What's next for wheat?

By Gary Kamen

July 2013 Chicago Wheat opened last week at $6.8125 per bushel and closed the week at $6.9750, but not before hitting a high of $7.09 for the week.

Global ending stocks for 2013/2014

In the May WASDE global ending stocks are projected to be at 186.4 million tons, up 6.2 million tons from last year. The 51.2 million ton increase in foreign production will more than offset the lower forecast production in the U.S. If recognized the forecast 701.1 million ton global production for 2013/2014 would be a record that is up 45.5 million tons from 2012/2013. So with the knowledge of global supplies, keep a sharp eye on how “big money” is posturing. U.S. Winter Wheat condition does not look as if it will take a toll on global supplies. Keep an eye on corn prices as a rising prices may help bring up wheat, but overall watch the strong trend down.

COT Data

The past week in the Disaggregated COT we saw the bearish posture continue with Producers dropping net shorts from -66,533 contracts to -41,459 contracts. And see how Managed Money added increased net shorts from -20,916 contracts to -46,565 contracts, now with a larger net short position than producers. And do not forget about the Swap Dealers moving from 106,031 contracts net long to 107,757 contracts net long. 

If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

Technicals

On the daily chart below you can see ADX is now at 24 reflecting a weak trend as the price action heads south of $7.00, and now is the time to look for the range. DI- is now just over DI+ with DI Differential under 5.00. Watch for an increasing DI Diff now to confirm the price drop will continue. Last week we saw Stochastics correct from oversold territory and MACD is now riding just below the signal line with no divergence.

Click to enlarge.

On the weekly chart you can see the drop below the 20-period exponential moving-average took place the week of Dec. 10, 2012 as you see “big money” move into a bearish posture and weekly ADX started moving above 20 and DI- crossed over DI- with and increasing DI Differential that followed.

Have a prosperous trading week.

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