New-crop December spring wheat for December delivery broke through trendline resistance in Tuesday's session, as indicated on the attached chart by the downward-sloping blue line drawn from the contract's Feb. 16 high. The contract's short-term uptrend was kept alive with another push higher on Wednesday, with a break-through resistance at $5.66/bushel, the 50% retracement of the move from the contract's recent high in February to the April 11 low.
Wednesday's move through resistance was challenged by noncommercial selling pressure, with a potential 5 1/2-cent gain evaporating in favor of a 4-cent loss on the day, back below resistance. Trade volume reached a five-day high this session, with Wednesday's December volume 38% higher than the volume traded on Tuesday that led to an 8-cent move higher. Wednesday's close at $5.60 1/2 came after the session's low successfully tested and held above the support of the contract's 200-day moving average, found at $5.60/bu.
It is too early to tell which side will gain the upper hand in this struggle for direction. Today's move is perhaps consistent with the latest CFTC data that shows noncommercial traders or investors holding a bearish net-short futures position for the first time since mid-November. The gold line on the third study indicates that the Dec/March spread has narrowed 1 1/2 cents this week to minus 9 1/4 cents, a sign of a less-bearish approach to trade by commercial traders. Nearby resistance on the spread chart is found at minus 9 cents, with further chart resistance seen at minus 8 cents, then at minus 6 cents.
The black line in the lower study shows the Dec HRS/Dec HRW spread, a proxy for the demand for higher protein wheat. While this spread weakened slightly this session, it has gained 11 3/4 cents so far this week and trades within a dime of the highest level seen over the life of the spread. Recent rains in the Southern U.S. Plains are likely the key, which could eventually lead to an overall lower protein winter crop.
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