As many other commodities, wheat prices have peaked in June. A bit earlier actually: at 677 US cents a bushel on June 1st, while stock indices and the CRB index posted a high on June11 or 12.

Over the long term, we can identify several technical patterns on the weekly chart. The current one is an uncertainty triangle built by the green ascending support line and by the red descending resistance line. Those two lines are the lower and upper limits of the trading range since last October. This trading range has been narrowing for the last 9 months. The price action found some support around 475 cents in last December (point A), but some new support higher, around 500 cents, a few months later (point B).

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The last few months has seen no-end of theories about what shape the economic recovery and stock market recovery will take.

Will it be ‘V’, ‘W’, ‘L’, ’square-root’ shaped?

Your editor has no idea. What we do know is that things aren’t as rosy as the mainstream media and analysts make it out to be.

Some of the contrary statistics we’ve seen in recent days and weeks make it hard to believe that the economy is heading in a permanently positive direction. In the near term it may give that impression, just as for a while a block of ice will remain intact under a burning sun.

It doesn’t last for long though, and it soon melts away.

Consumer spending up. House prices up. House building down. Job vacancies down. Unemployment up.

We don’t pretend to have all the answers, but the words ’strong’ and ‘economy’ don’t seem to quite fit in.

But out of those things it is the house prices that cause us the most concern. According to RP Data:

“It’s important to note that it has taken just 15 months for values to recover from the February ‘08 peak. I believe these results are encouraging, especially when we take a closer look at other Western markets around the world where prices are mostly in decline,”

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“Just how can the Fed credibly promise to be irresponsible…?”

HERE’S A THOUGHT – that tiny handful of investors and analysts warning how Fed policy risks hyper-inflation are in fact doing the central bank’s work.

The Fed wants you to believe hyperinflation is looming. Or at least, it should want that, if doubling its balance-sheet – purchasing and lending against investment junk – is going to work the wonders that modern central-bank theory says it can. And the Fed certainly wants you to believe it will stop at nothing to avoid deflation (”whatever means necessary” as the chairman put it back in 2002).

So anyone touting the hyperinflation risk in public is playing the shill, a decoy – seemingly unconnected – proclaiming the miracle powers of Dr.Ben Bernanke’s snake oil to CNBC anchors at every chance.

In fact, they’re doing the Fed’s work better than the Federal Reserve itself. Really.

“The major danger with a zero lower bound for the interest rate,” said Swedish policy-wonk Lars Svensson (also a Princeton colleague of the Fed chief and his credit-bubble associate Paul Krugman) in a speech earlier this year, “is that inflation expectations will be too low and even negative, and that the real interest rate will thus become too high.”

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Still positively correlated with the stock indices, particularly the S&P/ASX 200, the AUD/JPY currency pair strongly rebounded between February and June this year. It posted a recent high on June 11 at 80.43 (point C on the chart). From the low of 55.51 posted in early February (point E), it’s a rise of 45% in 4 months and a half.

The trends are therefore really easy to identify on this chart. First, there was a sharp bearish trend that drove the price from 104.50 to 55 in the second half of 2008 (between points A and B), when the financial crisis was spreading globally. As you know, this plunge particularly impacted the commodities and stock markets, but also the FX carry trades. The AUD/JPY was one of the most popular carry trades: risk aversion and deleveraging hit strongly the value of the “Aussie” against the Yen.

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