Grain Volatility Needs Further Examination

Minneapolis wheat had a rough ride, as did the rest of the grain space last week. Last Thursday, Minneapolis futures hit new contract highs above $10.60 a bushel, but failed to reach a new high at close, falling back into the dominance of October and November trading. . In doing so, momentum indicators fell sharply and the daily closing chart suggests that the entire rally from January 14 to February 24 was corrective in nature. According to Elliot Wave Count principles, if the rally from mid-January to late February was in fact corrective, it would warn that the C wave was extending lower and suppressing the lows from mid-January. It’s way too early in this wave count to predict something like that; but that remains a technical possibility at this stage. The Minneapolis Winter Wheat Brothers benefited from a stronger chart picture last week and into Monday night and are not warning of impending weakness. It’s hard to say that Minneapolis is ready to go where winter wheat contracts aren’t, but it’s a possibility worth exploring. For risk metrics, we would be looking at Friday’s $9.60 lows on the downside and the $10.24 3/4 corrective highs on the upside to base directional decisions on.

Chicago wheat was at the forefront of the erratic grain trade, closing the boundary last Thursday to be followed by a widened close at the lower boundary on Friday. In overnight trading, Chicago wheat recovered two-thirds of Friday’s downside close. Importantly, Chicago wheat managed to rally above the previous contract highs of November 24 at $8.79. To maintain a bullish posture, the May contract must maintain strength above this level. We would never call a technical condition “simple,” but when it comes to Chicago wheat, the May contract simply needs to stay above those November highs to feed the bulls. Sustained weakness below this level would be enough to confirm a bearish divergence in momentum and shift the position from bullish to neutral or even bearish. On the upside, the corrective high at $9.60 3/4 is the level needed to be overcome to reestablish full bullish policy with an expected acceleration in gains.

The comments above are for educational purposes and are not meant to be specific trading recommendations. Buying and selling grain and grain futures involves substantial risk and is not suitable for everyone.

Dana Mantini can be reached at [email protected]

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