Wheat Continues Directionless Trade

The battle between large supplies and a large net short fund position continues. Wheat appears to be searching for a direction. Wheat has not traded outside the range established on Monday. I had an upside objective of 517 in the May contract of Chicago wheat. That level has been tested a few times. The market just does not seem like it is ready to make a move in either direction right now.  The fact that selling dries up on sharp moves lower gives the bulls some confidence.

What has to happen to establish direction in the wheat markets once again? Because I do not believe the wheat market is going to stay in the recent range for very long, here are the items you are going to want to pay attention to. These items have not changed a great deal in the past few months. Fund activity, typically trend following funds, will continue to be very influential. The trade activity generated by trend following funds is often based on market momentum and the development of trends. 

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The Energy Report

Oh No My Recovery is Nascent

Hey maybe, just maybe mind you a "nascent" recovery isn't so bullish for oil after all. You think? Fed Chairman Ben Bernanke may have given oil a bit of a boost by his proclamation that interest rates will stay low and that the economy still needs his help seemed not to be as bullish for stocks and oil especially after weak durable goods report and weekly jobs number. In fact you could almost see the mood of the market shift as you glanced across the entirety of the commodity board. You could sense fear as oil broke along with industrial metals like copper yet gold and silver and the dollar rallied which is a sign that the market is worried that the global economy is going to get very ugly. Again! Of course there were reports like the one by the Bombay Bullion Association that said that gold imports into India increased by 400%from last year and speculation that the Chinese were active buyers as well but the negativity of stocks and industrials and strength in the treasuries suggests that angst about the recovery is rising.

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Expect a Near-Term Top in the Live Cattle Market

The cash steer market has been fully steady to higher for ten consecutive weeks. The Feb contract has rallied from the January low of 8500 to the recent high of 9300. The number one bullish fundamental appears to be the harsh winter conditions in the Great Plains. Cattle in the feed lots have been severely stressed, much more so than in most winters. This results in cattle marketings being delayed and when they are moved to slaughter the average weights are down from normal levels. The feed conversion of a stressed animal becomes so poor that feedlot managers just move the animal to slaughter. Indeed, average dressed steer weights have been running from 18 lbs to as much as 25 lbs below year ago weights. Over time, this amounts of a lot of tonnage lost. The other contributing factor to the recent strong rally has been impressively strong beef exports. Recent data confirmed that beef exports during December were 25% above year ago levels. Finally, the harsh winter conditions have prevented cattle from being placed into the feed lots, keeping total cattle-on-feed inventories at tighter levels than expected.

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