Everyone’s excited about wheat these days. And with good reason. The U.S. Department of Agriculture says the wheat carryover at the end of this season will be the lowest in 60 years, and wheat is battling with corn, soybeans and other crops for a bigger share of 2008 crop acreage as all have hit unprecedented price levels.
As the only type of wheat not yet sown for 2008, the Minneapolis spring wheat contract has been leading the charge for wheat. Since topping an unheard of $11 a bushel on Jan. 15, it has had at least 10 limit-up (30 cents) days, and there is talk of $20 wheat.
But the exchanges have increased daily limits to 60 cents a bushel beginning Monday, sometimes a sign the end of a bull move is near. And one of wheat’s acreage competitors, soybeans, posted another shooting star candle top warning Friday on somewhat bullish fundamental news – a 15 million bushel decline in the carryover estimate – as traders rejected higher prices, reflected by the shooting star’s long upper tail.
It’s too late to get onboard the rise in wheat with a long position and too risky to go short at this stage. But while wheat is doing its thing, has anybody noticed what is happening in coffee? Coffee futures have broken above 2005 and 2007 highs – in fact, coffee futures prices on Friday surged to their highest level since early 1998 and have posted six years of higher lows.
Looking at the daily chart from VantagePoint Intermarket Analysis Software, the indications for an uptrend are all there: (1) short-term difference crossing above the long-term difference and above the zero line, (2) Neural Index moving to 1.0, and (3) a predicted medium-term moving average crossover to the upside, which would have gotten you into a long position in the vicinity of $1.35 a pound. To that, you might add (4) a multi-year breakout to a new high and (5) a big bullish white candle Friday on the breakout.
And take a look at cocoa futures, which may be setting up a similar scenario.
I am not a big fan of New York markets, but it’s a good bet the hedge funds, the big players in various commodity sectors, have noticed. We’ll see what happens.
