World stocks were raised from 226.56 metric tons to a new record high of 228.49 million metric tons. This increases was aided by increases with exporters like the European Union and Australia. Wheat's recent rally attempt likely reflects growing concerns about U.S. wheat production and increasing dry conditions in other wheat-producing countries as a result of the El Nino effect. The fundamentalists see this as supporting the bulls.
The invisible hand, however, advises skepticism toward bullish interpretations. The return of technical strength in the U.S. dollar, an inevitable outcome within the evolving global debt crisis, will dampen not only wheat but also the entire commodity sector.
Investors, largely driven by emotions rather than discipline, tend to focus on volatility rather than the message of the market. This tendency prevents them from recognizing better opportunities in quieter markets.
Insights constructs and interprets the message of the market, the flow of sentiment, price, leverage, and time in order to define trends within the cycle of accumulation and distribution for subscribers.
Summary
The BEAR (Price) and BEAR (Leverage) trends under Q3 distribution after the seasonal high position wheat as a focused bear opportunity since the second week of September 2015.
Price
Interactive Charts: (NYSE:WEAT), WHEAT
The long-term trend oscillator (LTCO) defines a down impulse an impressive 35% annualized gain from 15.95 to 8.80 since the second week of May 2014 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression, the final phase of the CEC cycle, generally anticipates this change.
A close above 13.60 jumps the creek and transitions the trend from mark down to cause, while a close below 8.66 breaks the ice and maintains it.
Chart 1
Leverage
The long-term leverage oscillator (LTLO) defines a bear phase since the second week of September 2015 (chart 2). This focuses the down impulse (see price).
A diffusion index (DI) of -33% defines Q3 distribution (chart 3). A capitulation index (CAP) of 15% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from distribution to accumulation and complacency to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). A rally under these trends, a sign of strength (SOS), would be bullish for wheat longer-term.
Chart 2
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle defines weakness until the first week of July (chart 5). This seasonal path of least resistance restrains upside expectations (see price).
Chart 5