A Longer-Term Perspective on the Grains

April 2, 2009 07:00 PM



Chicago Wheat:

On all the grain futures,

one important thing to keep in mind is that they are still held hostage by the key "outside markets" that include crude oil, the value of the U.S. dollar and U.S. stock index prices. If the outside markets turn bearish again (weaker stock market, weaker crude oil prices and a firmer U.S. dollar), then it can be assumed the grains would start to trend sideways to lower. There are no clues to suggest the grains or other commodity markets will anytime soon become divorced from their close trading relationship with these key outside markets.
The weekly soft red winter wheat chart also shows that a longer-term downtrend line has recently been negated and that a fledgling uptrend line is in place. However, the bulls have more work to do in the coming weeks to suggest that prices can embark on a solid trend higher. Multiple closes above major psychological resistance at $6.00 in nearby Chicago wheat futures would be longer-term technically bullish to then suggest prices can continue to trend higher in the coming weeks.
The weekly chart for nearby soybean futures shows the bulls and bears in a battle for the technical advantage. Downtrend and uptrend lines can be drawn. But one of those trend lines will be negated soon, and the direction in which nearby soybean futures prices push above or below the trend-line resistance or support will very likely be the next longer-term trend in the soybean market. Also, a push in nearby soybean futures above solid longer-term technical resistance at $10.40 a bushel would suggest further upside price potential in the coming weeks or few months.
This week's price action has been impressive for the bulls. The weekly continuation chart for nearby corn futures does show that a longer-term downtrend line from last year's highs has been penetrated on the upside and negated. Also, a fledgling uptrend line is in place on the weekly chart, from the December and March lows. If nearby corn futures prices push solidly above solid longer-term technical resistance at the $4.25 level, then that would turn me more bullish the corn market. Right now, I'm still of the opinion that rallies in the grains are good selling opportunities, as recent price history has proven this strategy to be prudent. There will still be some good opportunities to buy call options in corn and soybeans heading into the summertime, when weather markets usually provide for at least a decent pop in prices.
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