Eight is enough

Chicago wheat futures were up eight days in a row coming into Friday morning. On Nov. 28 March Chicago wheat futures came off a low of $5.57 per bushel to get to as high as $6.49 per bushel earlier this week.

China has been in the market recently making significant purchases with four out of five days this week seeing flash sale announcements totaling 1.12 million metric tons.

Wheat bulls took a break on Friday deciding to take some profits while wheat bears caught a sigh of relief as the market was lower on the day.

Last Week’s Commitment of Traders report showed Managed Money to be holding a net short position in wheat futures totaling 120,000 contracts — a significant sum that many had speculated could leave room for a short covering move if any fundamental story could get some legs under the market.

That appears to be the case although the recent eight-day rally was somewhat orderly without a clear “panic” day of short covering that leaves the door open for more upside in a bigger short covering move, or maybe, and perhaps more likely, the funds will not be pushed out of a short wheat position that has proven very profitable and remains a logical trade assuming Chinese purchases dry up in the short run.

Precious metals peak

Front month gold futures hit an all-time high of $2,130 per ounce on Dec. 4 and then the order came from somewhere to sweep the leg and there was no amount of Miyagi magic that could stop the slide. A massive amount of volume traded that same day as gold and silver futures peaked only to finish much lower on the day putting in a key daily reversal lower and finishing lower yet on the week with a weekly key reversal lower in place as of early Friday afternoon.

Have a comment or question? Please reach out to derrick.hermesch@pinion.global.com

Opinions are solely the writers. Derrick Hermesch is a commodity futures broker with Paragon Investments LLC. He can be reached at 785-338-9605. This is not a solicitation of any order to buy or sell nor does it provide any recommendations in regard to the market. Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors.