Yesterday, we discussed the remarkable surge witnessed in grain prices this year stemming from declining yields. Indeed the rise has truly been impressive; from its lows in June, the Dow Jones/UBS Grains Index has gained in excess of 60% in intraday trading highs earlier this month.

To see what is driving the index’s incredible rise and reveal where the grain’s bull run stands now, I decided to take a closer look at the charts of the “Big Three” grains: Corn, Soybeans and Wheat.

In looking at our first chart for the Dow Jones/UBS  Corn Subindex, we see a similar chart to that of the Grains Index, with the impressive rise from  June lows to the intraday highs of early November.  Since then, however, prices have corrected and have now found support at the upward trend line which coincides as well with the 50-day moving average.

The MACD of the corn subindex turned bearish at the end of October. In examining the Average Directional Index (ADX), we note that despite the DI lines still remaining positive, the positive trend has definitely weakened.

The chart of the Dow Jones/UBS Soybean Subindex tells a similar story. It too has corrected this month and at its 50-day moving average, just slightly above further support at its upward trend line.

Recent weakness is demonstrated in the MACD which, earlier this month, has also rolled over. The ADX recently fell below 40, indicating weakness in the prevailing trend coupled with a sell signal coming from the crossing of the -DI above the +DI line.

The Dow Jones/UBS Wheat Subindex is the only chart that does not resemble that of the Grains Index nor that of the other two subindices. While it did have an notable run up from June lows, it reached its highs in August, whereas its counterparts continued to rally through to November.  Wheat prices, however, dropped to the $22 to $25 range where they have consolidated now for nearly four months.

Wheat prices, like those of corn and soybeans, have dropped this month falling below the consolidation range. They have managed, however, to find support above the 200-day moving average.

The MACD and ADX for the Dow Jones/USB Wheat Subindex point to little momentum and trendlessness with MACD below the zero line and the ADX below the 20.

Despite the charts of the “Big Three” grains pointing to caution, as technical indicators for all three have been flashing short-term warnings, it is important to note that key support levels remain intact. If supports do hold this correction could represent a good buying opportunity. So, along with the fundamentals, the key in spotting a reversal is to keep an eye on the technical indicators that began warning of the correction in the indices back in October and, in the case of wheat, even earlier.  To see the MACD cross back over to the upside and the ADX to positively firm up above 40, for example, could point to a resumption of the grain bull.