The Times - Serving Waitsburg, Dayton and the Touchet Valley

Many observers speak glibly about "cyclical" markets. It is a safe way for experts to lay down comments because the interpretation of cycles is entirely open.

While it is obvious that all markets have a somewhat regular back-and-forth price motion over time, along with patterns that repeat themselves, "Good ol' Murphy" says, "Once you have carefully measured and positively identified a repeating cycle pattern in any given market, the cycle will be replaced by another pattern and no longer apply".

Cycles are easy to see in the charts, but hard to actually trade. It does help to know what the major fundamental sea­sonal cycles are, but it ends up being a bias and not a trigger.

With all that said, there is a familiar and well-defined pattern that often appears when a long-established trend is about to change, known as "The a-b-c retracement". The key word here is "often" (not always).

In the present state of the wheat price market, we have just seen the first real attempt to change up from a very harsh price decline that lasted 16 months and dropped $1.50 per bushel. The first sign of life in this market began on Febru­ary 4, about 39 cents per bushel lower than the close of Tuesday, February 11.

If the old short-term cycle pattern holds this time, we have established "a" and "b" and are now expecting "c" to come along and lift Chicago wheat up to between $6.00 and $6.25 per bushel and the highest level since mid-December 2013. The 38% retracement level (for all you Fibonacci fans) is about $6.12 and the 50% level is about $6.30. These are commonly held targets coming back from a long down­trend.

For the analyst and comment provider, this is very thin ice to skate upon. Making a prognostication is a very slippery business, and the result is either a "genius" or a "fool".

The better way to use this new behavior pattern in wheat prices is to mark it as an indication of emerging change, and then slowing or halting new sales until the new upward trend pattern is either confirmed or denied. Even though the risk of wheat ownership is much lower than it was last year, it is way too early to be an aggressive buyer unless one has very deep pockets and lots of patience, not a common set of characteristics.

Meanwhile, we have something new to look at in wheat prices, and the upcoming spring emergence from winter dormancy in the northern hemisphere will be our best chance of any perception change in the mind of the crusty old wheat market.

Information and opinions contained herein come from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital.