July 14, 2013 Weekend Wrap

The current COT report is based upon market activity from July 3 through July 9.

Soybeans:

For the week, July soybeans lost 24.75 cents, August -3.00, November +29.00. The COT report showed that managed money liquidated 7,925 contracts of their long positions and also liquidated 1,479 contracts of their short positions. Commercial interests liquidated 1,992 contracts of their long positions and also liquidated 6,156 contracts of their short positions. As of the latest report, managed money is long soybeans by a ratio of 4.20:1, which is down slightly from the previous week of 4.24:1 and the ratio of 2 weeks ago of 4.67:1.

There was little to report in the way of major news for soybeans, but the carry out of 125 million bushels was left intact. The carry out for the 2013-2014 season was raised 30 million bushels.

Soybean meal:

For the week, July soybean meal gained $46.40, August +14.30, December +15.80. The COT report showed that managed money liquidated 5,545 contracts of their long positions and also liquidated 1,035 contracts of their short positions. Commercial interests liquidated 1,589 contracts of their long positions and also liquidated 2,528 contracts of their short positions. As of the latest report, managed money is long soybean meal by a ratio of 2.92:1, which is down from the previous week of 3.01:1 and the ratio of 2 weeks ago of 3.44:1.

Soybean oil:

For the week, July soybean oil lost 1.14 cents, August -0.92, December -0.29. The COT report showed that managed money added 1,388 contracts to their long positions and also added 3,106 contracts to their short positions. Commercial interests liquidated 239 contracts of their long positions and added 179 contracts to their short positions. As of the latest report, managed money is short soybean oil by a ratio of 1.69:1, which is up slightly from the previous week of 1.67:1 and the ratio of 2 weeks ago of 1.52:1.

Corn:

For the week, July corn gained 16.75 cents, September +19.75, December +18.00. The COT report showed that managed money liquidated 8,840 contracts of their long positions and added a massive 29,228 contracts to their short positions. Commercial interests added 334 contracts to their long positions and liquidated 21,003 contracts of their short positions. For the first time in over one year, managed money is now short corn by a ratio of 1.03:1, which is down substantially from the previous week when managed money was long by a ratio of 1.17:1 and the ratio of 2 weeks ago of 1.67:1.

The USDA reduced ending stocks by 40 million bushels and the carry out for the 2013 2014 season was increased by 10 million bushels. However, world stocks are at multiyear highs, and this will weigh on corn prices after August, unless there are significant weather problems in the critical growing period. For the intermediate term, corn has a bearish bias, but we discourage initiating short positions at current levels due to potential weather related concerns.

Wheat:

For the week, July Chicago wheat gained 19.50 cents, September +21.00, December +23.25. The COT report showed that managed money added 1,582 contracts to their long positions and also added 1,862 contracts to their short positions. Commercial interests liquidated 10,554 contracts of their long positions and added 2,055 contracts to their short positions. As of the latest report, managed money is short wheat by a ratio 1.61:1, which is about the same as the previous week of 1.62:1, but up from the ratio of 2 weeks ago of 1.24:1.

The USDA released its supply demand report for the grains on July 11, and the report on the wheat market was the most exciting part of it. The USDA cut its estimate for world stocks to a five-year low and raised projections for imports by China to an 18 year high. Although the USDA raised its estimate for world wheat production for 2013-2014 from its earlier report, this was more than offset by an increase in Chinese consumption. The USDA estimated that the stocks to usage ratio at the end of the 2014 season will be 24.7%, which is the lowest since the 2007-2008 season. Additionally, the USDA cut its estimate for US wheat stocks by May 31 2014 to 83 million bushels. One important fact to keep in mind is that Egypt, which is the largest importer of wheat has minimum pipeline supplies and in the near future will need to enter the world market for what could be a very large tender. Unfortunately, the political, economic and immediate financial situation is dire and Egypt is going to need food aid in order to feed its people.

Cotton:

For the week, December cotton lost 5 points. The COT report showed that managed money added 2,336 contracts to their long positions and also added 632 contracts to their short positions. Commercial interests liquidated 580 contracts of their long positions and added 2,616 contracts to their short positions. As of the latest report, managed money is long cotton by a ratio of 7.05:1, which is down from the previous week of 7.31:1 and the ratio of 2 weeks ago of 7.79:1.

The USDA raised its estimate for world cotton stocks at the close of the 2013-2014 season by 1.8 million bales to a record 94.3 million bales. Furthermore, it is questionable how much China will need to import due to the slowing of the economy. The USDA increased acreage to 10.25 million and increased 2013-2014 carry out by 300,000 bales. Cotton remains on a short-term sell signal, but an intermediate term buy signal.

Live cattle:

For the week, August live cattle lost 10 points, October -18. The COT report shows that managed money added 2,429 contracts to their long positions and liquidated 1,451 contracts of their short positions. Commercial interests added 1,437 contracts to their long positions and also added 2,664 contracts to their short positions. As of the latest report, managed money is long cattle by a ratio of 2.01:1, which is up from the previous week of 1.87:1 and the ratio of 2 weeks ago of 1.49:1.

Crude oil:

 For the week, August WTI crude advanced $2.73 and August Brent crude gained $1.18. The COT report for WTI showed that managed money added 14,887 contracts of their long positions and also added 1,942 contracts to their short positions. Commercial interests added 3,161 contracts to their long positions and liquidated 7,242 contracts of their short positions. As of the latest report, managed money is long WTI by a ratio of 9.34:1, which is down slightly from the previous week of 9.45:1 and the ratio of 2 weeks ago of 9.78:1.

It is remarkable that over 3 COT reporting periods, (June 19 through July 9) that WTI has advanced $5.38 or 5.45% and Brent has increased by $1.78 or 1.68%, but the long to short ratio of managed money has not changed much. During the past 2 COT reports, August WTI has advanced $8.64, or 9.06%, (Brent + $6.54/6.46%), but the long to short ratio of managed money has actually declined from 9.45:1 to 9.34:1.

In order to put the current long to short ratio in perspective, we examined periods during the past 2 years when WTI was trading at, or near the price on July 9 ($103.22 August contract) when the latest COT report was tabulated. Based upon the current reading, the long to short ratio is at the very high-end of its range going back over 2 years when WTI was trading near to the current price. The prices reflected in the table are based upon the closing price as of the COT tabulation date. We are using crude oil continuation prices. On the August Brent chart there is considerable resistance at the $115.00 level, and for WTI on the continuation chart, resistance comes in at $114.00.

Date of COT Report     Price on COT Date       Long to Short Ratio
July 9, 2013                     $103.22                               9.34:1
September 18, 2012            95.69                               6.12:1
September 11, 2012             96.81                               6.53:1
May 1, 2012                        105.95                               5.74:1
March 20, 2012                 105.70                               5.29:1
March 6, 2012                    105.01                               5.58:1
February 21, 2012              105.97                               7.73:1
January 3, 2012                 102.83                               4.66:1
April 26, 2011                     112.21                                8.89:1 
April 19, 2011                     108.28                               7.83:1
April 12, 2011                     106.25                               9.99:1
April 5, 2011                       108.34                             10.29:1
March 29, 2011                  104.79                               9.30:1
March 22, 2011                  104.97                               9.72:1
March 15, 2011                     97.18                               8.79:1
March 8, 2011                    105.02                              11.17:1
March 1, 2011                      99.63                               11.61:1                                     

Heating oil:

For the week, August heating oil gained 3.97 cents. The COT report showed that managed money added 4,963 contracts to their long positions and liquidated 5,356 contracts of their short positions. Commercial interests liquidated 1,494 contracts of their long positions and added 10,153 contracts to their short positions. As of the latest report, managed money is short heating oil by a ratio of 1.01:1, which is down substantially from the previous week of 1.36:1 and the ratio of 2 weeks ago of 1.49:1.

Gasoline:

For the week, August gasoline gained 22.07 cents. The COT report showed that managed money added 6,380 contracts to their long positions and liquidated 2,712 contracts of their short positions. Commercial interests liquidated 3,410 contracts of their long positions and added 8,292 contracts to their short positions. As of the latest report, managed money is long gasoline by a ratio of 2.65:1, which is up from the previous week of 2.03:1 and the ratio of 2 weeks ago of 2.13:1.

The current long to short ratio in gasoline is at the very low-end of its historical range going back at least 2 years. This means there are a large number of new participants that can enter the market and drive prices higher. This is especially the case because the blackbox momentum crowd tends to rush into markets that are breaking out into new highs, and the petroleum complex is the latest group to do this. Gasoline should encounter resistance at the February 15, 2013 high of $3.24 and the March 30, 2012 high of 3.41. Although volume and open interest stats will not be released until July 15, the stats for July 10 and 11 show that August gasoline advanced 9.54 cents, but total open interest advanced only 309 contracts during the two-day period. Gasoline is massively overbought from a price point of view and is due for a sharp correction. Keep in mind, the 50 day moving average of gasoline on the continuation chart is $2.82 and the 200 day average is 2.87.

Natural gas:

For the week, August natural gas gained 2.7 cents. The COT report showed that managed money added 5,964 contracts to their long positions and also added 9,703 contracts to their short positions. Commercial interests liquidated 1,938 contracts of their long positions and also liquidated 3,588 contracts of their short positions. As of the latest report, managed money is short natural gas by a ratio of 1.02:1, which is about the same as the previous week of 1.01:1 and the ratio of 2 weeks ago of 1.03:1.

 Copper:

For the week, September copper gained 9 cents. The COT report showed that managed money liquidated 1,081 contracts of their long positions and also liquidated 1,760 contracts of their short positions. Commercial interests liquidated 760 contracts of their long positions and added 246 contracts to their short positions. As of the latest report, managed money is short copper by a ratio of 1.93:1, which is about the same as the previous week of 1.92:1, but below the ratio of 2 weeks ago of 2.21:1.

Palladium:

For the week, September palladium gained $45.35. The COT report showed that managed money added 367 contracts to their long positions and liquidated 242 contracts of their short positions. Commercial interests liquidated 246 contracts of their long positions and also liquidated 54 contracts of their short positions. As of the latest report, managed money is long palladium by a ratio of 11.88:1, which is up from the previous week of 10.24:1, but below the ratio of 2 weeks ago of 13.43:1.

Platinum:

For the week, October platinum gained $80.50. The COT report showed that managed money liquidated 85 contracts of their long positions and added 202 contracts to their short positions. Commercial interests added 813 contracts to their long positions and also added 207 contracts to their short positions. As of the latest report, managed money is long platinum by a ratio of 2.23:1, which is down from the previous week of 2.27:1 and the ratio of 2 weeks ago of 2.31:1.

Gold:

For the week, August gold gained $64.90. The COT report showed that managed money added 2,931 contracts to their long positions and also added 433 contracts to their short positions. Commercial interests added 9,959 contracts to their long positions and also added 9,897 contracts to their short positions. As of the latest report, managed money is long gold by a ratio of 1.29:1, which is up from the previous week of 1.26:1, but down from the ratio of 2 weeks ago of 1.39:1.

Silver:

For the week, September silver gained $1.056. The COT report showed that managed money added 91 contracts to their long positions and liquidated 894 contracts of their short positions. Commercial interests liquidated 1,080 contracts of their long positions and also liquidated 1,741 contracts of their short positions. As of the latest report, managed money is long silver by a ratio of 1.17:1, which is up somewhat from the previous week of 1.12:1 and up from the ratio of 2 weeks ago of 1.01:1.

Canadian dollar:

For the week, the September Canadian dollar advanced 1.71 cents. The COT report showed that leveraged funds added 2,934 contracts of their long positions and also added 10,085 contracts to their short positions. As of the latest report, leveraged funds are short by a ratio of 2.04:1, which is up from the previous week of 1.89:1, but down somewhat from the ratio of 2 weeks ago of 2.13:1.

Australian dollar:

For the week, the Australian dollar lost 2 points. The COT report showed that leveraged funds added 630 contracts to their long positions and liquidated 7,226 contracts of their short positions. As of the latest report, leveraged funds are short the Australian dollar by a ratio of 1.57:1, which is down from the previous week of 1.74:1, but up slightly from the ratio of 2 weeks ago of 1.49:1.

Swiss franc:

For the week, the September Swiss franc gained 1.88 cents. The COT report showed that leveraged funds added 4,264 contracts to their long positions and also added 4,847 contracts of their short positions. As of the latest report, leveraged funds are long by a ratio of 1.31:1, which is down from the previous week of 1.60:1 and down substantially from the ratio of 2 weeks ago of 2.21:1.

British pound:

For the week, the September British pound gained 2.03 cents. The COT report showed that leveraged funds liquidated 1,693 contracts of their long positions and added 6,612 contracts to their short positions. As of the latest report, leveraged funds are short the British pound by a ratio of 2.04:1, which is up from the previous week of 1.73:1 and up substantially from the ratio of 2 weeks ago of 1.20:1.

Euro:

For the week, the September euro gained 2.30 cents. The COT report showed that leveraged funds liquidated 5,020 contracts of their long positions and added 16,810 contracts to their short positions. As of the latest report, leveraged funds are short the euro by a ratio of 1.64:1, which is up substantially from the previous week when they were short by a ratio of 1.12:1. Two weeks ago leveraged funds were long the euro by a ratio of 1.49:1.

Japanese yen:

For the week, the Japanese yen advanced 179 points. The COT report showed that leveraged funds liquidated 3,357 contracts of their long positions and added 8,415 contracts to their short positions. As of the latest report, leveraged funds are short by a ratio of 3.00:1, which is up from the previous week of 2.46:1 and the ratio of 2 weeks ago of 2.37:1.

Dollar index:

For the week, the September dollar index lost 1.52 points. The COT report showed that leveraged funds added 8,755 contracts to their long positions and also added 737 contracts to their short positions. As of the latest report, leveraged funds are short the dollar index by a ratio of 1.47:1, which is down from the previous week of 2.34:1 and the ratio of 2 weeks ago when leveraged funds were short by 2.68:1.

                                                                                                                          July 3 – July 9                     Year to Date

S&P 500 E mini:

For the week, the September S&P 500 E mini gained 43.00 points. The COT report showed that leveraged funds liquidated 10,296 contracts of their long positions and added 44,299 contracts to their short positions. As of the latest report, leveraged funds are short the E mini by a ratio of 1.60:1, which is up from the previous week of 1.48:1 and the ratio of 2 weeks ago of 1.53:1.