Weekend Wrap for April 13, 2014

Soybeans:

For the week, May soybeans lost 10.75 cents, July -7.75, and new crop November +6.25. The COT report revealed that managed money liquidated 6,746 contracts of their long positions and added 5,083 contracts to their short positions. Commercial interests added 2,334 contracts to their long positions and liquidated 8,241 contracts of their short positions. As of the latest report, managed money is long soybeans by ratio of 6.44:1, which is down substantially from the previous week of 7.90:1 and the ratio of 2 weeks ago of 8.90:1. Remarkably, the current ratio is the lowest since the COT tabulation date of January 28, 2014 when the ratio stood at 5.59:1.

Interestingly, managed money has become less bullish during the past 3 COT reporting periods. The long to short ratio topped out at 9.50:1 on February 18 and has been moving lower ever since. During the 3 reporting periods, (March 19-April 8) , May soybeans advanced 64.25 cents or +4.53%. This week’s price action will likely reinforce the declining bullish sentiment of managed money.

Soybean meal:

For the week, May soybean meal lost $6.20, July -3.80, new crop December +1.30. The COT report revealed that managed money liquidated 940 contracts of their long positions and also liquidated 809 contracts of their short positions. Commercial interests added 2,823 contracts to their long positions and added only 24 contracts to their short positions. As of the latest report, managed money is long soybean meal by ratio of 4.30:1, which is up slightly from the previous week of 4.18:1 and the ratio of 2 weeks ago of 4.17:1.

Soybean oil:

For the week, May soybean oil advanced 53 points, July +49, new crop December +74. The COT report revealed that managed money liquidated 2,036 contracts of their long positions and also liquidated 1,789 contracts of their short positions. Commercial interests added 8,422 contracts to their long positions and also added 12,547 contracts to their short positions. As of the latest report, managed money is long soybean oil by ratio of 1.22:1, which is exactly the same ratio as the previous week (1.22:1), but is below the ratio of 2 weeks ago of 1.46:1.

Corn:

For the week, May corn lost 3.25 cents, July -3.00, new crop December – 7.50. The COT report revealed that managed money liquidated 3,747 contracts of their long positions and added 2,731 contracts to their short positions. Commercial interests added 7,634 contracts to their long positions and also added 4,117 contracts to their short positions. As of the latest report, managed money is long corn by ratio of 7.50:1, which is down from the previous week of 8.10:1, but above the ratio of 2 weeks ago of 4.82:1.

Based upon the latest reading of the COT report, it would appear that managed money has finally gotten their fill of corn.

Chicago wheat:

For the week, May Chicago wheat lost 9.50 cents, July -8.25, new crop December -6.50. The COT report revealed that managed money added 281 contracts to their long positions and also added 2,233 contracts to their short positions. Commercial interests liquidated 855 contracts of their long positions and added 704 contracts to their short positions. As of the latest report, managed money is long Chicago wheat by ratio of 1.87:1, which is down slightly from the previous week of 1.95:1, but above the ratio of 2 weeks ago of 1.68:1.

Kansas City wheat: On April 10, May Kansas City wheat generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, May Kansas City wheat lost 14.25 cents, July -12.50, new crop December -9.75. The COT report revealed that managed money liquidated 3,184 contracts of their long positions and added 904 contracts to their short positions. Commercial interests added 1,902 contracts to their long positions and liquidated 3,117 contracts of their short positions. As of the latest report, managed money is long Kansas City wheat by ratio of 10.72:1, which is down dramatically from the previous week of 14.53:1 and down slightly from the ratio of 2 weeks ago of 11.26:1.

In the current quarter, May soybean oil is the leader with a gain of 4.16%, May soybeans -0.07%, May corn -0.70%, May soybean meal -1.34%, May Chicago wheat -5.31%, May Kansas City wheat -5.82%.

Year to date, May soybean meal is the leader with a gain of 16.02%, May corn + 15.86%, May soybeans +14.57%, May Kansas City wheat +11.90%, May Chicago wheat +7.88%, May soybean oil +6.61%.

Cotton: On April 10, May cotton generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, May cotton lost 3.38 cents, July – 2.22, new crop December +1.55. The COT report revealed that managed money liquidated 3,377 contracts of their long positions and added 160 contracts to their short positions. Commercial interests added 1,101 contracts to their long positions and liquidated 204 contracts of their short positions. As of the latest report, managed money is long cotton by ratio of 7.15:1, which is down from the previous week of 7.64:1 and the ratio of 2 weeks ago of 10.99:1.

The current ratio is lower than 7.45:1, the ratio derived from the COT report of February 11. The ratio derived from the COT report of February 4, 2014 stood at 4.48:1. The high for the ratio was 12.87:1 in the COT report of March 18.

Sugar #11:

For the week, May sugar lost 55 points, July -33, October – 21. The COT report revealed that managed money added 1,722 contracts to their long positions and liquidated 2,255 contracts of their short positions. Commercial interests liquidated 10,180 contracts of their long positions and also liquidated 4,061 contracts of their short positions. As of the latest report, managed money is long sugar by 3.54:1, which is above the previous week of 3.37:1 and substantially above the ratio of 2 weeks ago of 2.82:1.

The current ratio is the highest since managed money was long by a ratio of 3.54:1 in the COT report of November 19, 2013, but is below the November 12, 2013 ratio of 3.93:1. The time frame of the November 19, 2013 COT report was from November 13-November 19 and the trading range encompassed by this was from a low of 17.40 a high of 17.68. In short, managed money is currently as bullish as they were when prices were at approximately the same level several months ago. July sugar generated a short-term sell signal on April 2, and remains on an intermediate term buy signal.

On April 11, the May-July 2014 sugar spread closed at a 66 point premium to July, which is the highest premium for the July 2014 contract over May 2014 going back to April 16, 2013. This is very bearish.

Coffee:

For the week, May coffee advanced 16.20 cents, July +16.45, September +16.50. The COT report revealed that managed money liquidated 2,549 contracts of their long positions and also liquidated 652 contracts of their short positions. Commercial interests liquidated 5,915 contracts of their long positions and also liquidated 5,696 contracts of their short positions. As of the latest report, managed money is long coffee by ratio of 6.48:1, which is up slightly from the previous week of 6.27:1, but down from the ratio of 2 weeks ago of 7.24:1.

Cocoa:

For the week, May cocoa advanced $21.00, July +16.00, September +18.00. The COT report revealed that managed money liquidated 3,443 contracts of their long positions and also liquidated 396 contracts of their short positions. Commercial interests liquidated 1,331 contracts of their long positions and also liquidated 1,638 contracts of their short positions. As of the latest report, managed money is long cocoa by a ratio of 4.41:1, which is down slightly from the previous week of 4.53:1, but up slightly from the ratio of 2 weeks ago of 4.20:1.

The net long position of managed money has essentially been unchanged since the March 11 report (4.51:1). During this time (March 5-April 8) July cocoa has advanced 38.00, or +1.28%. Managed money does not seem to be interested in adding to long positions to any great extent.

In the current quarter, July coffee is the leader with a gain of 13.10%, July Cocoa + 1.08%, July cotton -4.81%, July sugar -5.46%.

Year to date, July coffee is the leader with a gain of 78.13%, July cocoa +9.98%, July cotton +5.47%, July sugar +1.45%.

Live cattle: On April 7, June live cattle generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, April live cattle advanced 1.80 cents, June +97 points, August +1.50 cents. The COT report revealed that managed money liquidated 1,253 contracts of their long positions and also liquidated 2,779 contracts of their short positions. Commercial interests liquidated 2,039 contracts of their long positions and added 6,851 contracts to their short positions. As of the latest report, managed money is long cattle by a stratospheric 17.38:1, which is up significantly from the previous week of 13.09:1 and the ratio of 2 weeks ago of 13.46:1. The increase in this week’s ratio is due to the liquidation of short positions by managed money.

Lean hogs:

For the week, April lean hogs advanced 1.77 cents, June + 10 points, August -55. The COT report revealed that managed money liquidated 1,943 contracts of their long positions and added 225 contracts to their short positions. Commercial interests liquidated 1,017 contracts of their long positions and also liquidated 3,490 contracts of their short positions. As of the latest report, managed money is long lean hogs by ratio of 15.67:1, which is down from the previous week of 16.89:1 and the ratio of 2 weeks ago of 17.54:1.

In the current quarter, June cattle is the leader with a decline of 1.25%, June lean hogs -4.68%.

Year to date, June lean hogs is the leader with a gain of 21.04%, June cattle + 4.91%.

WTI crude oil:

For the week, May WTI crude oil advanced $2.60, June +2.16, July +1.94. The COT report revealed that managed money added 11,900 contracts to their long positions and liquidated 14,230 contracts of their short positions. Commercial interests added 4,038 contracts to their long positions and also added 14,591 contracts to their short positions. As of the latest report, managed money is long WTI crude oil by a ratio of 11.36:1, which is up substantially from the previous week of 7.51:1 and the ratio of 2 weeks ago of 7.12:1. The current ratio is the highest since the COT report of March 11 when the ratio for that week was 12.49:1.

Brent crude oil: As of April 11, June Brent crude oil remains on a short and intermediate term sell signal.

Heating oil:

For the week, May heating oil advanced 2.53 cents, June + 2.48, July +2.43. The COT report revealed that managed money liquidated 4,045 contracts of their long positions and added 2,493 contracts to their short positions. Commercial interests liquidated 2,040 contracts of their long positions and also liquidated 2,873 contracts of their short positions. As of the latest report, managed money is long heating oil by ratio of 1.81:1, which is down significantly from the previous week of 2.31:1 and the ratio of 2 weeks ago of 2.49:1.

Gasoline: On April 8, May gasoline generated a short-term buy signal and remains on an intermediate term buy signal.

For the week, May gasoline advanced 8.31 cents, June +6.94, July +6.09. The COT report revealed that managed money liquidated 2,688 contracts of their long positions and also liquidated 317 contracts of their short positions. Commercial interests added 5,278 contracts to their long positions and also added 6,707 contracts to their short positions. As of the latest report, managed money is long gasoline by ratio of 4.78:1, which is down slightly from the previous week of 4.86:1, but above the ratio of 2 weeks ago of 3.75:1.

Natural gas: On April 10, May natural gas generated a short-term buy signal, which reversed the short-term sell signal generated on March 12. May natural gas remains on an intermediate term buy signal.

For the week, May natural gas advanced 18.1 cents, June +16.8, July + 16.7. The COT report revealed that managed money added 13,091 contracts to their long positions and liquidated 5,553 contracts of their short positions. Commercial interests added 5,373 contracts to their long positions and also added 5,093 contracts to their short positions. As of the latest report, managed money is long natural gas by ratio of 1.66:1, which is above the previous week of 1.54:1, but down from the ratio of 2 weeks ago of 1.78:1.

In the current quarter, May natural gas is the leader with a gain of 5.70%, May gasoline +2.91%, May WTI crude oil +1.86%, May heating oil +0.48%, June Brent crude oil -0.32%, May ethanol -11.70%.

Year to date, May ethanol is the leader with a gain of 37.62%, May natural gas +12.32%, May WTI crude oil +5.51%, May gasoline +1.62%, June Brent crude oil – 2.05%, June heating oil – 3.41%.

Copper:

For the week, May copper advanced 1.90 cents while the July contract gained 1.35. The COT report revealed that managed money added 198 contracts to their long positions and liquidated 6,151 contracts of their short positions. Commercial interests added 462 contracts to their long positions and also added 3,137 contracts to their short positions. As of the latest report, managed money is short copper by ratio of 1.46:1, which is down from the previous week of 1.68:1 and down substantially from the ratio of 2 weeks ago of 1.87:1.

The May-July 2014 copper spread is inverting similar to the action of March-May 2014 as the March contract neared expiration. During the current quarter, July copper is essentially unchanged and for July copper to generate a short-term buy signal, the low the day must be above $3.0323. Although copper has struggled to move higher, it has not been able to make a daily low above our key pivot point. Until this occurs, the market will trade sideways to lower.

From the April 6 Weekend Wrap:

“Copper has been in a long-term bear market, and rallied from a low of $2.877 on March 19 to a high of 3.0740 on April 2. For copper to generate a short-term buy signal, the low the day must be above 3.0348. Until this occurs the market should be traded from the short side.”

Palladium:

For the week, June palladium advanced 16.05. The COT report revealed that managed money liquidated 1,890 contracts of their long positions and also liquidated 920 contracts of their short positions. Commercial interests added 310 contracts to their long positions and also added 734 contracts to their short positions. As of the latest report, managed money is long palladium by ratio of 5.11:1, which is an increase from the previous week of 4.59:1 and the ratio of 2 weeks ago of 3.97:1.

Platinum: On April 11, July platinum generated a short-term buy signal and remains on an intermediate term buy signal.

For the week, July platinum gained $11.70. The COT report revealed that managed money added 912 contracts to their long positions and liquidated 931 contracts of their short positions. Commercial interests liquidated 1,240 contracts of their long positions and also liquidated 41 contracts of their short positions. As of the latest report, managed money is long platinum by ratio of 6.92:1, which is an increase from the previous week of 5.73:1, but down from the ratio of 2 weeks ago of 7.59:1.

Gold:

For the week, June gold advanced $15.50. The COT report revealed that managed money liquidated 8,241 contracts of their long positions and added 1,685 contracts to their short positions. Commercial interests added 354 contracts to their long positions and liquidated 510 contracts of their short positions. As of the latest report, managed money is long gold by ratio of 3.89:1, which is down from the previous week of 4.45:1 and down dramatically from the ratio of 2 weeks ago of 6.87:1.

The current ratio is slightly lower than 4.10:1, the ratio of the COT report of February 25, 2014.

Silver:

For the week, May silver closed unchanged. The COT report revealed that managed money added 87 contracts to their long positions and also added 403 contracts to their short positions. Commercial interests added 5,960 contracts to their long positions and also added 7,018 contracts to their short positions. As of the latest report, managed money is long silver by ratio of 1.33:1, which is nearly the same as the previous week of 1.34:1, but down from the ratio of 2 weeks ago of 1.56:1.

In the current quarter, June palladium is the leader with a gain of 3.90%, July platinum +2.73%, June gold +2.61%, July silver +0.65%, July copper + 0.15%.

Year to date, June palladium is the leader with a gain of 12.10%, June gold +9.55%, July platinum +6.01%, July silver +2.84%, July copper -10.23%.

Canadian dollar: On April 9, the June Canadian dollar generated an intermediate term buy signal after generating a short-term buy signal on April 1.

For the week, the June Canadian dollar advanced 17 pips. The COT report revealed that leveraged funds liquidated 149 contracts of their long positions and also liquidated 1,444 contracts of their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio 2.03:1, which is down slightly from the previous week of 2.07:1, but up from the ratio of 2 weeks ago of 1.65:1.

Australian dollar:

For the week, the June Australian dollar advanced 1.16 cents. The COT report revealed that managed money added 3,238 contracts to their long positions and liquidated 4,815 contracts of their short positions. As of the latest report, leveraged funds are long the Australian dollar by ratio of 1.51:1, which is up from the previous week of 1.16:1 and a complete reversal from the ratio of 2 weeks ago when leveraged funds were short by ratio of 1.39:1.

Swiss franc: On April 11, the June Swiss franc generated a short-term buy signal, which reversed the short-term sell signal of April 2. The June Swiss franc remains on an intermediate term buy signal.

For the week, the June Swiss franc advanced 2.13 cents. The COT report revealed that leveraged funds liquidated 5,506 contracts of their long positions and also liquidated 2,281 contracts of their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio of 1.35, which is down from the previous week of 1.50:1 and the ratio of 2 weeks ago of 1.57:1.

British pound: On April 9, the June British pound generated a short-term buy signal and remains on an intermediate term buy signal.

For the week, the June British pound advanced 1.68 cents. The COT report revealed that leveraged funds added 13,672 contracts to their long positions and also added 3,792 contracts to their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 4.18:1, which is down slightly from the previous week of 4.25:1 and down substantially from the ratio of 2 weeks ago of 5.00:1.

Euro: On April 10, the June euro generated a short-term buy signal, which reversed the short-term sell signal of April 3. The euro remains on an intermediate term buy signal.

For the week, the June euro gained 1.85 cents. The COT report revealed that leveraged funds liquidated 10,258 contracts of their long positions and added 4,243 contracts to their short positions. As of the latest report, leveraged funds are long the euro by ratio of 1.90:1, which is down from the previous week of 2.40:1 and the ratio of 2 weeks ago of 2.71:1.

Yen: On April 9, the June yen generated a short and intermediate term buy signal.

For the week, the June yen advanced 159 pips. The COT report revealed that leveraged funds liquidated 8,022 contracts of their long positions and also liquidated 6,904 contracts of their short positions. As of the latest report, leveraged funds are short the yen by ratio of 3.73:1, which is up from the previous week of 3.02:1 and the ratio of 2 weeks ago of 3.44:1.

We think that many speculative short sellers of the yen would be surprised to learn in the current quarter, the yen is the top performer of the major currencies and year to date is the second best performer.

Dollar index: On April 9, the June dollar index generated a short-term sell signal and remains on an intermediate term sell signal.

For the week, the June dollar index lost 1.05 points. The COT report revealed that leveraged funds liquidated 52 contracts of their long positions and also liquidated 8,307 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 5.53:1, which is down from the previous week of 6.91:1 and the ratio of 2 weeks ago of 7.38:1.

In the current quarter, the June yen is the leader with a gain of 1.54%, June Australian dollar + 1.43%, June Swiss franc +1.00%, June euro +0.81%, June Canadian dollar +0.78%, June British pound +0.46%, June dollar index -0.88%.

Year to date, the Australian dollar is the leader with a gain of 5.98%, June yen +3.50%, June Swiss franc +1.46%, June British pound +1.16%, June euro +0.70%, June dollar index -1.00%, June Canadian dollar -2.82%.

S&P 500 500: (250x) On April 11, the June S&P 500 E mini generated a short-term sell signal, but remains on an intermediate term buy signal. An intermediate term sell signal could be generated as early as tomorrow.

In the Weekend Wrap, we are changing from the S&P 500 E mini to the larger the S&P 500 futures contract, which we think gives clients a better idea of speculator sentiment. The E mini is used as a hedging vehicle and does not reflect the underlying sentiment of the market. The larger index seems to be far more accurate, and we welcome opinions on this subject.

For the week, the S&P 500 large futures contract lost 48.60 points. The COT report revealed that leveraged funds added 2,865 contracts to their long positions and also added 1,381 contracts to their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 1.14:1, which is down from the previous week of 1.55:1 and the ratio of 2 weeks ago of 2.09:1.

In the current quarter, the New York Composite Index is the leader with a decline of 2.34%, Dow Jones Industrial Average cash index -2.60%, S&P 500 cash index -3.03%, NASDAQ 100 cash index -4.14%, S&P 400 cash index -4.35%, Russell 2000 cash index -5.25%.

Year to date, the New York Composite Index is the leader with a decline of -1.15%, S&P 500 cash index -1.77%, S&P 400 cash index -1.79%, Dow Jones Industrial Average cash index -3.32%, NASDAQ 100 cash index -4.04%, Russell 2000 cash index -4.49%.

Is interesting to note that with all the hand wringing about the decline in the indices, the fact remains for most of them the decline began around April 4 and it was only the NASDAQ 100, Russell 2000 and the S&P 600 that fell in March. For example, the NASDAQ 100 made its 52-week high on March 6 while the Russell 2000 accomplished this on March 4. The S&P 600 made its 52-week high on March 21. Since then through April 11, the NASDAQ 100 cash index has fallen 7.80% while the S&P 600 cash index has fallen 6.34% and the Russell 2000, -8.36%. Keep in mind, the calculations are made from the 52-week high, not from the closing prices on the day the high was made.

The Dow Jones transportation index made its 52-week high on April 3 and through April 11 has declined 4.58% while the Dow Jones Industrial Average topped out on April 4 and has declined 3.64% through April 11. The S&P 400 made its 52-week high on April 4 and has declined 5.75% through April 11. The S&P 500 made its 52-week high on April 4 and has fallen 4.30% through April 11 while the New York Composite Index made its 52-week high on the same day as the S&P 500 and has fallen 3.64% through April 11.

Notably, the financial sector of the S&P 500 topped out on March 21 and through April 11 has fallen 6.10%. Healthcare topped out on March 6 and has fallen 7.72% through April 11. We attribute a good portion of the negative performance of healthcare to the crash of the biotech sector, which is part of the healthcare sector. Consumer discretionary was one of the worst sectors of the S&P 500 losing 7.99% after making its 52-week high on March 7. Both material and industrial sectors topped out on April 4 and through April 11 have fallen 4.76% and 4.69% respectively.

The best performing sectors after making their 52-week highs have been consumer staples, which made its 52-week high on April 10 and has fallen 1.98% from that high through April 11. The second best performer was the energy sector which made its 52-week high on April 4 and from that high through April 11 has fallen 2.80%.

The technology sector made its 52-week high on April 3, which again reinforces the weakness in the NASDAQ 100 was caused primarily by biotech as the NASDAQ 100 made its 52-week high on March 6.

The worst performing sector of the S&P was telecommunications, which has fallen 8.84% from the 52-week high made on April 23, 2013.

We think lower prices are in store for equities and would advise against making new commitments to the long side at this juncture.

 10 year Treasury Note: On April 10, the June 10 year Treasury Note generated a short-term buy signal, but remains on an intermediate term sell signal.