Technically Speaking

Weekly Analysis: Signs of Value Amid Downtrends

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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The weekly chart of September Minneapolis wheat shows commercials holding their largest net-long position in 22 months, suggesting prices are finding support near their lowest level in over a year (DTN ProphetX chart).

Minneapolis Wheat: September Minneapolis wheat closed down 10 1/4 cents Monday, just before USDA said 80% of spring wheat was rated good to excellent, the highest such rating since 2010. Like corn and soybeans, the outlook for spring wheat prices looks bearish after falling over a dollar since late May. Apparently, commercials see things differently as CFTC data showed them holding the largest net-long position since August 2016. With September prices near their lowest level in a year, commercials aggressively net long, and speculators showing their most bearish sentiment in nearly two years, Minneapolis wheat looks ripe for finding support.

Soybean Oil: December soybean oil finished 0.20 lower Monday as prices continue to languish near their lowest levels in 11 years. There is no sign of prices turning higher yet, but one thing that has changed is commercials have acquired 42,201 net longs, their largest such holding in over four years. Meanwhile, noncommercials are net short, showing the most bearish sentiment in four years. For now the trend remains down, but downside potential should be limited and noncommercials are vulnerable to short-covering.

October Lean Hogs: After over four months of trending lower, October hogs took another step Monday, dropping 2.42 to 56.12. Prices are getting close to the 2017 low of 54.92 for October hogs and not only is the weekly stochastic oversold, but commercials increased net longs to 34,882 as of July 3, the most since 2009. Fundamentally, it is difficult to make a case for higher hog prices, but with noncommercials showing the most bearish sentiment since 2012 and commercials finding value on the long side of hogs, prices should have room to trade higher.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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