June 16 Weekend Wrap

The COT reporting period is June 5-June 11.

Soybeans:

For the week, July soybeans lost 11.75 cents, August -22.75, November -32.00. The COT report showed that managed money added 12,522 contracts to their long positions and liquidated 507 contracts of their short positions. Commercial interests added 2,262 contracts to their long positions and also added 15,075 contracts to their short positions. As of the latest report, managed money is long soybeans by a ratio of 4.29:1, which is up from the previous week of 3.98:1 and the ratio of 2 weeks ago of 3.16:1.

Soybean meal:

For the week, July soybean meal lost $1.80, August -8.20, December -13.10. The COT report showed that managed money added 9,032 contracts to their long positions and also added 451 contracts to their short positions. Commercial interests added 1,045 contracts to their long positions and also added 10,433 contracts to their short positions. As of the latest report, managed money is long soybean meal by a ratio of 5.39:1, which is up from the previous week of 4.98:1 and the ratio of 2 weeks ago of 4.37:1.

Soybean oil:

For the week, July soybean oil lost 5 points, August -10, December -32. The COT report showed that managed money added 2,379 contracts to their long positions and liquidated 726 contracts of their short positions. Commercial interests liquidated 404 contracts of their long positions and also liquidated 1,807 contracts of their short positions. As of the latest report, managed money is short soybean oil by a ratio of 1.33:1 which is down from the previous week of 1.41:1 but up from the ratio of 2 weeks ago of 1.16:1.

Corn:

For the week, July corn lost 11.25 cents, September -19.75, December -25.50. The COT report showed that managed money liquidated 5,169 contracts of their long positions and added 39 contracts to their short positions. Commercial interests added 9,793 contracts to their long positions and also added 6,971 contracts to their short positions. As of the latest report, managed money is long corn by a ratio of 1.78:1, which is down slightly from the previous week of 1.82:1 and the ratio of 2 weeks ago of 1.95:1.

Wheat:

For the week, July Chicago wheat lost 15.50 cents, September -16.00, December -17.75. The COT report showed that managed money liquidated 1,518 contracts of their long positions and also liquidated 1,227 contracts of their short positions. Commercial interests liquidated 8,182 contracts of their long positions and also liquidated 7,452 contracts of their short positions. As of the latest report, managed money is short wheat by a ratio 1.24:1, which is about equal to last week of 1.23:1, but below the ratio of 2 weeks ago of 1.49:1.

COT Report June 5-June  11   Year to Date
July soybean meal +2.41%            +10.66%
July soybeans        +0.77%             +8.69%
July corn                 -0.50%             -6.06%
July bean oil             -1.13%             -4.23%
July wheat                -1.73%            -14.24%   

Cotton:

For the week, July cotton gained 6.43 cents, December +4.26. The COT report showed that managed money added 5,996 contracts to their long positions and also added 3,801 contracts to their short positions. Commercial interests added 1,370 contracts to their long positions and also added 5,358 contracts to their short positions. As of the latest report, managed money is long cotton by a ratio of 3.13:1, which is down from the previous week of 3.57:1 and the ratio of 2 weeks ago of 5.20:1.

As of the latest COT report, the long to short ratio is at its lowest level since before March 12, 2013. From June 11 through June 13, open interest increased by 2,478 contracts while December cotton advanced 3.97 cents. In short, it is unlikely that the long to short ratio has expanded much beyond the ratio reflected in the recent tabulation date of June 11. If the market pulls back as we expect, it is highly likely that some recent speculative longs will be shaken out on the correction. This places cotton in the sweet spot with respect to an entry point on the long side. This is because shorts have been blown out on the recent advance and longs will be taken out once cotton corrects its over bought status. Cotton generated a short-term buy signal on June 13, and continued its advance on the 14th. We think a correction lasting 1-2 and possibly 3 days should take cotton down to 86.50 and possibly to its 50 day moving average of 85.30 on the December chart.

 COT Tabulation Date         Closing Price     Long to Short Ratio
June 11                                        85.18               3.13:1
June 4                                         85.44               3.57:1
May 28                                       81.42                 5.20:1
May 21                                        83.86                9.01:1
May 14                                        86.92               13.41:1
May 7                                            87.15                  8.76:1
April 30                                        87.47                  6.32:1
April 23                                        85.10                  4.60:1
April 16                                        85.42                   4.15:1
April 9                                          86.61                   4.27:1
April 2                                          90.34                   5.81:1
March 26                                     89.33                    5.55:1
March 19                                      91.53                    5.89 1
March 12                                      88.16                    6.66:1

For the first time in several months, WTI, Brent, heating oil and gasoline are on short-term buy signals. Collectively, they should provide underlying support for further advances in WTI and Brent. However, if global equity markets take a major dive, all bets are off. Also, the geopolitical ramifications of the recent election in Iran, which appointed a moderate as president, and the escalating confrontation between the West and Syria will make trading especially difficult.

WTI Crude oil:

For the week, July WTI gained $1.82 and Brent crude advanced $1.34. The COT report showed that managed money added 9,945 contracts to their long positions and liquidated 6,277 contracts of their short positions. Commercial interests added 11,037 contracts to their long positions and also added 19,310 contracts to their short positions. As of the latest report, managed money is long WTI by a ratio of 7.62:1, which is up substantially from the previous week of 6.13:1 and the ratio of 2 weeks ago of 6.69:1.

Brent crude oil: On June 14, August Brent crude oil generated a short-term buy signal, but remains on an intermediate term sell signal.

Heating oil: On June 14, July heating oil generated a short-term buy signal and remains on an intermediate term sell signal.

For the week, July heating oil gained 6.91 cents. The COT report showed that managed money liquidated 139 contracts of their long positions and added 3,467 contracts to their short positions. Commercial interests added 10,883 contracts to their long positions and also added 9,079 contracts to their short positions. As of the latest report, managed money is short heating oil by a ratio of 1.78:1, which is up from the previous week of 1.64:1 and up substantially from the ratio of 2 weeks ago of 1.18:1.

It is fascinating that heating oil generated its first short-term buy signal in the week the COT short to long ratio in heating oil reached its highest level of 2013 (1.78:1). We examined our records for the year and found the second highest short to long ratio occurred on the tabulation date of April 23, 2013 at 1.62:1. The trading range of heating oil during the reporting period (April 17-April 23) was from $2.7277-2.8186. The trading range for the current COT report has been from $2.8378-2.9157. In other words, the trading range for the current COT report is approximately 10 cents higher than the trading range during the tabulation period of the April 23 report.  However, the short to long ratio is higher than it was during the COT reporting period in April.

On June 12, open interest increased by 2,295 contracts as heating oil advanced 3.77 cents. However, on June 13, heating oil advanced another 4.43 cents and open interest declined by 4,315 contracts. The preliminary report for Friday’s trading shows that open interest declined by 5,938 contracts on volume of 134,004 contracts. If the open interest decline in the preliminary report is close to the final report released on Monday, we have additional corroboration that market participants are massively liquidating as the market moves higher. As is usually the case after a buy signal is generated, a pullback occurs lasting 1-2 and possibly 3 days. As a consequence, we think heating oil can setback to the $2.88 2.89 level, before it would be safe to consider bullish positions. Unfortunately, the heating oil ETF, UHN does not track heating oil very well and we discourage its use.

Gasoline:

For the week, July gasoline gained 2.52 cents. The COT report showed that managed money added 3,211 contracts to their long positions and also added 323 contracts to their short positions. Commercial interests added 12,311 contracts to their long positions and also added 14,079 contracts to their short positions. As of the latest report, managed money is long gasoline by a ratio of 3.00:1, which is up slightly from the previous week of 2.86:1 and the ratio of 2 weeks ago of 2.24:1.

Ethanol:

For the week, August ethanol declined 1.03 cents.

Natural gas:

For the week, July natural gas lost 9.5 cents. The COT report showed that managed money liquidated 25,050 contracts of their long positions and also liquidated 4,476 contracts of their short positions. Commercial interests added 11,900 contracts to their long positions and liquidated 3,427 contracts of their short positions. As of the latest report, managed money is long natural gas by a ratio of 1.11:1, which is down  from the previous week of 1.19:1, and down substantially from the ratio of 2 weeks ago of 1.32:1.

COT Report June 5-June  11   Year to Date
July WTI crude oil +2.00%            +4.44%
July gasoline           -0.09%             +2.53%
August Brent           -0.14%              -0.96%
July heating oil       -0.78%               -1.17%
August ethanol        -3.22%            +11.88%
July natural gas       -6.51%             +4.97% 

Copper:

For the week, July copper lost numerals 6.70 cents. The COT report showed that managed money liquidated 2,560 contracts of their long positions and added 9,498 contracts to their short positions. Commercial interests added 6,518 contracts to their long positions and also added 1,284 contracts to their short positions. As of the latest report, managed money is short copper by a ratio of 1.72:1, which is up from the previous week of 1.23:1 and the ratio of 2 weeks ago of 1.33:1.

Palladium:

For the week, September palladium lost $29.50. The COT report showed that managed money added 1,204 contracts of their long positions and also added 158 contracts to their short positions. Commercial interests liquidated 83 contracts of their long positions and added 253 contracts to their short positions. As of the latest report, managed money is long palladium by a ratio of 25.02:1, which is down from the previous week of 28.52:1 and the ratio of 2 weeks ago of 31.06:1.

Platinum:

For the week, July platinum lost $55.20. The COT report showed that managed money added 390 contracts to their long positions and liquidated 792 contracts of their short positions. Commercial interests liquidated 362 contracts of their long positions and added 1,288 contracts to their short positions. As of the latest report, managed money is long platinum by a ratio of 3.48:1, which is up from the previous week of 3.17:1 and the ratio of 2 weeks ago of 2.64:1.

Gold:

For the week, August gold advanced $4.60. The COT report showed that managed money added 4,233 contracts to their long positions and also added 2,503 contracts to their short positions. Commercial interests liquidated 524 contracts of their long positions and also liquidated 3,775 contracts of their short positions. As of the latest report, managed money is long gold by a ratio of 1.90:1, which is the same as last week’s 1.91:1, but above the ratio of 2 weeks ago of 1.70:1.

Silver:

For the week, July silver gained 21.1 cents. The COT report showed that managed money liquidated 151 contracts of their long positions and added 2,440 contracts to their short positions. Commercial interests liquidated 1,842 contracts of their long positions and also liquidated 1,222 contracts of their short positions. As of the latest report, managed money is short silver by a ratio of 1.03:1, which is a reversal from the previous week when managed money was long by a ratio of 1.08:1 and the previous week when they were long by a ratio of 1.03:1.

COT Report June 5-June  11   Year to Date
September palladium -0.07%        +3.98%
July platinum              -0.84%         -6.54%
August gold                  -1.57%        -17.40%
July silver                     -3.85%       -27.49%
July copper                  -5.19%        -12.94% 

Canadian dollar: On June 14, the September Canadian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, the September Canadian dollar gained 42 points. The COT report showed that leveraged funds liquidated 5,063 contracts of their long positions and also liquidated 8,322 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 5.66:1, which is up substantially from the previous week of 4.24:1 and the ratio of 2 weeks ago of 3.00:1.

Australian dollar:

For the week, the September Australian dollar gained 1.03 cents. The COT report showed that leveraged funds liquidated 3,261 contracts of their long positions and also liquidated 661 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 2.03:1, which is up from the previous week of 1.89:1 and the ratio of 2 weeks ago when leveraged funds were short by 1.38:1.

Swiss franc:

For the week, the September Swiss franc gained 1.46 cents. The COT report showed that leveraged funds liquidated 332 contracts of their long positions and also liquidated 4,262 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 3.23:1, which is down from the previous week of 3.68:1, but up from the ratio of 2 weeks ago of 2.85:1.

British pound:

For the week, the September British pound gained 1.44 cents. The COT report showed that leveraged funds added 6,280 contracts to their long positions and liquidated 14,567 contracts of their short positions. As of the latest COT report, leveraged funds are short by a ratio of 2.81:1, which is down significantly from the previous week of 3.95:1 and the ratio of 2 weeks ago of 3.20:1.

Euro:

For the week, the September euro advanced 1.17 cents. The COT report showed that leveraged funds added a massive 22,012 contracts to their long positions and liquidated a massive 17,252 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 1.04:1, which is down dramatically from the previous week when they were short by a ratio of 2.10:1 and the ratio of 2 weeks ago of 2.86:1.

Japanese yen:

For the week, the September yen gained 342 points. The COT report showed that leveraged funds added 4,972 contracts to their long positions and liquidated 9,807 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 1.87:1, which is down from the previous week of 2.37:1 and the ratio of 2 weeks ago of 2.68:1.

The bulk of the recent rally in the yen, euro, British pound, Canadian dollar and Swiss franc began on May 29. In the table below, we have calculated the appreciation of those currencies along with the open interest increase/decrease from May 29 through June 13. During the May 29 through June 13 time frame, open interest in the yen increased approximately 10%, which was the best percentage open interest increase of the 5 currencies listed below. The Swiss franc had the worse performance with a 9.28% decrease in open interest as the Swiss franc rallied 5.57%. Despite the massive rally in the franc, the short to long ratio is the second highest among the group. However, on a year to date basis, the Swiss franc is outperforming the other currencies (-1.25%) with the exception of the euro (+0.86%). In short, professional currency speculators are on the wrong side of the Swiss franc.

On June 7, the June Swiss franc generated a short-term buy signal and the September Swiss franc generated an intermediate term buy signal on June 11. As of June 14, the euro, British pound and Swiss franc are on short and intermediate term buy signals. The yen is on a short-term buy signal and is close to generating an intermediate term buy signal. The Canadian dollar is on a short-term buy signal, but remains on an intermediate term sell signal. All of these are massively overbought and due for a good-sized correction. Do not chase the markets. Wait for a correction.

Performance May 29-June 13  Tot open Interest Increase/Dec   COT short to long ratio (June 11 tabulation date)

June Japanese yen  +7.62%          + 25,316 contracts                                     1.87:1
June Swiss franc     +5.57%               – 5951    ”                                                3.23:1 
June pound             +4.22%              +5609    ”                                                2.81:1
June euro                +4.06%              +6081     ”                                               1.04:1
June Canadian $    +2.02%              +5496     ”                                               5.66:1         

Dollar index:

For the week, the September dollar index lost 1.09 points. The COT report showed that leveraged funds added 655 contracts to their long positions and liquidated 6,897 contracts of their short positions. As of the latest report, leveraged funds are long the dollar index by a ratio of 1.16:1, which is a complete reversal from the previous week when they were short by a ratio of 1.06:1 and the ratio of 2 weeks ago when they were short by 1.12:1.

COT Report June 5-June  11   Year to Date
September yen      +4.06%           -8.27%
September franc    +2.44%           -1.25%
September pound  +2.20%           -3.31%
September euro     +1.72%           +0.86%
September CAD $  +1.57%            -1.83%
September AUD $   -1.94%           -6.50%
September $ index  -2.13%          +0.84%   

S&P 500 E mini:

For the week, the September S&P 500 E mini lost 14.30 points. The COT report showed that leveraged funds liquidated 33,880 contracts of their long positions and also liquidated 45,229 contracts of their short positions. As of the latest report, leveraged funds are short the E mini by a ratio of 1.78:1, which is about the same as the previous week of 1.80:1 and the ratio of 2 weeks ago of 1.85:1.