Expanding dry conditions has wheat traders on edge, with December hard red spring (HRS) wheat closing higher for a fourth session, ending 15 1/4 cents higher at $6.63 3/4/bushel (bu), the largest daily move during the four sessions. The last time this contract achieved four consecutive winning sessions was seen from Jan. 12-15.
This week's move has seen the new-crop December contract breach the four levels of Fibonacci retracement of the contract's short-term trend ranging from $6.46 1/4 to $6.61 3/4/bu, as well as the 100-, 20- and 50-day moving averages, in that particular order.
The stochastic momentum indicators seen in the lower study of the attached chart are trending higher, while have yet to reach overbought territory and signal the potential for a continued move in this direction. The path has now been cleared for a continued move to test the Feb. 24 high of $6.79 3/4/bu.
Supporting this move is a likely return of noncommercial buying. As seen in the blue histogram bars in the middle study of the chart, this group had pared their bullish net-long position for three consecutive weeks to a net-long of 11,465 contracts as of March 30, which is the smallest bullish position seen since the week ending Dec. 29, or in 2021. It is quite possible that investors will pivot to reestablish longs in this market.
The brown line on the first study shows that the Dec21/March22 spread has strengthened or narrowed by 2 1/2 cents so far this week to minus 6 3/4 cents, the first sign of strength in seven weeks. On this day of 2020, this spread was shown at minus 11 cents, while the five-year average is minus 11.8 cents. This bears watching.
While not shown, the continuous MGEX December contract may provide some insight as to this market's potential should a fresh December high be reached. The April 8 close is just below the 50% retracement of the move from the 2017 high to the 2019 low, calculated at $6.64 3/4/bu. This level has posed a challenge for almost all of 2021 trade, while a breach of this level could lead to a continued move to the 61.8% retracement at $7.07/bu.
Cliff Jamieson can be reached at firstname.lastname@example.org
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