Weekend Wrap for April 20, 2014

The COT reporting period is from April 9 through April 15.

Soybeans:

For the week, May soybeans advanced 51.00 cents, July +55.00, new crop November + 24.50. The COT report revealed that managed money added 5,183 contracts to their long positions and liquidated 3,511 contracts of their short positions. Commercial interests added 3,098 contracts to their long positions and also added 9,477 contracts to their short positions. As of the latest report, managed money is long soybeans by ratio 7.42:1, which is up from the previous week of 6.44:1, but down from the ratio of 2 weeks ago of 7.90:1.

Soybean meal:

For the week, May soybean meal advanced $15.40, July +14.90, new crop December +5.80. The COT report revealed that managed money added 4,928 contracts to their long positions and also added 680 contracts to their short positions. Commercial interests liquidated 5,599 contracts of their long positions and also liquidated 502 contracts of their short positions. As of the latest report, managed money is long soybean meal by ratio of 4.39:1, which is up slightly from the previous week of 4.30:1 and the ratio of 2 weeks ago of 4.18:1.

Soybean oil: On April 15, May and July soybean oil generated a short-term buy signal, which reversed the short-term sell signal of March 20. May and July soybean oil remains on an intermediate term buy signal.

For the week, May soybean oil advanced 1.31 cents, July +1.40, new crop December +1.03. The COT report revealed that managed money added 5,204 contracts to their long positions and liquidated 8,694 contracts of their short positions. Commercial interests liquidated 689 contracts of their long positions and added 11,182 contracts to their short positions. As of the latest report, managed money is long soybean oil by ratio of 1.60:1, which is up from the previous week of 1.22:1 and the ratio of 2 weeks ago of 1.22:1. The current ratio is the highest since the COT tabulation date of March 18 when managed money was long soybean oil by 1.77:1.

Corn:

For the week, May corn lost 3.75 cents, July -4.00, new crop December -2.50. The COT report revealed that managed money liquidated 6,411 contracts of their long positions and added 11,810 contracts to their short positions. Commercial interests added 7,593 contracts to their long positions and liquidated 4,388 contracts of their short positions. As of the latest report, managed money is long corn by ratio of 5.75:1, which is down substantially from the previous week of 7.50:1 and the ratio of 2 weeks ago of 8.10:1. The current ratio is the lowest since the COT tabulation date of March 25, 2014 when managed money was long corn by ratio of 4.82:1.

We received the first sign of bullish disillusionment by managed money when the April 8 COT report was released. This report showed for the 1st time that managed money with liquidated long positions and added to short positions. This week’s report confirmed the sentiments of the April 8 report. Thus far in the 2nd quarter, July corn has lost 1.23% and is in last place for performance in the 2nd quarter of the grains we follow. If we examine performance for July corn for the past month, it is in 2nd to the last place with a gain of 16.50 cents, or +3.41% with July Chicago wheat in last place with a gain of 16.50 cents or a gain of 2.48%. Some money has been made by longs during the past month but it has been minimal and as we have observed in the past: when markets stop going up, they start going down. July corn remains on a short and intermediate term buy signal. Stand aside.

Chicago wheat:

For the week, May Chicago wheat advanced 31.00 cents, July +30.75, new crop December +29.25. The COT report revealed that managed money liquidated 4,617 contracts of their long positions and also liquidated 298 contracts of their short positions. Commercial interests added 2,743 contracts to their long positions and also added 788 contracts to their short positions. As of the latest report, managed money is long Chicago wheat by ratio of 1.80:1, which is down from the previous week of 1.87:1 and the ratio of 2 weeks ago of 1.95:1.

Kansas City wheat:

For the week, May Kansas City wheat advanced 38.50 cents, July +39.00, new crop December +35.75. The COT report revealed that managed money liquidated 4,913 contracts of their long positions and added 442 contracts to their short positions. Commercial interests added 3,093 contracts to their long positions and liquidated 2,599 contracts of their short positions. As of the latest report, managed money is long Kansas City wheat by ratio of 8.68:1, which is down significantly from the previous week of 10.72: 1 and the ratio of 2 weeks ago of 14.53:1. The current ratio is the lowest since the COT tabulation date of March 18 when managed money was long Kansas City wheat by ratio of 7.14:1.

In the 2nd quarter through April 17, July soybean oil is the leader with a gain of 7.46%, July soybeans +5.09%, July soybean meal +3.11%, July Kansas City wheat -0.03%, July Chicago wheat -0.36%, July corn -1.23%.

Year to date, July soybean meal is the leader with a gain of 19.23%, July Kansas City wheat +18.88%, July soybeans +18.80%, July corn +14.53%, July Chicago wheat +13.34%, July soybean oil +9.53%.

Cotton:

For the week, May cotton advanced 1.15 cents, July +1.89, new crop December +47 points. The COT report revealed that managed money liquidated 3,616 contracts of their long positions and added 2,493 contracts to their short positions. Commercial interests added 3,846 contracts to their long positions and liquidated 5,243 contracts of their short positions. As of the latest report, managed money is long cotton by ratio of 5.34:1, which is down substantially from the previous week of 7.15:1 and the ratio of 2 weeks ago of 7.64:1. The current ratio is the lowest since the COT tabulation date of February 4 when managed money was long cotton by ratio of 4.48:1. Note that commercial interests and managed money were doing the opposite in this week’s report.

Sugar #11:

For the week, May sugar lost 14 points, July -13, October -5. The COT report revealed that managed money liquidated 2,259 contracts of their long positions and added 10,203 contracts to their short positions. Commercial interests added 1,089 contracts to their long positions and also added 10,982 contracts to their short positions. As of the latest report, managed money is long sugar by ratio of 2.94:1, which is down substantially from the previous week of 3.54:1 and the ratio of 2 weeks ago of 3.37:1.

Coffee:

For the week, May coffee closed unchanged, July +55 points, September +60. The COT report revealed that managed money liquidated 1,739 contracts of their long positions and also liquidated 2,424 contracts of their short positions. Commercial interests liquidated 43 contracts of their long positions and added 514 contracts to their short positions. As of the latest report, managed money is long coffee by a stratospheric ratio of 9.40:1, which is substantially above the previous week of 6.48:1 and the ratio of 2 weeks ago of 6.27:1.

The current ratio is the highest since the bull market began in late January. July coffee made its 52-week high on March 12, 2014 at $2.11.50 and the long to short ratio in the COT report of March 18 was 6.69:1. In short, managed money is far more bullish on coffee than mid March even though coffee is trading 3.50% lower on April 17 than March 12. The increase in the ratio was due to the liquidation of short positions

Cocoa:

For the week, May cocoa advanced $14.00, July +21.00 September +17.00. The COT report revealed that managed money liquidated 2,938 contracts of their long positions and added 1,122 contracts to their short positions. Commercial interests added 2,288 contracts to their long positions and also added 1,916 contracts to their short positions. As of the latest report, managed money is long cocoa by ratio 4.07:1, which is down significantly from the previous week of 4.41:1 and the ratio of 2 weeks ago of 4.53:1. The current ratio is the lowest of 2014.

In the 2nd quarter through April 17, July coffee is the leader with a gain of 13.39%, July Cocoa +1.75%, July cotton -1.29%, July sugar -14.41%.

Year to date, July coffee is the leader with a gain of 77.32%, July Cocoa +10.87%, July cotton +9.95%, July sugar +3.59%.

Live cattle:

For the week, April cattle lost 65 points, June -1.40 cents, August -95 points. The COT report revealed that managed money added only 21 contracts to their long positions and also added 1,031 contracts to their short positions. Commercial interests added 1,203 contracts to their long positions and liquidated 983 contracts of their short positions. As of the latest report, managed money is long cattle by a ratio of 15.44:1, which is down from the previous week of 17.30:1 and above the ratio of 2 weeks ago of 13.09:1.

Lean hogs:

For the week, June lean hogs advanced 3.60 cents, July +5.52, August +5.30. The COT report revealed that managed money added 878 contracts to their long positions and liquidated 1,183 contracts of their short positions. Commercial interests added 1,357 contracts to their long positions and also added 613 contracts to their short positions. As of the latest report, managed money is long hogs by a stratospheric ratio of 21.20:1, which is up dramatically from the previous week of 15.67:1 and the ratio of 2 weeks ago of 16.89:1.

The current ratio is the highest of 2014. The massive increase in the long to short ratio was due to the sizable liquidation of short positions by managed money. In the current report, managed money is holding 74,397 contracts long and only 3,510 contracts short. We advise against being long hogs at this juncture and for the market to resume its uptrend, the low for the day must be above 1.26350. One final point… Rarely, has OIA seen a long to short ratio above 20:1 in any commodity. This is another cautionary sign for anyone long the market.

In the 2nd quarter through April 17, June hogs is the leader with a loss of 1.85%, June cattle -2.77%.

Year to date, June hogs is the leader with a gain of 24.64%, June cattle +3.82%.

WTI crude oil:

For the week, May WTI crude oil advanced 56 cents, June +75, July +84. The COT report revealed that managed money added 12,991 contracts to their long positions and added 1,511 contracts to their short positions. Commercial interests added 7,122 contracts to their long positions and also added 10,418 contracts to their short positions. As of the latest report, managed money is long crude oil by ratio of 11.23:1, which is down slightly from the previous week of 11.36:1, but substantially above the ratio of 2 weeks ago of 7.51:1.

Brent crude oil: On April 15, June Brent crude oil generated a short and intermediate term buy signal.

Heating oil: On May heating oil generated a short and intermediate term buy signal.

For the week, May heating oil advanced 7.50 cents, June +7.42, July + 7.07. The COT report revealed that managed money added 7,892 contracts to their long positions and also added 2,935 contracts to their short positions. Commercial interests added 8,894 contracts to their long positions and also added 7,813 contracts to their short positions. As of the latest report, managed money is long heating oil by ratio of 1.92:1, which is up slightly from the previous week of 1.81:1, but down from the ratio of 2 weeks ago of 2.31:1.

Gasoline:

For the week, May gasoline advanced 4.03 cents, June +4.66, July + 4.88. The COT report revealed that managed money added 14,276 contracts to their long positions and liquidated 1,462 contracts of their short positions. Commercial interests added 2,080 contracts to their long positions and also added 11,876 contracts to their short positions. As of the latest report, managed money is long gasoline by a ratio of 6.35:1, which is up substantially from the previous week of 4.78:1 and the ratio of 2 weeks ago of 4.86:1. The current ratio is the highest since the COT tabulation date of January 7, 2014 when managed money was long gasoline by a ratio of 8 71:1.

Natural gas:

For the week, May natural gas advanced 12.1 cents, June +11.9, July +10.7. The COT report revealed that managed money added 4,910 contracts to their long positions and also added 1,660 contracts to their short positions. Commercial interests added 17,052 contracts to their long positions and also liquidated 17,359 contracts of their short positions. As of the latest report, managed money is long natural gas by ratio of 1.68:1, which is up slightly from the previous week of 1.66:1 and the ratio of 2 weeks ago of 1.54:1. The ratio of 2 weeks ago (1.54:1) is the lowest long to short ratio seen in 2014.

Natural gas is positioned to advance in the week ahead. The long to short ratio is pinned at the very low-end of its range during 2014, which means there is a surplus of speculators who have not entered the market and will do so as natural gas continues to advance. On April 10, May natural gas generated a short-term buy signal, and we advised clients to wait for the pullback of 1-3 days before initiating bullish positions. In the April 14 report, after May natural gas had corrected over a 3 day period, we advised clients to initiate bullish positions. OIA also stated, we didn’t think May natural gas would trade much below $4.475.

From the April 14 report:

“Natural gas: OIA recommends the initiation of bullish positions in natural gas. We recommend using options due to natural gas’ volatility. Although we do not have a an exit point for the trade, May natural gas should not trade significantly below $4.475.”

“We see a pattern of volume expansion on price advances and volume contraction on price declines, which is positive. As this report is being compiled on April 15, May natural gas is trading unchanged on the day after making a daily low of $4.511, which is the lowest print since April 9 ($4.498). On April 10, May natural gas generated a short-term sell signal, which reversed the short-term sell signal generated on March 12. Since then, the market has conformed to the 3 day pullback protocol and April 15 is the 3rd day. Natural gas remains on a short and intermediate term buy signal.”

In the 2nd quarter through April 17, May natural gas is the leader with a gain of 8.35%, June gasoline +4.80%, June WTI crude oil +2.87%, June heating oil +2.75%, June Brent crude oil +0.92%, June ethanol – 18.84%.

Year to date, May natural gas is the leader with a gain of 15.14%, June ethanol + 26.49%, June WTI crude oil +6.50%, June gasoline +3.49%, June heating oil -0.66%, June Brent crude oil -1.20%.

Copper:

For the week, July copper advanced 20 points. The COT report revealed that managed money liquidated 152 contracts of their long positions and added 1,301 contracts to their short positions. Commercial interests added 6,609 contracts to their long positions and also added 5,136 contracts to their short positions. As of the latest report, managed money is short copper by ratio of 1.51:1, which is up slightly from the previous week of 1.46:1, but down from the ratio of 2 weeks ago of 1.68:1.

Palladium:

For the week, June palladium advanced 30 cents. The COT report revealed that managed money added 98 contracts to their long positions and liquidated 433 contracts of their short positions. Commercial interests liquidated 70 contracts of their long positions and added 751 contracts to their short positions. As of the latest report, managed money is long palladium by ratio of 5.68:1, which is up from the previous week of 5.11:1 and the ratio of 2 weeks ago of 4.59:1.

Platinum: On April 16, July platinum generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, July platinum lost $33.50. The COT report revealed that managed money added 248 contracts to their long positions and liquidated 870 contracts of their short positions. Commercial interests liquidated 311 contracts of their long positions and also liquidated 584 contracts of their short positions. As of the latest report, managed money is long platinum by ratio 8.34:1, which is up from the previous week of 6.92:1 and up substantially from the ratio of 2 weeks ago of 5.73:1. The current ratio is the highest since the COT report of March 11 when managed money was long platinum by ratio of 8.76:1.

Gold: On April 14, June gold generated a short-term buy signal and remains on an intermediate term buy signal.

In the April 14 report (written on April 15), OIA recommended the initiation of bullish positions and to use the April 15 low of 1284.40 as the exit point. On Thursday April 17, we recommended the liquidation of bullish  positions because it appears imminent gold will generate a sell signal. The buy signal generated on April 14 was false.

For the week, June gold lost $25.10. The COT report revealed that managed money liquidated 4,274 contracts of their long positions and added 4,263 contracts to their short positions. Commercial interests added 3,488 contracts to their long positions and liquidated 5,796 contracts of their short positions. As of the latest report, managed money is long gold by ratio of 3.25:1, which is down from the previous week of 3.89: 1 and is down substantially from the ratio of 2 weeks ago of 4.45:1.

The current ratio is below the ratio tabulated from the COT report of February 25 when managed money was long by ratio of 4.10:1, but above the ratio tabulated on February 18 when managed money was long gold by ratio of 2.26:1.

Silver:

For the week, July silver lost 35.00 cents. The COT report revealed that managed money added 159 contracts to their long positions and also added 3,386 contracts to their short positions. Commercial interests added 749 contracts to their long positions and liquidated 906 contracts of their short positions. As of the latest report, managed money is long silver by ratio of 1.18:1, which is down significantly from the previous week of 1.33:1 and the ratio of 2 weeks ago of 1.34:1.

In the 2nd quarter through April 17, June palladium is the leader with a gain of 2.80%, June gold +0.76%, July copper +0.40%, July platinum -0.35%, July silver -1.21%.

Year to date, June palladium is the leader with a gain of 10.91%, June gold +7.57%, July platinum +2.84%, July silver +0.99%, July copper -10.00%.

Canadian dollar:

For the week, the June Canadian dollar lost 33 pips. The COT report revealed that leveraged funds added 2 contracts to their long positions and also added 1,831 contracts to their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio of 2.09:1, which is up slightly from the previous week of 2.03:1 and the ratio of 2 weeks ago of 2.07:1.

Australian dollar:

For the week, the June Australian dollar lost 66 pips. The COT report revealed that leveraged funds added 3,050 contracts to their long positions and liquidated 2,160 contracts of their short positions. As of the latest report, managed money is long the Australian dollar by ratio of 1.78:1, which is up from the previous week of 1.51:1 and up substantially from the ratio of 2 weeks ago of 1.16:1.

Swiss franc:

For the week, the June Swiss franc lost 91 pips. The COT report revealed that leveraged funds added 4,630 contracts to their long positions and also added 3,542 contracts to their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio 1.34:1, which is the same as the previous week of 1.35:1, but down slightly from the ratio of 2 weeks ago of 1.50:1.

British pound:

For the week, the June British pound advanced 53 pips. The COT report revealed that leveraged funds liquidated 1,568 contracts of their long positions and also liquidated 7,239 contracts of their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 5.14:1, which is up significantly from the previous week of 4.18:1 and the ratio of 2 weeks ago of 4.25:1. The hefty increase in the current ratio is due to the liquidation of short positions by leveraged funds.

Euro:

For the week, the June euro lost 68 pips. The COT report revealed that leveraged funds added 14,063 contracts to their long positions and also added 6,707 contracts to their short positions. As of the latest report, leveraged funds are long the euro by ratio of 1.93:1, which is up slightly from the previous week of 1.90:1, but down from the ratio of 2 weeks ago of 2.40:1.

Yen:

For the week, the June yen lost 79 pips. The COT report revealed that leveraged funds liquidated 1,406 contracts of their long positions and also liquidated 18,367 contracts of their short positions. As of the latest report, leveraged funds are short the yen by a ratio of 3.15:1, which is down significantly from the previous week of 3.73:1, but up slightly from the ratio of 2 weeks ago of 3.02:1.

Dollar index:

For the week, the June dollar index advanced 38 points. The COT report revealed that leveraged funds added 6,799 contracts to their long positions and also added 1,207 contracts to their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 2.63:1, which is down dramatically from the previous week of 5.53:1 and the ratio of 2 weeks ago of 6.91:1.

In the 2nd quarter through April 17, the June British pound is the leader with a gain of 0.77%, June yen +0.76%, June Australian dollar + 0.72%, June Canadian dollar +0.41%, June euro +0.31%, June Swiss franc + 0.19%, June dollar index – 0.39%.

Year to date, the June Australian dollar is the leader with a gain of 5.23%, June yen +2.71%, June British pound +1.48%, June Swiss franc +0.65%, June euro +0.20%, June dollar index -0.52%.

S&P 500: (x250)

For the week, the June S&P 500 futures contract advanced 46.20 points. The COT report revealed that leveraged funds liquidated 881 contracts of their long positions and added 5,468 contracts to their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 2.13:1, which is up dramatically from the previous week of 1.14:1 and the ratio of 2 weeks ago of 1.55:1.

In the 2nd quarter through April 17, the New York Composite Index was the leader with a gain of 0.05%, Dow Jones Industrial Average -0.30%, S&P 500 cash index -0.40%, NASDAQ 100 cash index -1.70%, S&P 400 cash index -1.96%, Russell 2000 cash index – 3.00%.

Year to date, the New York Composite Index is the leader with a gain of 1.27%, S&P 500 cash index +0.89%, S&P 400 cash index +0.66%, Dow Jones Industrial Average -1.01%, NASDAQ 100 cash index -1.60%, Russell 2000 cash index -2.21%.

From the April 13 weekend Wrap:

“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.”

The data in the April 13 Weekend Wrap was based upon the April 11 close, which was the low point of the move for the broad indices and corresponding sectors. For comparison purposes we are providing data that shows how far the sectors are from their 52-week highs based upon the April 17 close. In this way, clients can readily discern the relative strength of various sectors. 

Percentage decrease from the 52-week high for each sector on April 11: financial – 6.10%, healthcare -7.72%, energy -2.80%, technology -5.21%, telecommunications -8.84%, consumer discretionary -7.99%, consumer staples -1.98%, materials -4.76%, industrials -4.69%.

Percentage decrease from the 52-week high for each sector on April 17: financial -3.61%, healthcare – 5.74%, energy -0.25%, technology -3.06%, telecommunications -7.08%, consumer discretionary -5.73%, consumer staples -0.04%, materials -1.79%, industrials -1.27%.

Energy and consumer staples were the outperformers from their 52-week highs through April 11 and continued to be the leaders through April 17 after the S&P 500 rallied for 4 consecutive days.

We suggest that long positions in stocks and ETFS be restricted to the energy and consumer staples sectors. However, our preference is the energy sector because it has been out of favor, many stocks pay sizable dividends, and it is a far less crowded trade than consumer staples.

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