand. Technicals are man-made numbers generated from viewing historical trading patterns. Technical analysis is based on the idea that history repeats itself. Thus, technical indicators work because people, i.e., traders, make them work.

Fundamentals - supply and demand - are, however, the basis for any given price. That is, fundamentals determine price. Yet, over a very short time period technicals can rule the day. Technicals might be viewed as a brief road map that takes us from Point E to Point F, while the entire objective is to get from Point A to Point Z. Fundamentals always take us from Point A to Point Z. Nevertheless, one should never bet against the technical market indicators, but likewise, one must understand that price is always seeking its balance between supply and demand. Supply and demand always rule.