The wheat market is overbought, analyst says

Has a short-term peak been put into the wheat market?

The technical action has been very impressive (except for the weak close yesterday), but given the extremely overbought condition, we will not rule out the possibility that a short-term peak may have been put in place.

December Minneapolis wheat surged to a new contract high yesterday. It closed higher on the day but nearly 14¢ off the earlier highs. July Kansas City Wheat closed moderately higher but also nearly 14¢ off the highs. Concerns about freeze damage hitting the winter crops helped lift July Chicago Wheat to a new contract high before that market closed 18¢ off its highs. Wheat prices have rallied nearly 90¢ off its March 31 lows, leaving it extremely overbought. Stochastics are above 80. Recent showers in the Central Plains benefited soil moisture, but temperatures below freezing for the next few nights could cause some damage and burn-off. 

Dryness and drought are causing concern in the Northern Plains ahead of spring wheat planting, and the showers this week will do little to increase soil moisture. The five-day forecast shows very little rain for the entire Plains except for southeastern Kansas and eastern Oklahoma. North Dakota is the driest at 78% short/very short, with South Dakota at 58%.

The six- to 10-day forecast calls for below-normal precipitation and above-normal temperatures for Nebraska, Kansas, Oklahoma, and Texas. The Dakotas are expected to see normal precipitation.

For the eight- to 14-day forecast, temperatures and precipitation are expected to be near normal. Dryness and drought are also a significant concern in the Canadian Prairies ahead of spring wheat planting.

Winter wheat in northern and Eastern Europe experienced cooler temperatures last week and again this week, which will slow growth. 

Market Ideas

A move under $6.51¼ for July wheat could attract increased selling pressure, with support seen at $6.46¼ and $6.42. The move to contract highs yesterday leaves 703½ as the next upside target. 

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For daily updates on cattle, hogs, corn, wheat, and the soy complex, visit hightowerreport.com.


*** This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

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