September 3, 2008

CBOT wheat bears eye downside objectives

The technical signs are pointing toward more downward movement in Chicago wheat futures.

Chicago Board of Trade December wheat futures prices on Tuesday (September 2) gapped lower on the daily bar chart and hit a fresh nine-month low.

Importantly from a technical perspective, December wheat also on Monday pushed below what were very strong technical support levels at the May low of US$7.68 and the August low of US$7.71. This produced serious technical damage and does suggest still more downside price pressure to come.

December wheat futures prices are also in a 5 ½ -month-old downtrend from the mid-March contract high of US$12.84 ¼. The wheat bears do have fresh, solid technical momentum on their side and are looking for more on the downside in the near term.

The next downside technical objective for the powerful wheat bears is to produce a close below strong longer-term technical support at US$7.50. That price level stood for more than 10 years as the all-time high for nearby wheat futures, until being replaced during the 2007 rally in prices. Below that lies major psychological support at US$7.00 a bushel.

The next upside price objective for the beleaguered bulls is to push prices above solid technical resistance at last week's low of US$7.98 ½ , which is also the top of Tuesday's downside price gap on the daily bar chart.

It would take multiple closes back above psychological resistance at US$8.00 a bushel in CBOT December wheat to provide the bulls with some fresh upside near-term technical momentum.

Wheat traders and all grain traders will continue to keep an eye on the key "outside markets" - crude oil prices and the value of the US dollar. More downside price pressure in crude and upside action in the US dollar index will find the wheat bears continuing to flex their muscles.