Returning to the theme of how to gauge whether grains markets have set a top, this week has provided some negativity in signals.
Revisiting the advice from RJ O’Brien to “watch for penetration of key benchmark moving averages”, wheat futures for May have surrendered their 50-day moving average, and look like ending below it on a weekly chart.
For corn, the May contract has this week closed below its 40-day line for the first time in seven months - although has managed to rebound off its 40-daly line, some 9 cents below at $5.32 a bushel.
Past the peak
Open interest is another factor which may be ringing an alert too.
“Watch for evidence that open interest is topping out or eroding, which would indicate an outbound money flow,” RJ O’Brien said.
In fact, open interest, ie the number of live contracts, set 2021 peaks some time ago for Chicago corn, soybeans and wheat.
In wheat, the open interest in futures as of the last session, at 417,879 contract, was down 35,032 lots from the high, with the soybean figure 92,201 lots below its peak and corn’s open interest 187,789 contracts from the top set on February 18.
At least, from a bull’s perspective, the outward flow is showing signs of stabilising, and even reversing in the case of wheat.
Not that this has helped wheat futures, which for May shed 1.3% for the week to last night - compared with a 0.2% gain in soybeans, which achieved a 0.2% gain in prices.
The rule appears to be holding better for Kansas City hard red winter wheat futures - which have seen a notable cut in open interest, and prices of which fell by 2.7% during the week.
|Crop||Open interest March 11
||Change from 2021 top
Date of 2021 top
|Kansas City wheat||214,903||-4,470||-18,896||February 19|
|Chicago wheat||417,879||+963||-35,032||January 29|
|Data in contracts. Futues only