HardAssetsInvestor

Written by Larry Bear  |

August 02, 2012

Larry Baer's Technicals: Grains Continue Higher, And Buy Signals Keep Coming

Details

Historic drought in Midwest pushing wheat, soybeans higher and corn into a supertrend.

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Wheat

Wheat futures (both September and December contracts) indicated a fresh buy signal on the daily chart Monday (7/30). If wheat closes below its 20-period simple moving average, I’d suggest waiting for a fresh buy signal or a change in trend.

The trend is up on the weekly chart for wheat. The nine-period SMA is trending above the 20-period SMA. Wheat futures issued a King’s Cross counter-trend buy signal on the monthly chart in June. The King’s Cross is my attempt to account for why, shortly after a change in trend, a market often puts in its extreme. What I discovered is that the trend had not actually changed; rather, it was just an event—a news event, short or long covering, etc.—that caused a correction. After this “event,” the market would often turn around and resume its previous trend.

MONTHLY WHEAT

Soybeans

The November soybeans (as well as September and August contracts) similarly are suggesting buy signals on the daily chart (7/30). Soybeans gave a buy signal on the weekly chart two weeks ago, and a close above $17.61 even on Friday will suggest a fresh buy signal on the weekly chart. Following a King’s Cross counter-trend buy signal on the monthly chart in February, the trend has now changed to the upside on the monthly chart.

Corn

Old crop corn (September contract) and new crop corn (December) issued buy signals on the daily chart last Friday (7/27), following some nice consolidation from this overbought market and has now, for the time being, resumed its super-trend upward. I define a supertrend as a market that is trending above its nine-period SMA. The trend is up on the weekly chart, and corn is showing a King’s Cross counter-trend buy signal on the monthly chart for the month of July.

DAILY CORN

The current drought in the Midwest is being compared with droughts that lasted several years in the 1950s and 1930s, which is why surging old crop prices are adding support to new crop prices. It should also be noted that drought in the Black Sea wheat-growing regions has some estimating that Russia may cut grain exports by half in the 2012/13 marketing year.