Wheat prices plunged overnight to lock limit down, after going lock limit UP 90 cents yesterday, and increasing 70 cents last night. Prices on wheat dropped more than $2.00 in overnight trading, after rising 70 cents in the first few minutes! I've never seen anything like this before in the futures markets!
Historical Precedent Just Two Weeks Ago?
This is very likely a short-term event, and may be a great buying opportunity, if history repeats itself. When the CME increased its lock limits from 30 cents to 60 cents 2 weeks ago, prices plunged because the increase in margins forced brokers to liquidate the long positions of many traders that no longer had account margins that were sufficiently large to cover their positions. This may have occurred again last night, since the CME increased the lock limit from 90 cents (just 30 cents 2 weeks ago) over the weekend to $1.35 -- more than doubling it in just two days! More forced selling has almost certainly occurred. I suspect prices may likely rebound within the next few days -- perhaps even today!
