Eight is Enough

Chicago wheat futures were up eight days in a row coming into Friday morning. On Tuesday, Nov. 28, March Chicago wheat futures came off a low of $5.57/bu to get to as high as $6.49/bu 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 (COT) 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/oz on Monday, Dec. 4, and then the order came from somewhere to sweep the leg and there was no amount of Mr. 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.

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