I often come across news items in the mainstream channels that read as follows:
"Skittish Grain Markets Waiting For Harvest For Direction." (December 3 Stock & Land)
It's the typical handiwork of fundamental analysis, which says that broad trends in financial markets are created as a reaction to certain outside events in a clear and consistent manner. They aren't. While the news can and often does create volatile price spikes (although not always in a "logical" direction), it has no effect on the larger trend.
Case in point: One day after the above headline published, wheat prices got the "harvest" data it was supposedly "waiting for." The report was decidedly bearish and included these stats: U.S. winter wheat planting advanced to 90% versus 86% last week; conditions showed 64% of the crop in good/excellent condition; AND, export sales were down 3% from a week earlier, "way behind" 2008's sales profile. (December 4 Associated Press)
YET -- wheat prices rallied.
Now take a long look at the following close-up of wheat prices since the start of 2009. Labeled in print are several excerpts of our past wheat analysis taken from various Futures Junctures Service publications.
Here are the broader insights as they appeared at the time:
March 2009 Monthly Futures Junctures:
"Grains Selloff cooling Down: The decline from the January peak at 658 ¼ shapes up quite nicely as a countertrend move, which we can expect will be more than fully retraced in the weeks ahead.. clearing the way for a run up on the January high."
June 2009 Monthly Futures Junctures:
"The Party's Over In Grains: Wheat prices finished a three-wave corrective advance at the recent June peak of 677. We can now look for wheat to more than completely retrace the December 2008 advance that began at 497."
October 6 Daily Futures Junctures: "Wheat is at an interesting juncture. I think it prudent to acknowledge that an important low could be in place..." with prices likely to see the $6.00 per bushel level soon.