Wheat prices made bottom extensions yesterday in the front month and in the continuation series:
Grain markets have been stuck for many weeks in the face of the ongoing threat of an escalation of the trade war between Trump and the rest-of-the-world/a compromise with China and so we are wary of any signals that we get when the situation lurches from one uncertainty to another. The US government shutdown has also inhibited grain price movement as it has stopped the steady supply of information from the USDA that is one of the rhythms of the markets. There was a catch-up data-dump from the USDA on Friday that provided some clarification but the markets' response has been a bit perverse.
Normally, we seize any bottom extension as an opportunity to buy - we are much more likely to jump in to long positions on these signals than we are to sell short on top extensions - it's simply a reflection of the way that markets 'bottom' rather than the way they 'top'. Spike tops are rare, spike bottoms are common.
Here though, we are cautious. Partly that is because US grains are a political football right now and so the ripples in the trading crowd that we read and report here are of diminished importance - they can be overwhelmed by a real or perceived shift from the White House.
Accordingly, we are looking at Wheat through bullish spectacles but we want to see some signs of a reversal before we advise a 'buy'. If you see something that satisfies you that the drop is ending, jump in. Otherwise, we will watch and wait and send out a recommendation the moment we have some evidence.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com