Hi all, I have been studying the corn (zc), Wheat (zw) and Soybean (zs) price action for the day session for a while now. I notice that there is usually a strong move in one direction up or down after 12 noon eastern standard time. Why is this? Do the big boys wait to buy and sell at this time?
1) What you're "seeing" is merely the result of high prices and volatility. It's not a conspiracy 2) One of the "good" things about grains is that the trading hours for the pit, from 9:30am until 1:15pm, are very few. This means that the activity is concentrated into a narrow time frame. Because of that narrowness, extreme price moves are possible because of the scarce amount of time available to trade. Bonds and the S&P are slightly different because of their longer hours. 3) When markets are making contract-highs and all-time high prices, it tends to attract buying from funds that look for that type of chart pattern. That can feed on itself day-after-day and week-after-week. 4) When these markets "slow down", it can attract selling from shorter-term traders who believe that the momentum is gone and the market is slightly more vulnerable to a pullback before the rally can resume once again.
I work on the CBOT floor, mainly in the livestock section but the Ags generate a lot of activity and volume on the open (from 9:30 to 10:00) and then during the closing period (12:00-12:30 to 1:15). This can be explained because of, like the poster before myself said, the narrow trading hours that the Ags carry which is why there is more volatilty and price movement. Second, a lot of the big activity, like you said, happens during these hours. There are equity-like market on open (to be filled within first 5-10 min) and market on close (last 5-10 min) orders that people leave with brokers to fill. Big size also comes in during these times from hedgers and funds. Once there is a big movement to one direction, stop running generally occurs as well, creating a domino effect. You might have seen a pretty large move in the electronic and pit Wheat and Soybean market on Friday's close, as there was a big pit spreader selling September and December Wheat (drove it down about 15 cents with a domino effect) and buying August and September Soybeans (driving those up about 0.10 each).
I've noticed the exact same patterns as I look into other markets to diversify my trading outside of the ten-year notes and the financials. Thanks for the excellent commentary.
as a former clerk in the grain options for a local trading outfit a note to option traders: if you want the best markets in terms of narrow b/a spreads don't send your orders in around lunch time if daily volume is rather low. Many of the locals head out for lunch and the fewere traders in the pit widen the spread. Especially true for the lighter trasded back month options. Front month like dec corn and nov beans are always very liquid.