Last week we looked at the new-crop December MGEX spring wheat contract that was facing challenges at resistance of the contract's 200-day moving average and struggling to sustain daily gains.
Tuesday's session saw this contract add to recent losses, closing 7 3/4 cents lower at $5.71 1/4/bushel, the third straight daily loss, while breaking various levels of potential support.
The December broke below its 20-day moving average of $5.77/bu, the first close below its 20-day in just over one month. Tuesday's session also broke below the 33% retracement of the move from the contract low reached in May to its June high calculated at $5.72/bu.
Other support levels successfully tested in Tuesday's session were the contract's 100-day moving average at $5.70 1/2/bu as well as the 38.2% retracement of the previously discussed uptrend, calculated at $5.68 3/4/bu.
While not shown, the stochastic momentum indicators on the daily chart continue to trend lower and are in the center of the neutral zone of the chart, signaling the possibility of a further move to the downside. Also not shown, weekly stochastics are seen rolling over while near the over-bought region of the chart.
As seen on the first study of the attached chart, the new-crop December/March futures spread has weakened in six of the past seven sessions, a growing sign of an increasingly bearish view of market fundamentals held by commercial traders. This spread closed at minus 12 1/2 cents this session, with nearby chart support seen at minus 14 cents.
The lower study shows the net-short futures position held by noncommercial traders at 1,182 contracts as of June 11, the smallest net short held in 10 weeks. At the same, the same report shows a shift from a bearish net short to a bullish net-long position in soft red winter wheat and traders could be having second thoughts since forecasts for the 10-day window appear favorable for U.S. harvest, which could lead to noncommercial selling.
A breach of nearby support, the 100-day at $5.70 1/2 as well as the 38.2% retracement at $5.68 3/4/bu, could pave the way for a further move to a test of the 50% retracement level found at $5.61 1/4/bu and the 50-day at $5.58/bu.
Cliff Jamieson can be reached at email@example.com
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