March hard red spring wheat settled lower for a third session on Tuesday, ending down 5 1/4 cents/bushel (bu) at $9.34 1/2/bu, its third consecutive lower close. The March daily chart shows spring wheat attempting to bottom and there are various supportive signals that can be considered.
While the Nov. 29 low was the lowest trade seen since Sept. 20 on this chart, or more than two months, the session's low dipped below the contract's 61.8% retracement of the move from the August low to October high, calculated at $9.34 1/2/bu. Tuesday's close ended at this level. A breach of this support could result in a further slide to a September weekly low of $9.15/bu and even a test of psychological support at $9/bu.
The brown line on the first study is the March/May futures spread, which weakened slightly to a 2-cent inverse this session (March over the May), a level not seen since mid-June of this year. This spread was reported at minus 6 1/2 cents early this month.
The red histogram bars on the next study show noncommercial traders adding modestly to their bullish net-long position in the week ending Nov. 22, or to 1,955 contracts. We've seen a similar pattern in recent months; this position dipped as low as 1,896 contracts in the week ending Aug. 30, only to increase in each of the four weeks following.
The blue line on the lower study shows the spread between the National Spring Wheat Index in the U.S. and the National Hard Red Winter Index. This spread has alternated from slightly positive (HRS over HRW) to slightly negative (HRW over HRS) through the first half of November, but HRS has clearly shown gains at the expense of HRW since, closing at 40 cents on Monday. This is viewed as a proxy for the demand for higher protein wheat and is the widest spread seen since late July.
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