The July MGEX spring wheat contract advanced 42 1/2 cents on May 11 to a fresh contract high of $12.58/bushel (bu), while closing at $12.56/bu for the largest daily increase seen in just over one month. The old-crop contract has reached a fresh contract high in four of the past five sessions, while old-crop is maintaining only a modest premium relative to new-crop. The July/September spread bounced from even money on May 10 to a 3 1/2-cent inverse on May 11 (July closing over the September).
As seen on the attached continuous active chart, today's move resulted in a breach of resistance at $12.29/bu, which represents the 50% retracement of the move from the $19.81/bu weekly high reached in January 2008 to the August 2009 low of $4.77/bu. This represents the highest trade seen since February 2008.
Fibonacci retracement theory would indicate that a sustained breach of this support will lead to a continued move to a test of the 61.8% retracement of $14.06 1/2/bu.
The histogram on the lower study shows noncommercial traders holding a bullish net-long futures position of 24,796 contracts, below the April high of 25,203 contracts, while down 9.7% from the all-time high reached in November. It would seem that the opportunity exists for increased speculative positioning from the long side, although the increasing cost of money and threat of margin calls should this market turn lower may lead to a cautious approach.
Cliff Jamieson can be reached at email@example.com
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