Technically Speaking

Whiplash Wheat

Source: DTN ProphetX

Back before the television show MASH turned into a drama, it had a number of episodes that were so funny their lines have become part of everyday humor. If I ever need a stand in for something crazy, it's always Captain Tuttle. If in Chicago and hungry for good barbeque, I ask for Adam's Ribs in Dearborn Station. This week, watching the wheat market has reminded me of another classic episode, "Deal Me Out".

The setup is this: During a marathon poker game at the camp, Corporal Radar O'Reilly supposedly hits an elderly Korean gentleman with a jeep. Captain Sam Pak, a visiting South Korean doctor, recognizes the old man and says, "Well, you know what you got there, Henry (Colonel Blake). You got the famous Whiplash Wang." It turns out the elder Korean made a living pretending to be hit by vehicles.

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After all that, how did wheat remind me of an episode of MASH? Take a look at the attached daily chart for the September Chicago (SRW) contract and you'll see for yourself. Tuesday saw the contract post a high of $6.17 1/2 before closing at $6.15 3/4, up 32 1/4 cents from Monday's settlement. Then just to prove wheat is still wheat, Wednesday's session saw the contract fall to a low of $5.76, down 39 3/4 cents for the day, before closing at $5.88 1/2. If that isn't whiplash, from a market as old as recorded time, then I don't know what is.

A sidenote here: psychotic feeder cattle could make an equally strong, if not stronger, case for whiplash. In that fun little market the more active (an understatement, to be sure) August contract rallied $3.35 Monday, fell the limit $4.50 Tuesday, before rallying almost $4.50 Wednesday.

Anyway, back to wheat. Despite the recent histrionics the market is in an uptrend on both its weekly (secondary, intermediate-term) and monthly (major, long-term) charts. The last two weeks have seen the September Chicago contract test resistance at $5.66 3/4 and $6.15 3/4, prices that mark the 33% and 50% retracement levels of its previous secondary downtrend from $7.62 through its contract low of $4.99 1/4. It was the test of the latter mark, the 50% retracement level, earlier this week that sparked the renewed selling interest that has driven the contract lower.

The DTN National SRW Wheat Index (SR.X, national average cash price) tends to post a seasonal rally (weekly close only) from mid-June through mid-August, averaging a gain of about 11% (chart not shown). However, it should be noted that the 2-week rally of this year's low weekly close of $4.60 (third week of June) has seen almost a 20% increase in the SR.X (calculated at $5.49 Wednesday evening). Therefore it is possible that the cash market may have established a minor (short-term) top, and could look to consolidate within a wide range, thanks to the volatility of the underlying futures market, over the next few weeks.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

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