Are the Bears Done with Wheat?

What's this you say? A commodity market in a downtrend?

Well, yes and no. March wheat futures at the Chicago Board of Trade have been in a decided downtrend since topping out on October 1 at $9.64 per bushel. But the trend has stalled in the last few trading sessions. The contract settled at $7.96 on November 20, following a classic example of a "head-and-shoulders" top.

A head-and-shoulders top signals a reversal of an uptrend. And March wheat did indeed uptrend. The contract rose $2.01 from its July 30 trough to the October high. Momentum slowed in mid-September as the "left shoulder" was formed at $9.065. Undaunted bulls took the bait and bid up the contract to the October "head," only to find their efforts turned back as prices slid. Tentative buying re-emerged for a late-October rally to $8.92, but the failure to establish new highs confirmed the formation of a "right shoulder." At that point, buying dried up and it was "market sellers" down to $7.825.

It's been two weeks of tug-and-pull as bulls and bears kept March wheat rangebound. The next objective for technically minded bears is a close below $7.40. For wheat bulls to turn the tables, a number of closes above the $8.00 psychological resistance level will be required.

‘Til somebody comes out on top, enjoy your Wheaties!

March 2008 CBOT Wheat