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/bushel to get to as high as $6.49/bushel earlier this week.

China has been in the market recently making significant purchases, with 4 out of 5 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/oz. 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.