Focus: A Tale of Two Directions
The grains made further declines last week and a showed no technical evidence of bottoming yet. December wheat fell 50¢ (9%), December corn slipped by 30.5¢ (8%), and November soybeans dropped 30¢ (3%). December oats had the largest percentage decline of 11%. November rough rice lost 8.1¢ (6%). The downward pressure on prices is largely due to the rise in the value of the U.S. dollar. A comparison of the U.S. dollar to wheat prices provides insight in their opposite directions over the past three months. The dollar broke to the upside from a sideways channel in early August, and wheat followed with a break to the downside in September. The continued drop in oil prices is also adding downward pressure on grains due to decreased shipping costs and reduced demand for biofuels. When the dollar puts in a top, grains are likely to find a bottom about the same time.
Chart Courtesy of TradeStation
Dr. Charles B. Schaap transitioned from health care to wealth care in the nineties. He is the author of ADXcellence —Power Trend Strategies and Invest with Success—Big Profits for Small Investors. Dr. Schaap is a commodity futures strategist and recognized authority in technical analysis of the financial markets. His website is www.adxcellence.com.
