Charts Tell Another Story: The Case of Wheat

The chart of Wheat (given below) is probably one of the more interesting charts. In technical analysis terms, we have what is often referred to as positive divergence or what seems to be an accumulation pattern. The reason why the chart seems so interesting is that the chart seems to indicate accumulation despite the fact that there are a number of news items' that claim that we are heading for a record Wheat crop in USA as well as India. The significance of the chart (US markets Wheat Continuous KBT) increases since it has occurred in the weekly charts, which tend to have a greater bearing on the long-term trend. Add to this the recent reports about the complete crop failure in Niger.

Interestingly, the Base metals complex is exhibiting more signs of distribution (or negative divergence) han accumulation. The significance of this pattern would only be known once there are more details about the actual output of wheat, rather than estimates. The fact that the world food stocks are at their lowest point in three decades may have ominous portends, if these charts turn out to be true.

                                           (Click to Enlarge Chart)