The USDA will release their supply and demand report WASDE) on April 9. This is a potential make or break report for soybeans and corn. Much buying by speculators has been based upon the USDA raising its exports for soybeans and corn. Regardless of whether exports are raised, the central question is: what USDA numbers are baked into current prices.

The COT reporting period spanned March 26-April 1.

Soybeans:

For the week, May soybeans advanced 37.25 cents, July +47.25, November +18.00. The COT report revealed that managed money added 5,213 contracts to their long positions and also added 3,600 contracts to their short positions. Managed money added 11,381 contracts to their long positions and also added 16,145 contracts to their short positions. As of the latest report, managed money is long soybeans by ratio of 7.90:1, which is down from the previous week of 8.90:1, but above the ratio of 2 weeks ago of 7.25:1.

Soybean meal:

For the week, May soybean meal advanced $10.70, July +13.20, December + 1.90. The COT report revealed that managed money added 1,480 contracts to their long positions and liquidated 70 contracts of their short positions. Commercial interests added 6,464 contracts to their long positions and also added 7,652 contracts to their short positions. As of the latest report, managed money is long soybean meal by ratio of 4.18:1, which is the same as the previous week of 4.17:1, but up from the ratio of 2 weeks ago of 3.88:1.

From March 31, the day of the planting intentions and quarterly grain stocks report through April 4, May soybeans have advanced 37.25 cents, or + 2.59% while new crop November soybeans advanced 18.00 cents, or +1.51%. 

Soybean oil:

For the week, May soybean oil advanced 1.09 cents, July +1.06, December +86 points. The COT report revealed that managed money liquidated 4,644 contracts of their long positions and added 5,466 contracts to their short positions. Commercial interests added 8,829 contracts to their long positions and also added 5,852 contracts to their short positions. As of the latest report, managed money is long soybean oil by ratio of 1.22:1, which is down from the previous week of 1.46:1 and the ratio of 2 weeks ago of 1.77:1.

Corn:

For the week, May corn advanced 9.75 cents, July +11.25, December +19.50. The COT report revealed that managed money added a hefty 13,663 contracts to their long positions and liquidated a massive 24,347 contracts of their short positions. Commercial interests added 3,555 contracts to their long positions and added a massive 63,262 contracts to their short positions. The addition of short positions by commercials is the largest number we have seen during the past year. As of the latest report, managed money is long by an unbelievable 8.10:1, which is up dramatically from the previous week of 4.82:1 and the ratio of 2 weeks ago of 4.41:1.

From the March 31, the day of the planting intentions and grain stocks report through April 4, May corn advanced 9.75 cents, or +1.98% while new crop December corn gained 19.50 cents, or +4.00%.

The massive increase in the current ratio from the previous week’s number occurred when corn moved only 21.00 cents during March 26-April 1. The current ratio is higher than the one recorded on October 30, 2012 when managed money held a net long position of 260,552 contracts and were long corn by ratio of 7.23:1. During that time, corn traded in a range of $7.30 to 7.60. During late August and September 2012, the net long position of manage money was higher than the current one. For example, on August 28, 2012 the net long position of managed money was 308,710 contracts, which represented a long to short ratio of 16.25:1. However, corn was trading in the low $8.00 range when this occurred. The fact remains, the current ratio represents a bullish outlook similar to the one held by managed money when corn was trading $2.00-2.50 higher.

The highest ratio occurred in the report of August 7, 2012 when managed money held a net long position of 281,242 contracts and the long to short ratio stood at 23.48:1

In the February 25 COT report managed money held a net long position of 102,380 contracts, or a long to short ratio of 1.68:1. By the report of April 1, this had exploded to a net long position of 283,043 contracts or an increase of 180,663 contracts net long representing a long to short ratio of 8.10:1.

On February 25, commercials held a net short position of 281,242 contracts or a short to long ratio of 1.88:1. By the March 25 report, the net short position of commercials increased to 450,724 contracts, an increase net gain of 169,482 contracts sold short, or a short to long ratio of 2.55:1.

In summary, from February 25 through April 1 managed money increased their net long position by 180,663 contracts and commercials increased their net short position by 169,482 contracts. During this time, May corn advanced 46.25 cents or 10.03%.

We are highlighting the battle between managed money and commercials to emphasize the point that although the increase in long positions has been moving corn higher, this is not likely to continue. Betting against commercials is similar to betting against the casino; you may win a battle(s), but most likely lose the war.

Chicago wheat:

For the week, May Chicago wheat lost 25.75 cents, July -22.75, December -18.00. The COT report revealed that managed money added 1,429 contracts to their long positions and liquidated 7,608 contracts of their short positions. Commercial interests added 3,697 contracts to their long positions and also added 2,719 contracts to their short positions. As of the latest report, managed money is long by an inexplicable 1.95:1, which is up significantly from the previous week of 1.68:1 and up dramatically from the ratio of 2 weeks ago of 1.39:1.

Remarkably, managed money is holding the largest net long position in Chicago wheat since the rally began on February 3 even though Chicago wheat traded in a range of $7.13 1/2 – 6.83 1/2 during the COT report and closed at 6.85 1/4 on April 1. This was the lowest close for the May contract since March 17 (6.74 1/2). The current ratio in Chicago wheat by managed money is baffling.

Kansas City wheat:

For the week, May Kansas City wheat lost 29.75 cents, July -25.25, December -20.50. The COT report revealed that managed money added 1,997 contracts to their long positions and liquidated 803 contracts of their short positions. Commercial interests liquidated 1,758 contracts of their long positions and added 264 contracts to their short positions. Amazingly, managed money is long KC wheat by ratio of 14.53:1, which is up significantly from the previous week of 11.26:1 and more than double the ratio of 2 weeks ago of 7.14:1. From March 12-April 1 (3 COT reports), May KC wheat advanced only 25.00 cents

Like Chicago wheat, the market positioning of managed money is beyond comprehension. For example, during the most recent COT period (March 26-April 1), KC wheat lost 4.83% while Chicago lost 3.25%, yet the net long position of managed money increased. If performance is measured for 2 COT periods (March 19-April 1), May KC wheat lost 1.28% and Chicago wheat lost 1.05%. In short, managed money in both Chicago and Kansas City wheat have been increasing long positions as prices have declined. As a result, we expect prices to continue falling until a significant portion of managed money longs get blown out. Of the commodities covered in this report, KC wheat has the highest ratio with the exception of  hogs (16.89:1).

Year to date, May soybean meal is the leader with a gain of 17.54%, May corn +16.62%, May soybeans +15.41%, May KC wheat +14.11% May Chicago wheat +9.44%, May soybean oil 5.27%

From March 1 through March 31, Chicago wheat was the leader with a gain of 15.77%, May KC wheat +13.35%, May corn +8.31%, May soybean meal +4.72%, May soybeans +3.54%, May soybean oil -3.28%.

Cotton:

For the week, May cotton lost 1.34 cents, July -94 points, December -1. The COT report revealed that managed money liquidated 1,425 contracts of their long positions and added 2,664 contracts to their short positions. Commercial interests added 640 contracts to their long positions and also added 1,186 contracts to their short positions. As of the latest report, managed money is long cotton by ratio of 7.64:1, which is down dramatically from the previous week of 10.99:1 and the ratio of 2 weeks ago of 12.87:1. The major addition of short positions was responsible for the decline in the ratio.

It appears likely that May cotton topped out on March 26 after making a high at 97.35, then reversing and closing 2.45 cents lower on very heavy volume of 56,095 contracts, which was the highest volume traded since February 13 (58,512 contracts). On the 26th, total open interest increased by 852 contracts, which is negative. On the following day (March 27), May cotton rallied 90 points on light volume of 17,409 contracts and total open interest declined by 297 contracts, again this is negative open interest action. On March 28, May cotton rallied for the 2nd day in a row, this time by 1.18 cents and total open interest declined by 1,008 contracts, which is negative open interest action relative to the price advance. From March 31 through April 3, total open interest increased by 587 contracts during which time May cotton declined by 2.76 cents. Bearish.

In short, ever since cotton topped out on March 26, open interest action has been negative, whether cotton was advancing or declining. For cotton to resume its advance, the low for the day must be at least 92.67. Until this occurs, cotton will struggle and based upon price and open interest action of the past several sessions is likely to generate a short-term sell signal. The USDA report on April 9 will likely determine the next major direction of cotton prices. At this juncture, we have no buy or sell recommendation, but would suggest that cotton be avoided until a signal is generated one way or the other. If a sell signal is generated, there will be plenty of fuel provided by managed money longs to send prices significantly lower.

One other bearish factor has occurred during the past couple of sessions and this has been the change of spreads from inversion to contango. For example, on March 31, the May-July 2014 spread closed at 3 point premium to July over May, which was the first time this occurred since January 29, 2014. On that date, May cotton closed at 86.24. On April 4 the May-July 2014 spread closed at a 27 point premium to July over May, which is the highest close for the spread since December 5, 2013 when the May-July 2014 spread closed at 34 point premium to July over May. The closing price for the May contract on December 5 was 79.24. Over many years, we have found that spreads often foretell the next major direction of a market. When a cotton spread is trading near levels last seen several months ago when current prices are significantly higher than they were 6 months ago, caution is required.

Sugar #11: On April 2, May sugar generated a short-term sell signal, which reversed the March 27 short-term buy signal. May sugar remains on an intermediate term buy signal area

For the week, May sugar lost 63 points, July -48, October -38. The COT report revealed that managed money liquidated 5,503 contracts of their long positions and also liquidated 12,833 contracts of their short positions. Commercial interests liquidated 3,436 contracts of their long positions and added 4,970 contracts to their short positions. As of the latest report, managed money is long sugar by ratio of 3.37:1, which is a significant advance from the previous week of 2.82:1 and the ratio of 2 weeks ago of 2.81:1. The hefty liquidation of short positions was responsible for the increase in this week’s ratio.

Coffee:

For the week, May coffee gained 4.40 cents, July +4.50, September +4.50. The COT report revealed that managed money liquidated 2,304 contracts of their long positions and added 737 contracts to their short positions. Commercial interests added 561 contracts to their long positions and liquidated 3,329 contracts of their short positions. As of the latest report, managed money is long coffee by ratio of 6.27:1, which is down from the previous week of 7.24:1 and the ratio of 2 weeks ago of 6.69:1.

Cocoa: On April 2, May Cocoa generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, May cocoa lost $17.00, July -11.00, December – 8.00. The COT report revealed managed money liquidated 1,338 contracts of their long positions and also liquidated 1,932 contracts of their short positions. Commercial interests added 1,114 contracts to their long positions and liquidated 3,231 contracts of their short positions. As of the latest report, managed money is long cocoa by ratio of 4.53:1, which is up slightly from the previous week of 4.20:1 and slightly below the ratio of 2 weeks ago of 4.56:1.

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 1) May Cocoa has advanced 44.00, or 6.20%. However, managed money does not seem to be interested in adding to long positions.

Year to date, May coffee is the leader with a gain of 63.79%, May cotton +9.48%, May cocoa +9.20%, May sugar +4.77%.

From March 1 through March 31, May cotton was the leader with a gain of 7.32%, May sugar +0.62%, May cocoa -0.07%, May coffee -1.33%.

Live cattle:

For the week, April live cattle lost 3.45 cents, June -3.55, August -2.80. The COT report revealed managed money added 1,842 contracts to their long positions and also added 439 contracts to their short positions. Commercial interests added 2,874 contracts to their long positions and also added 4,220 contracts to their short positions. As of the latest report, managed money is long cattle by ratio of 13.09:1, which is down from the previous week of 13.46:1 and the ratio of 2 weeks ago of 14.60:1

In the April 3 report, OIA recommended the liquidation of bullish positions advised in late December. A short-term sell signal is imminent.

Lean hogs:

For the week, April lean hogs lost 2.42 cents, June -9.02, August -8.82. The COT report revealed that managed money liquidated 1,619 contracts of their long positions and added 74 contracts to their short positions. Commercial interests liquidated 366 contracts of their long positions and also liquidated 919 contracts of their short positions. As of the latest report, managed money is long hogs by ratio of 16.89:1, which is down from the previous week of 17.54:1 and about the same as the ratio of 2 weeks ago of 16.81:1.

Year to date, April hogs is the leader with a gain of 35.81%, April cattle +4.15%.

From March 1 through March 31, April hogs was the leader with a gain of 17.92%, April cattle +2.46%.

WTI crude oil:

For the week, May WTI crude oil lost 53 cents, June -43, July -34. The COT report revealed that managed money added 10,065 contracts to their long positions and liquidated 1,064 contracts of their short positions. Commercial interests added 23,968 contracts to their long positions and also added 29,910 contracts to their short positions. As of the latest report, managed money is long WTI crude oil by ratio of 7.51:1, which is up from the previous week of 7.12:1, but down from the ratio of 2 weeks ago of 8.21:1.

Heating oil:

For the week, May heating oil lost 3.99 cents, June -3.74, July -3.71. The COT report revealed that managed money liquidated 770 contracts of their long positions and added 848 contracts to their short positions. Commercial interests liquidated 13,092 contracts of their long positions and also liquidated 16,983 contracts of their short positions. As of the latest report, managed money is long heating oil by ratio of 2.31:1, which is down from the previous week of 2.49:1 and the same as the ratio of 2 weeks ago of 2.30:1.

Gasoline:

For the week, May gasoline lost 54 points, June -1.15 cents, July -1.66. The COT report revealed that managed money liquidated 24 contracts of their long positions and also liquidated 4,520 contracts of their short positions. Commercial interests liquidated 5,283 contracts of their long positions and also liquidated 9,362 contracts of their short positions. As of the latest report, managed money is long gasoline by ratio of 4.86:1, which is up significantly from the previous week of 3.75:1 and the ratio of 2 weeks ago of 4.01:1. The hefty decline of short positions was responsible for the increase in the ratio.

Natural gas:

For the week, May natural gas lost 4.6 cents, June -5.2, July – 5.2. The COT report revealed that managed money added 3,280 contracts to their long positions and added 26,137 contracts to their short positions. Commercial interests added 4,801 contracts to their long positions and also added 1,575 contracts to their short positions. As of the latest report, managed money is long natural gas by ratio of 1.54:1, which is down significantly from the previous week of 1.78:1 and the ratio of 2 weeks ago of 1.95:1.

The current ratio is lower than 1.63:1, which was the ratio on the tabulation date of December 17, 2013, but is above the ratio in the December 10 report of 1.24:1. The trading range encompassed by the December 17 COT report was a high of $4.215 to a low of 4.065, a range that is significantly lower than the one encompassed by the current report of 4.251-4.570. In short, managed money is fairly bearish on natural gas considering the current price level.

Year to date, May ethanol is the leader with a gain of 38.72%, May natural gas +7.68%, May WTI crude oil +3.16%, May gasoline -0.80%, May Brent crude oil -3.08%, May heating oil -4.21%.

From March 1 through March 31, May ethanol was the leader with a gain of 24.87%, May WTI crude oil -0.33%, May Brent crude oil -0.69%, May gasoline -1.72%, May heating oil -1.99%, May natural gas -3.87%,

Copper:

For the week, May copper lost 1.90 cents. The COT report revealed that managed money added 294 contracts to their long positions and liquidated 4,952 contracts of their short positions. Commercial interests liquidated 2,046 contracts of their long positions and added 2,449 contracts to their short positions. As of the latest report, managed money is short copper by ratio of 1.68:1, which is down from the previous week of 1.87:1 and the ratio of 2 weeks ago of 1.75:1.

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 gained $17.05. The COT report revealed that managed money liquidated 459 contracts of their long positions and also liquidated 954 contracts of their short positions. Commercial interests liquidated 4 contracts of their long positions and also liquidated 215 contracts of their short positions. As of the current report, managed money is long palladium by ratio of 4.59:1, which is up from the previous week of 3.97:1, but down slightly from the ratio of 2 weeks ago of 4.62:1. The increase in the ratio was due to the liquidation of short positions by managed money.

Platinum: July platinum will generate a short-term buy signal, which will reverse the short-term sell signal generated on March 25, if July platinum makes a daily low above $1446.10.

For the week, July platinum gained $43.70. The COT report revealed that managed money liquidated 1,721 contracts of their long positions and added 1,292 contracts to their short positions. Commercial interests added 1,228 contracts to their long positions and liquidated 3,143 contracts of their short positions. As of the latest report, managed money is long platinum by ratio of 5.73:1, which is down dramatically from the previous week of 7.59:1 and the ratio of 2 weeks ago of 6.81:1.

Our experience informs us that platinum tends to lead gold higher and lower. For example, July platinum topped out on March 5 with a high of $1490.10 and bottomed on March 27 at 1395.20. Gold on the other hand, topped on March 17 at $1392.20 and bottomed on April 1 at 1277.40. Since bottoming on March 27, July platinum has advanced $48.90, or + 3.49% while June gold advanced only $11.50, or +0.89%. However, since the platinum rally began on March 28 through April 3 (final data only), total open interest has declined by 1268 contracts, however, part of this certainly can be attributed to the impending expiration of the April contract. Preliminary stats for Friday indicate that total open interest increased by 620 contracts on volume of 6345. On Friday, July platinum made a high of $1452.00, which is the highest print since March 20 (1455.30).

To summarize: clients should focus their attention on platinum rather than gold at this juncture because it appears inevitable that platinum will generate a short-term buy signal before gold.

Gold:

For the week, June gold advanced $9.20. The COT report revealed that managed money liquidated 7,262 contracts of their long positions and added 8,298 contracts to their short positions. Commercial interests liquidated 4,316 contracts of their long positions and also liquidated 7,602 contracts of their short positions. As of the latest report, managed money is long gold by ratio of 4.45:1, which is down significantly from the previous week of 6.87:1 and down dramatically from the ratio of 2 weeks ago of 8.49:1.

Silver:

For the week, May silver gained 15.6 cents. The COT report revealed that managed money liquidated 1,690 contracts of their long positions and added 2,420 contracts to their short positions. Commercial interests added 379 contracts to their long positions and liquidated 1,200 contracts of their short positions. As of the latest report, managed money is long silver by ratio of 1.34:1, which is down from the previous week of 1.56:1 and the ratio of 2 weeks ago of 2.29:1.

The current ratio is lower than 1.43:1 made on the tabulation date of February 11, but above 1.08:1 made on the COT tabulation date of February 4, 2014.

Year to date, June palladium is the leader with a gain of 10.22%, June gold +8.30%, July platinum +5.41%, May silver +2.81%, May copper -10.60%.

From March 1 through March 31, June palladium was the leader with a gain of 4.10%, July platinum -1.92%, June gold -2.80%, May copper – 5.04%, May silver -6.77%.

Canadian dollar: On April 1, the June Canadian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, the June Canadian dollar advanced 61 pips. The COT report revealed that leveraged funds liquidated 13,421 contracts of their long positions and also liquidated 9,497 contracts of their short positions. As of the latest report, managed money is short the Canadian dollar by ratio of 2.07:1, which is up from the previous week of 1.65:1, but down dramatically from the ratio of 2 weeks ago of 4.52:1. The short ratio increased as a result of liquidation of long positions.

Australian dollar:

For the week, the June Australian dollar advanced 37 pips. The COT report revealed that leveraged funds added 9,616 contracts to their long positions and liquidated 5,359 contracts of their short positions. As of the latest report, leveraged funds are now long the Australian dollar by ratio of 1.16:1, which is a complete reversal from the previous week when they were short by ratio of 1.39:1 and the report of 2 weeks ago when managed money was short by ratio of 1.73:1.

We went into our records as far back as September 2013 and couldn’t find one week when leveraged funds were net long the Australian dollar.

Swiss franc: On April 2, the June Swiss franc generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the June Swiss franc lost 65 pips. The COT report revealed that leveraged funds liquidated 237 contracts of their long positions and added 534 contracts to their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio of 1.50:1, which is down from the previous week of 1.57:1 and the ratio of 2 weeks ago of 1.58:1.

British pound:

For the week, the June British pound lost 65 pips. The COT report revealed that leveraged funds added 11,127 contracts to their long positions and also added 7,240 contracts of their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 4.25:1, which is down from the previous week of 5.00:1 and the ratio of 2 weeks ago of 4.71:1. The decline in this week’s ratio was due to the addition of short positions.

Euro: On April 3, the June euro generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the June euro lost 50 pips. The COT report revealed that leveraged funds liquidated 6,184 contracts of their long positions and added 1,854 contracts to their short positions. As of the latest report, leveraged funds are long the euro by a ratio of 2.40:1, which is down from the previous week of 2.71:1 and the ratio of 2 weeks ago of 3.10:1.

Yen:

For the week, the June yen lost 42 pips. The COT report revealed that leveraged funds added 10,092 contracts to their long positions and also added 21,108 contracts to their short positions. As of the latest report, leveraged funds are short the yen by ratio of 3.02:1, which is down from the previous week of 3.44:1, but up from the ratio of 2 weeks ago of 2.84:1. This week’s ratio declined due to the addition of long positions.

Dollar index: On April 3, the June dollar index generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, the June dollar index advanced 24 points. The COT report revealed that leveraged funds added 671 contracts to their long positions and also added 2,224 contracts to their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 6.91:1, which is down from the previous week of 7.38:1, but up dramatically from the ratio of 2 weeks ago of 4.39:1.

Year to date, the June Australian dollar is the leader with a gain of 4.67%, June yen +1.93% June dollar index +0.28%, June British pound +0.15%, June Swiss franc -0.43%, June euro -0.65%, June Canadian dollar -3.00%.

From March 1 through March 31, the June Australian dollar was the leader with a gain of 4.05%, June dollar index +0.48%, June Canadian dollar +0.24%, June euro -0.35%, June British pound -0.50%, June Swiss franc -0.71%, June yen -1.40%.

 S&P 500 E mini:

For the week, the June S&P 500 E mini gained 9.70 points. The COT report revealed that leveraged funds added 25,121 contracts to their long positions and liquidated 28,403 contracts of their short positions. As of the latest report, leveraged funds are short the S&P 500 E mini by ratio of 1.79:1, which is down from the previous week of 1.96:1 but up from the ratio of 2 weeks ago of 1.64:1.

Year to date, the S&P 400 is the leader with a gain of 1.83%, S&P 500 + 0.91%, Russell 2000 -0.88%, Dow Jones Industrial Average -0.99%, NASDAQ 100 -1.46%.

From March 1 through March 31, the Dow Jones Industrial Average is the leader with a gain of 0.83%, S&P 500 + 0.69%, S&P 400 +0.23%, Russell 2000 – 0.84%, NASDAQ 100 -2.72%.

AAII Index                      Recent week      2 weeks ago    3 weeks ago
  Bullish 35.4% 31.2% 36.8%
  Bearish 26.8 28.6 26.2
  Neutral 37.9 40.2 37.1
Source: American Association of Individual Investors,