Canada Markets

Spring Wheat's Conflicting Signals

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Noncommercial buying helped lift HRS to a higher close for the first time in four sessions on Wednesday, while holding above retracement support at $7.28 3/4/bu., the 38.2% retracement of the move from the contract's April low to July high. The middle study shows momentum indicators stabilizing but have yet to fully reach oversold territory. The lower study shows the September/December futures spread continuing to weaken to minus 10 cents this session, pointing to a growing commercial bearish sentiment. (DTN graphic by Nick Scalise)

Those who did not price new-crop spring wheat may be left wondering if they will get another chance at the levels seen earlier in the month. At a time when the current crop tour in the U.S. is relaying disappointing results for wheat and durum in the Dakotas and crop conditions on the Canadian Prairies are seen on the decline, chart signals cannot be overlooked.

December spring wheat, the contract of choice now for most prairie pricing, closed higher for the first time in four sessions Wednesday with a 13-cent gain. This compares to the 56-cent loss realized during the previous three sessions. Despite a bearish outside-day trading bar seen in Tuesday's trade, a partial rebound saw price return to a level above support at $7.28 3/4/bu. on Wednesday, the 38.2% retracement of the move from the contract's April low to July high. A sustained move below this level could lead to a further retracement to $6.93 1/4, with a test of psychological support at $7 along the way. Price remains technically weak, given continued trade below the contract's 20-day moving average (brown line), which was breached on Monday for the first time since May.

The middle study shows the stochastic momentum indicators on the daily chart attempting to stabilize near oversold territory. Should the market change direction, reflected by a crossover of indicators, it would not be viewed as the most bullish of moves that are reserved for crossovers that take place within oversold territory or below 20 on the chart.

The lower study is perhaps the most concerning -- the activity of commercial traders is pointing to a growing bearish view of market fundamentals. The blue line represents the Sept/Dec futures spread, which has traded at a 17 3/4-cent bullish inverse as recently as July 3, while ended at a bearish 10-cent carry on Wednesday (December trading higher than the September). This spread weakened 5 1/2 cents last week and a further 2 1/4 cents so far this week. The gold line represents the Dec/March spread, which has moved from a 1/2-cent carry to a 1/4-cent inverse today, still far from the 19 1/4-cent inverse calculated on July 3.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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