Trader sentiment on the grain complex (corn, wheat, rice and especially oats) has been very bearish for weeks, but prices have stabilized and RSI is turning up. This could be the set-up for decent rally, especially if general risk appetite comes back for a couple of weeks.
Here’s a chart of wheat going back to 2003, weekly scale:
And here are oat futures:
You can see in these that the grain complex went through a mania in 2007 and early 2008 with the rest of the commodities, but that froth was quickly blown off in the crash. Prices are in rather neutral territory on a longer-term basis, which you can see for yourself by checking 25-year charts on indexmundi.com or futures.tradingcharts.com.
I like the looks of the grain complex here. Corn, soy, wheat and oats are all pretty oversold, and if an oscillation pattern holds, there could be a rally right about now. Also nice that their rates of decline have flattened out a tad.
Here’s a closer view, a 1-hour scale of the last month:
Source: Interactive Brokers
The whole commodity complex is short-term oversold, and grains should benefit from any bounce there. They are also likely to tag along with any continuation in the stock rally.
Dollar index here, with my annotations of readings in the Daily Sentiment Index (trade-futures.com) at extremes and turning points:
Dollar chart from Stockcharts.com
Clusters of low-mid single digit readings are very rare and very bullish. You all know what it means for stocks when the dollar makes a big break upwards.
For good measure, here’s the 3-year chart of the S&P versus the 20-day average equity put:call ratio:
Remember my mention the other day of a possible bullish breakout in grains? Corn, wheat and oats all had fantastic days. I was in wheat, for a 4% day. Here’s corn, with its 9% move: