I attached 2 charts here.
First is the KC/Chicago wheat spread
Second is Silver
Historically higher protein content wheat should carry some premium in the market should demand for US cargoes ever emerge and sustain. There has been noise in the market about Russian exports slowing in 2019, at least prior to harvest next spring due to their rapid export pace during this past Summer and Fall. This would leave other wheat exporters to fill the void namely the US and Argentina to name a few. Recent rallies though have become selling opportunities as funds have flipped to a net short in KC wheat near 5K contracts while funds are short Chicago now 28K contracts from 41K the week prior. The bullish black swan would be if Russia adopted export quotas on their wheat which would be seen as rationing. If this were to emerge, we could see a 6 handle on both Kc and Chicago contracts as old crop contracts would rally appreciably in my view. Again this is all talk. If one is looking to long wheat in some fashion, look to buy March Kc and sell March Chicago
Buy the spread at negative 9 cents with a tight stop at 13.4 under. Risking 4.4 cents. I think this spread has the opportunity to trade back to at least parity, if not between 3.4 to 7.0 over. . See chart.
Silver-Does anybody want to be short precious metals into year-end and beyond? Trade disagreements aside, geo-political worries and a hawkish Fed have taken some steam out of equities, with the tech heavy Nasdaq seeing sizable percentage drops. Uneasiness about global economic health amid gridlock in Washington DC. Maybe be giving fund managers a reason to diversify into metals. Gold near 1200 and Silver at 14.00 look cheap to me as the market has bounced higher from these levels in recent sessions. If looking to take a shot consider buying March 15.50-16.50 call spread at 13 points. The risk is $650.00 plus commissions and fees. Risk 7 cents from entry and look at the trend lines on the chart. I don’t think this is a bad bet given risk to reward. Risk 300-400 to potentially take in 70 to 80 points on a sizable rally. Call me for exit levels at any time At 888 391 7894 or email me at slusk@walshtrading.com
