Cash HRW Wheat: The cmdty National HRW Wheat Price Index (HRWI) closed at $3.71 1/2, up 1/4 cent for the week. The HRWI remains in a secondary (intermediate-term) 5-wave uptrend while its minor (short-term) trend looks to have turned down. This would be viewed as Wave 2 of the secondary pattern and should result in a solid retracement of Wave 1 from $3.40 1/2 (September 3) through the high of $3.78 (September 19). Initial minor support is at the low of $3.67, with downside targets near $3.59 1/2 and $3.55. These prices mark the 50% and 61.8% retracement levels of Wave 1. Theoretical Position: Cash sales of 2019 harvested HRW bushels should be complete. Those looking for some sort of re-ownership position, or owning cash HRW wheat for feed purposes, could by cash HRW wheat using last Friday’s HRWI settlement near $3.72. Otherwise, wait for Wave 2 of the secondary 5-wave pattern to test downside targets before buying.
Wheat Kansas City July 2020: The contract closed $4.39 1/4, down 1 cent for the week. New-crop July 2020 remains in a secondary (intermediate-term) 5-wave uptrend, while its minor (short-term) trend has turned down. This would be viewed as a Wave 2 move within the secondary pattern, with initial minor support at the recent low of $4.34 3/4 (September 24). Downside targets are near $4.32 and $4.29, prices that mark the 50% and 61.8% retracement levels of Wave 1 from the low of $4.19 (September 3) through the high of $4.45 1/4 (September 23). Theoretical Position: 25% of expected 2020 production was covered when the contract hit $5.51. Another 25% was done with the move to a new contract low below $4.63 3/4. This creates an average price of approximately $5.07 on an expected 50% of 2020 production. At last Friday’s close, July 2020 Kansas City wheat remains in the lower 6% of the 8-year price distribution range, still considered a buying opportunity.
Cash SRW Wheat: The cmdty National SRW Wheat Price Index (SRPI) closed at $4.72 3/4, up 3 1/2 cents for the week. The SRPI is actually a difficult market to classify by trend at this time, having failed to establish some of the signals I look for. While cash SRW wheat looks to be in a secondary (intermediate-term) uptrend, the last signal posted by weekly stochastics was a bearish crossover above the overbought level of 80% (week of June 24). This would imply the ongoing rally is a Wave B (second wave) rally within a 3-wave downtrend pattern. If so, then the SRPI would be expected to move below the Wave A (first wave) low of $4.32 1/2. Look for a possible island-top formation on the short-term daily chart if the SRPI gaps down Sunday evening into Monday morning. Theoretical Position: As with cash HRW wheat, 2019 harvested SRW bushels should be sold at this time. Those needing cash coverage could have locked in supplies near the recent weekly settlement of $4.46 1/4.
Wheat Chicago July 2020: The contract closed at $5.02 1/4, up 2 1/2 cents for the week. July 2020 Chicago wheat remains in a secondary (intermediate-term) 5-wave uptrend, though its minor (short-term) trend looks to be down. This would be viewed as a Wave 2 sell-off within the secondary pattern, with initial support at the recent low of $4.92 3/4. Beyond that, Wave 2 targets are between $4.87 and $4.82 1/2, prices marking the 50% and 61.8% retracement levels of Wave 1 from $4.68 (September 3) through the high of $5.06 1/4 (September 18). Theoretical Position: Some may have priced 25% of 2020 expected production when the contract hit $5.49. Another, or initial, 25% could’ve been priced when the contract hit $5.67 1/2. If so, 50% of expected 2020 SRW production would be covered at an average price of $5.58 1/4.
Cash SWW Wheat: The National SWW Wheat Index (SWWI) closed at $5.36 1/4, up 2 3/4 cents for the week. The SWWI extended its secondary (intermediate-term) uptrend to a new 4-week high of $5.36 1/4 last week, a test of resistance at $5.37 1/4. This price marks the 50% retracement level of the previous downtrend from $5.71 (week of June 24) through the low of $5.03 1/2 (week of September 2). The 61.8% retracement level is up near $5.45 1/4. Theoretical Position: 25% of expected 2019 production could be priced near $5.38. Another 25% was priced near the weekly closes of $5.55 and $5.58, creating an average price on 75% of expected production near $5.50. The last 25% could be priced as harvest progresses.
Cash HRS Wheat: The cmdty National HRS Wheat Price Index (HSWI) closed at $4.82 3/4, up 27 3/4 cents for the week. The HSWI extended its secondary (intermediate-term) uptrend last week to a new 4-week high of $4.91. However, the HSWI posted a minor bearish key reversal Thursday, indicating its short-term trend has turned down. Initial support is at Thursday’s low of $4.79 1/2, with downside targets near $4.61 1/4 and $4.52, prices that mark the 38.2% and 50% retracement levels of the previous minor uptrend from $4.12 3/4 through last week’s high. Theoretical Position: 2019 production was 50% covered at $6.46 1/2 versus the September futures contract. Hold the balance of production given the market’s secondary, and potential major, uptrend. Also, the market’s seasonal pattern turns up from mid-September through late November with an average gain of 10%. If the previous week’s close of $4.21 1/2 is the seasonal low weekly close, the 5-year seasonal pattern would suggest a high weekly close at the end of November of $4.63 1/2.
Wheat Minneapolis December 2019: The contract closed $5.47, up 22 3/4 cents for the week. December Minneapolis extended its secondary (intermediate-term) uptrend to a new 4-week high of $5.59. This was also a test of the initial upside target near $5.57 1/2, a price that marks the 38.2% retracement level of the previous downtrend from $6.73 through the low of $4.86 1/2. The contract’s minor (short-term) trend turned down last week with downside targets of $5.31, $5.22 1/2, and $5.14. Theoretical Position: 2019 production is 50% covered at $6.46 1/2 (September futures) from the week of August 6, 2018 (in conjunction with a bearish spike reversal). These futures hedges would have been rolled to the December near the recent weekly close in the spread of 15 3/4 cents. This would create a futures hedge price near $6.62.
