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COMMODITY REVIEW AND OUTLOOK
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(November 18, 1997) WHEAT: SHORT TERM–Wheat is having trouble holding gains, as confirmation that Pakistan and Egypt had bought wheat failed to bring in new buying. Good crops and ample supplies suggest that wheat may have trouble holding gains for now and that the downtrend may continue. However, Australia and South Africa could both have problems with El Nino, and China reportedly has had problems with their wheat crop. One negative hanging over the market may be a perception that U.S. wheat is too expensive, but recent declines remove much of the credibility from that story. Without some sort of trigger, however, I suspect that plentiful world supplies of wheat will keep a lid on rallies. The market was also a bit oversold, and technically offered a cheap shot at the long side of the market. But it is unlikely that the trend has reversed itself. Exports have been lackluster. If El Nino becomes a real problem rather than potential, wheat could have plenty of upside.
RESISTANCE–Resistance basis December lies near 348, 355, 360, 363 368, 372-374, 376.
SUPPORT–Support basis December remains near 342, 335, 330, 323.
RECOMMENDATION–Aggressive traders could consider this a reversal and buy a dip back to the low 340's with stops under 335 or 330. Look for a rally to the low 350's. However, most traders should sell December wheat in the mid-upper 340's with stops over 355 or 360 or of 5-10 cents. Look for a decline back to the low 340's, possibly much lower. Long-term bullish option traders should buy March or May calls for the long pull on a decline to the 350-360 area basis March. Objective is open.
M. Steven Morgan
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