Wheat surge in the making
The wheat trade is in an interesting place, with Kansas City threatening a breakout through moving averages, which has kept these markets in a bearish trend. When talking about the Elliott wave count, I realize there are many technicians out there who suggest wheat prices are ready to tumble again. I beg to differ with them—my wave count is different, projecting that wheat has the potential for a strong rally into April. With the massive short position held by index funds, this could accelerate the move if we get a strong close on Friday. If that happens, they will find themselves in jeopardy, similar to what happened to corn when the shorts decided to abandon their positions and actually went long. They have the seasonals against them, as wheat typically bounces in March and April, often tied to weather. Additionally, they have a weakening currency against them (strong export sales noted this morning, above expectations), and frankly, they face threatening weather not only in the U.S. but also in Russia and Pakistan, which could put their sizable short position at risk.
In the video today, we also look at live and feeder cattle, which we have been projecting would bounce from a wave 4 low that occurred last Tuesday. The present values tagged today could set up a scenario for a setback. Nothing occurred technically on the closes today, but key resistance levels were achieved, which could create a pause in the cattle market—especially if the stock market were to have a rough day on Friday and close at new lows for the week. Cattle are in a favorable position, but as you've probably noticed, with high volatility, the recent recovery has not seen new highs in live cattle futures, only in feeder cattle, which have effectively hugged near the 280 mark at each close. Deferred futures last year also struggled at 280. There's something significant about that number, which could still lead to a setback.