Wheat Market Cycle Analysis and Early 2014 Forecast

Seventy-two years ago, in January 1942, W.D. Gann publishes 'How to Make Profits Trading in Commodities: A Study of the Commodity Markets.' He devotes a great deal of time discussing the wheat market and presents time cycles that go back as far as the mid XIX century.

The cash wheat market is studied following Gann's writings understood from the perspective presented in Bradley Cowan's works. It is found that the wheat time cycles presented by Gann in his 1942 book are still influencing the market today. An analysis of the cash wheat market is completed from the major top of February 2008 to the present time, including a forecast of a possible turning point in early 2014.

Figure 1 is a daily price-time chart of cash wheat prices at St. Louis, Missouri from 2008 to 2014. It shows harmonics of Gann’s 20 years cycle related to a major bottom in January 1895, 119 years ago, as described by Gann in How to Make Profits Trading in Commodities.
   

Figure 1
Daily cash prices for wheat at St. Louis, Missouri from 2008 to 2014. Harmonics of Gann's 20yrs and 14yrs cycles.

These harmonics were responsible for the all-time high of February 2008 and the major bottom of October 2009. Smaller harmonics of this cycle also aligned with other important turning points such as the reaction bottom of Mar 15th 2011 and the bottoms of Oct 4th and Nov 25th 2011, which were part of a triple bottom formation at the end of 2011.

Figure 1 also contains a harmonic of Gann’s 14 years cycle anchored at the late November 2009 top which aligned with the May 14th 2012 final bottom. The relevance of this top is clearer in the futures market where it is evident that this cycle marked the beginning of a 7 month bear market ending in June 2010.

All the harmonics described above project a turning point for early February 2014. Additionally, the cash wheat market has been in a vectorial contraction process since February 2008 that seems to be expiring. All this hints the possibility that a major cycle bottom could be around the corner. Of course, other indications should confirm that this is the case.
 

It is important for the analyst and trader to keep in mind that cycles spanning so many decades occasionally deviate for several weeks from their expected dates, however recent harmonics point to a possible turning point in February 2014.  

Update: Early 2014 Wheat Market Analysis  

Nadiel Outis

Grain Market Analysis