Canada Markets

Since reaching the $6.25 per bushel low in January, December Minneapolis red spring wheat gained $1.45/bu to reach a high of $7.70/bu in late March, although five tests of this price level prevented a further move higher.

Prices have since traded sideways in a range between the March 31 high of $7.55/bu and the April 4 low of $7.27 3/4/bu, while further bound by the support of the contract's 200-day moving average, which is seen on the chart as the gently downward-sloping red line.

Thursday's trade saw a 12 cent move lower in the December, breaking below the sideways range and the 200-day moving average as well as last week's low of $7.27 3/4/bu. The potential exists to slide to a test of support at the March weekly low of $7.22 1/2/bu, the 33% retracement of the January through March rally at $7.22/bu, then again at the 38.2% retracement of the same rally at $7.14 1/2/bu.

The second study indicates the recent trend of downward momentum, with stochastic indicators soon to be in the oversold region of the chart below 20%. The longer-term weekly chart (not shown) is also indicating a cross-over of indicators in the overbought region near 80%, although this is taking place in the neutral zone of the chart (below 80%) and is not viewed to be as bearish or as strong of a signal as a crossover taking place in the overbought region above 80%.

The lower study is indicating an increasing carry or spread between the December 2014 and the March 2015 futures, a sign of a growing bearish sentiment among commercial traders. While the spread reached a recent high of minus 4 1/4 cents on the daily chart (March trading above the December) as recent as March 25, this spread has widened to minus 10 1/4 cents in Thursday's trade, falling 3 1/2 cents so far this week. (Note that the attached chart indicates a minus 9 cent spread on the lower study, with the contract settlements later indicating a close of minus 10 1/4 cents) This is sign of growing commercial bearishness. A combination of an increasing global carryout for 2013/14, including Canada, as well as a rebound in spring wheat acres in the U.S. as forecast in the Prospective Plantings report is impacting the sentiments of traders.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(AG)

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