CROPS

A s trade decision-makers, human beings are not gener- ally wired to be patient when a market (or anything else) takes longer than 60 to 90 days to move. The Chicago wheat July (new crop) futures contract has not trend- ed out of an 82-cent band between $7.41 and $6.59 since February 12, well over 100 calendar days and well beyond the capacity of most of us to be patient.

The general slope of the period within this horizon-less Sargasso market is gently lower, although there was a two- day period of violence during which the market traded both the high and the low within two trading sessions on the last day of March and the first day of April.

Market watchers and traders often develop the impulse to make a trade, any trade, when this pattern is present in prices. It is the classic "buy low and sell high" setup, using previous highs and lows as forecasts of turning points. The trader is a genius as long as the pattern holds. The punishment meted out by the market for trading too early or too late is usually not severe, as the rebound from the boundary soon occurs.

The problem is that eventually the range edge is broken, sometimes violently. The wisdom of the chart-based trader is that if an established pattern is broken, there must be some- thing different happening. A factor has grown stronger, or is newly emerged. The price pattern reveals that either the buy- ers or the sellers have gained power.

It is the business of the fundamental analyst to anticipate, identify and track the reasons for the change. If this is done well, those who have been patient are alerted to a sea-change and are able to either protect themselves or set up to take advantage of the change. The range trader usually gives back some if not all of the profits gained in the days when the ping- pong ball stayed on the table.

The most prominent factor in the wheat market today is the rapidly expanding northern hemisphere harvest, along with a new crop in the higher latitudes that is quickly gaining definition. In the next 90 days, a very large amount of wheat will become available to buyers, as farmers pay their bills and run out of storage space. The futures market is well aware of this supply expansion potential, so in general is doing well to hold above the low end of the established price range. A break below the low end of the range, about 30-40 cents below pres- ent prices, say $6.60-$6.70 in Chicago lead contracts, would be a bell ringing for the range trader and the patient marketer as well.

The Spot Market Price Index is a measure of price move- ments of 22 sensitive basic commodities whose markets are presumed to be among the first to be influenced by changes in economic conditions. As such, it serves as one early indica- tion of impending changes in business activity. 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.