Forecasting prices is a daunting task, but an even more formidable exercise is analyzing all of the various factors of supply and demand. The situation has been exacerbated in recent decades by the emergence of the world market with all its intertwining interconnections that create a mind-boggling tangle. Prices of crude oil and metals skyrocketed in the beginning of this new millennium, but they also saw some major corrections following each new high. Analysis of supply and demand alone is not as effective as technical levels in explaining the countertrends within the major uptrends in those markets.

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Navigating the Labyrinth

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The first question at the start of an Outlook Seminar in Southern Minnesota in mid-February was, "What's the difference between fundamental and technical analysis?" The answer was part of my seminar.
I first look at fundamentals starting with a review of the weather, then the Global Supply-Demand tables for corn and soybeans, followed by the U.S. Supply-Demand tables, and the different acreage. I then usually provide technical analysis - a review of the Chicago Board of Trade (CBOT) monthly/weekly corn and soybean charts. This shows the long-term highs and lows, seasonal price patterns and long-term price cycles. After that I fine-tune the analysis using CBOT daily corn and soybean charts.
The next, more difficult question was, "Don't corn and soybean prices seem too high based on the current fundamentals?" My answer was "yes," but the market is always right in the long term. However, prices can move too high or too low as trade perceptions of the market change and fund managers buy and sell.
These are the three key factors that I evaluate when looking at the different Supply-Demand fundamental scenarios listed above.

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Fundamental and Technical analysis

When many people in the financial world refer to technical analysis, it is often in direct contrast to the other major school of market analysis, fundamental analysis. The contrast between the two is clear and distinct.

Fundamental analysis focuses on what the underlying reasons may be for market movement. In the stock market, this would consist of news and financial information (e.g. earning) that are directly associated with a particular publicly traded company. In the futures market, it would consist of substantive market information regarding a sepcific commodity (e.g. wheat or oil) or financial market/index (e.g S&P 500). In the foreign exchange, or currency, market, fundemental analysis would be primarily concerned with international economies, central bank policy, interest rates, and inflation.

Fundamental analysis stands in stark contrast to the world of technical analysis. Instead of concerning ifself with the underlying resons for price movement, technical analysis focuses on the price movement itself and how mass human behavior is manifested in price action. Technical analysts believe that all fundamental information and econimic factors that can cause price movement are already reflected in price action. Therefore, technical analysis purists generally avoid looking at earnings or crop reports or international econimic coditions. Instead, the two primary tools of price and volume as depicted on a financial chart are sufficient for most analysts of the technical persuasion. Of these two tools, price is univerally more important.

There is another way Chen, & James describe the distinction between fundamental analysis and technical analysis that you can find it in page 15 of the book.

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Fundamental Analysis vs Technical Analysis