Weekend Wrap for February 23, 2014

Soybeans:

For the week, for soybeans advanced 33.25 cents, May +35.25, July +37.25. The COT report revealed that managed money added 12,881 contracts to their long positions and liquidated 55 contracts of their short positions. Commercial interests added 243 contracts to their long positions and also added 10,748 contracts to their short positions. As of the latest report, managed money is long soybeans by ratio of 9.50:1, which is up from the previous week of 8.91:1 and the ratio of 2 weeks ago of 7.67:1.

Soybeans present an interesting dilemma. Old crop stocks are tight, and sales have been brisk up to this point, but there is a risk of major cancellations by the Chinese once the Brazilian crop begins to move out to the marketplace. Last year, cancellations did not begin until April, and there appears to be a window between now and the planting intentions report on March 31 for soybeans to grind slowly higher. Additionally, the very dry conditions in Brazil should give soybeans an added lift.

Soybean meal:

For the week, March soybean meal advanced $5.80, May +7.90, July +7.80. The COT report revealed that managed money added 3,031 contracts to their long positions and liquidated 1,233 contracts of their short positions. Commercial interests added 1,236 contracts to their long positions and also added 8,135 contracts to their short positions. As of the latest report, managed money is long soybean meal by ratio of 4.49:1, which is up from the previous week’s ratio of 4.11:1 and the ratio of 2 weeks ago of 3.64:1.

Soybean oil:

For the week, March soybean oil advanced 1.80 cents, May +1.76, July +1.68. The COT report revealed that managed money added 4,095 contracts to their long positions and liquidated 10,285 contracts of their short positions. Commercial interests liquidated 14,527 contracts of their long positions and added 7,936 contracts to their short positions. As of the latest report, managed money is short soybean oil by ratio of 1.72:1, which is down from the previous week of 2.13:1 and the ratio of 2 weeks ago of 2.29:1.

Corn:

For the week, March corn advanced 7.75 cents, May +8.25, July +7.75. The COT report revealed that managed money added 2,256 contracts to their long positions and liquidated 2,390 contracts of their short positions. Commercial interests added 15,940 contracts to their long positions and also added 44,472 contracts to their short positions. As of the latest report, managed money is long corn by ratio of 1.33:1, which is up slightly from the previous week of 1.30:1 and up substantially from the ratio of 2 weeks ago of 1.05:1.

Chicago wheat:

For the week, March Chicago wheat advanced 11.25 cents, May +9.25, July +8.75. The COT report revealed that managed money liquidated 4,737 contracts of their long positions and also liquidated 12,910 contracts of their short positions. Commercial interests liquidated 16,186 contracts of their long positions and added 3,286 contracts to their short positions. As of the latest report, managed money is short Chicago wheat by ratio of 1.40:1, which is down slightly from the previous week of 1.46:1 and the ratio of 2 weeks ago of 1.56:1.

The open interest action in the recent COT report is indicative of a complete lack of confidence by managed money for wheat to continue its move higher. The fact that managed money liquidated 4,737 contracts of their long positions when May wheat advanced 21.25 cents in the February 12-February 18 time frame confirms the lack of interest by managed money for the long side.

Kansas City wheat: On February 18, March Kansas City wheat generated an intermediate term buy signal after generating a short-term buy signal on February 5.

For the week, March Kansas City wheat advanced 8.25 cents, May +9.50, July +10.00. The COT report revealed that managed money added 392 contracts to their long positions and liquidated 5,191 contracts of their short positions. Commercial interests liquidated 3,218 contracts of their long positions and added 2,387 contracts to their short positions. As of the latest report, managed money is long Kansas City wheat by ratio of 1.91:1, which is up significantly from the previous week of 1.51:1 and the ratio of 2 weeks ago of 1.26:1.

Cotton:

For the week, March cotton lost 46 points, May -69, July -35. The COT report revealed that managed money added 5,666 contracts to their long positions and liquidated 411 contracts of their short positions. Commercial interests liquidated 7,558 contracts of their long positions and also liquidated 446 contracts of their short positions. As of the latest report, managed money is long cotton by ratio of 8.61:1, which is up from the previous week of 7.45:1 and dramatically higher than the ratio of 2 weeks ago of 4.48:1.

Sugar #11: On February 19, May sugar generated a short-term buy signal, but remains on an intermediate term sell signal. It is quite possible that an intermediate term buy signal will be generated this week

For the week, March sugar advanced 1.09 cents, May +1.08, July + 98 points. The COT report revealed that managed money added 1,220 contracts to their long positions and liquidated 14,728 of their short positions. Commercial interests liquidated 5,854 contracts of their long positions and added 24,501 contracts to their short positions. As of the latest report, managed money is short sugar by ratio of 1.10:1, which is down from the previous week of 1.19:1 and the ratio of 2 weeks ago of 1.19:1.

Coffee:

For the week, March coffee advanced 28.26 cents, May 27.70, July +27.00. The COT report revealed that managed money added 3,318 contracts to their long positions and liquidated 5,113 contracts of their short positions. Commercial interests added 4,175 contracts to their long positions and also added 10,160 contracts to their short positions. As of the latest report, managed money is long coffee by ratio of 2.27:1, which is up from the previous week of 1.67:1 and double the ratio of 2 weeks ago of 1.25:1.

Cocoa:

For the week, March Cocoa lost $5.00, May -17.00, July -18.00. The COT report revealed that managed money added 115 contracts to their long positions and liquidated 706 contracts of their short positions. Commercial interests liquidated 1,897 contracts of their long positions and also liquidated 2,242 contracts of their short positions. As of the latest report, managed money is long cocoa by ratio of 6.76:1, which is up slightly from the previous week of 6.43:1, but down from the ratio of 2 weeks ago of 7.90:1.

Live cattle:

For the week, April cattle advanced 35 points, June +42, August +15. The COT report revealed that managed money liquidated 4,301 contracts of their long positions and also liquidated 228 contracts of their short positions. Commercial interests added 800 contracts to their long positions and liquidated 2,616 contracts of their short positions. As of the latest report, managed money is long cattle by ratio of 10.59:1, which is down slightly from the previous week of 10.73:1 and the ratio of 2 weeks ago of 11.78:1.

Lean hogs:

For the week, April lean hogs advanced 3.18 cents, June +1.90, August +2.50. The COT report revealed that managed money added 6,934 contracts to their long positions and liquidated 2,182 contracts of their short positions. Commercial interests added 2,393 contracts to their long positions and also added 10,027 contracts to their short positions. As of the latest report, managed money is long lean hogs by ratio 4.71:1, which is up significantly from the previous week of 3.72:1 and the ratio of 2 weeks ago of 3.60:1.

WTI crude oil:

For the week, April WTI crude oil advanced $2.07, May +1.90, June +1.75. The COT report revealed that managed money added 23,868 contracts to their long positions and liquidated 7,846 contracts of their short positions. Commercial interests liquidated 5,828 contracts of their long positions and also liquidated 3,417 contracts of their short positions. As of the latest report, managed money is massively long WTI crude oil by a ratio of 15.20:1, which is up dramatically from the previous week of 10.53:1 and double the ratio of 2 weeks ago of 7.69:1. The current ratio is the highest that we have seen in the past couple of years.

Heating oil:

For the week, March heating oil advanced 2.10 cents, April +2.23, May +1.84. The COT report revealed that managed money added 4,955 contracts to their long positions and liquidated 944 contracts of their short positions. Commercial interests added 12,965 contracts to their long positions and also added 15,457 contracts to their short positions. As of the latest report, managed money is long heating oil by ratio of 3.11:1, which is up from the previous week of 2.66:1 and the ratio of 2 weeks ago of 2.39:1.

Gasoline:

For the week, March gasoline advanced 2.80 cents, April +3.08, May +2.81. The COT report revealed that managed money added 8,529 contracts to their long positions and liquidated 6,727 contracts of their short positions. Commercial interests liquidated 2,102 contracts of their long positions and added 10,190 contracts to their short positions. As of the latest report, managed money is long gasoline by ratio of 3.14:1, which is up significantly from the previous week of 1.99:1 and the ratio to so of 1.99:1.

On February 10, March gasoline generated a short and intermediate term buy signal. This week is the first time that managed money has initiated new long positions and liquidated short positions by a sizable amount. We consider this to be a sign of caution for anyone long gasoline.

Natural gas:

For the week, March natural gas advanced 92.1 cents, April +43.5, May +24.0. The COT report revealed that managed money liquidated 10,815 contracts of their long positions and also liquidated 19,796 contracts of their short positions. Commercial interests added 11,459 contracts to their long positions and also added 6,217 contracts to their short positions. As of the latest report, managed money is long natural gas by ratio of 2.50:1, which is up from the previous week of 2.22:1 and the ratio of 2 weeks ago of 2.12:1.

Copper:

For the week, March copper advanced 2.65 cents, May +5 point, July -60 points. The COT report revealed that managed money added 778 contracts to their long positions and liquidated 6,108 contracts of their short positions. Commercial interests liquidated 7,088 contracts of their long positions and also liquidated 2,137 contracts of their short positions. As of the latest report, managed money is short copper by ratio of 1.28:1, which is down from the previous week of 1.50:1, but above the ratio of 2 weeks ago of 1.20:1.

During the past week, March copper advanced 2.65 cents while the May contract was basically changed and the July contract lost 60 points. From February 3 through February 21, March copper gained 3.41% while the May contract advanced 2.39%. The March contract is showing unusual strength as it approaches 1st notice day, but the May contract has not kept up and like March is on a short and intermediate term sell signal. The May contract is not close to reversing its sell signals.

The 50 day moving average for the May contract is $3.2936, which is close to our pivot points of 3.2969 and 3.2940. We think copper will struggle to move above this, and after more speculative shorts have been blown out, the May contract may be a candidate for bearish positions. Total copper open interest has increased by 1,860 contracts from February 4 through February 20 while May copper has advanced 7.55 cents. This is not much of an increase considering the magnitude of the advance, but the March contract is losing open interest as it approaches 1st notice day. Copper is the only commodity we follow that is on a short and intermediate term sell signal.

Palladium:

For the week, March palladium advanced $2.40. The COT report revealed that managed money liquidated 425 contracts of their long positions and also liquidated 1,248 contracts of their short positions. Commercial interests liquidated 56 contracts of their long positions and added 139 contracts to their short positions. As of the latest report, managed money is long palladium by ratio 4.32:1, which is up from the previous week of 3.48:1 and slightly above the ratio of 2 weeks ago of 4.21:1.

Platinum:

For the week, April platinum lost $2.20. The COT report revealed that managed money added 426 contracts to their long positions and liquidated 1362 contracts of their short positions. Commercial interests liquidated 36 contracts of their long positions and added 1127 contracts to their short positions. As of the latest report, managed money is long platinum by ratio 4.15:1, which is up from the previous week of 3.46:1, but slightly below the ratio of 2 weeks ago of 4.29:1.

Gold:

For the week, April gold advanced $5.00. The COT report revealed that managed money added 6,456 contracts to their long positions and liquidated 10,228 contracts of their short positions. Commercial interests liquidated 8,045 contracts of their long positions and added 9,473 contracts to their short positions. As of the latest report, managed money is long gold by ratio of 2.26:1, which is up from the previous week of 1.80:1 and the ratio of 2 weeks ago of 1.68:1.

We continue to be amazed by the relatively low long to short ratio of managed money in gold. The bulk of the action in the latest COT report was the liquidation of short positions by managed money, rather than the addition of new long positions. April gold has had 8 weeks when it closed higher and only one week when it closed lower (week of January 27). The market is overbought relative to its 20 day moving average of $1278.70, and the 50 day moving average of 1250.30, but April gold has been trading steadily upward. Additionally, there are not sufficient numbers of new longs to add selling pressure on a pullback. As we have said in previous reports, it is likely that corrections will be shallow, and this will continue to frustrate would be longs sitting on the sidelines.

Silver: On February 18, March silver generated an intermediate term buy signal after generating a short-term buy signal on February 12.

For the week, March silver advanced 36.1 cents. The COT report revealed that managed money liquidated 498 contracts of their long positions and liquidated 10,768 contracts of their short positions. Commercial interests added 749 contracts to their long positions and also added 6,212 contracts to their short positions. As of the latest report, managed money is long silver by ratio of 2.66:1, which is up significantly from the previous week of 1.44:1 and the ratio of 2 weeks ago of 1.08:1.

Similar to gold, only much more so, the increase in the long to short ratio of managed money was driven primarily by the liquidation of 10,768 short positions. Remarkably, even longs liquidated as the market rocketed $1.745 higher between February 12 and February 18 (the COT reporting period). The move seen during February 12- February 18 when longs liquidated confirms our thesis that managed money is highly dubious of the bull run in silver. From February 3 through February 20, total open interest increased by 2,206 contracts, which is unimpressive, but like copper, is approaching 1st notice day, which means the March contract will see heavy liquidation. Like gold, silver is overbought, and should have a correction, however with a small number of managed money longs, we think  corrections will be shallow. The lows during the past week in the May contract were as follows: February 18 $21.365, February 19 21.405, February 20 21.435. We think the lows will hold, and can be used as an exit point for bullish positions if clients become concerned about the direction of silver. It should be noted that the lows of last week were made after the big move of + $1.027 on February 14.

Canadian dollar:

For the week, the March Canadian dollar lost 1.18 cents. The COT report revealed that managed money added 495 contracts to their long positions and liquidated 2,769 contracts of their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio of 7.48:1, which is down from the previous week of 8.09:1, but up from the ratio of 2 weeks ago of 6.82:1.

Australian dollar:

For the week, the March Australian dollar lost 59 pips. The COT report revealed that leveraged funds liquidated 767 contracts of their long positions and also liquidated 6,158 contracts of their short positions. As of the latest report, leveraged funds are short the Australian dollar by ratio of 6.00:1, which is up from the previous week of 5.84:1, but down from the ratio of 2 weeks ago of 6.65:1.

Swiss franc:

For the week, the March Swiss franc advanced 58 pips. The COT report revealed that leveraged funds added 1,935 contracts to their long positions and also added 4,658 contracts to their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio of 1.20:1, which is down from the previous week of 1.55:1 and the ratio of 2 weeks ago of 1.84:1.

British pound:

For the week, the March British pound lost 96 pips. The COT report revealed that leveraged funds added 26,794 contracts to their long positions and also added 11,750 contracts to their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 3.25:1, which is down from the previous week of 3.58:1 and the ratio of 2 weeks ago of 3.75:1.

Euro:

For the week, the March euro advanced 44 pips. The COT report revealed that leveraged funds added 12,780 contracts to their long positions and liquidated 5672 contracts of their short positions. As of the latest report, managed money is long the euro by a ratio of 1.70:1, which is up significantly from the previous week of 1.27:1 and the ratio of 2 weeks ago of 1.21:1.

Yen:

For the week, the March yen lost 62 pips. The COT report revealed that leveraged funds added 2,576 contracts to their long positions and also added 2,486 contracts to their short positions. As of the latest report, leveraged funds are short the yen by a ratio of 1.90:1, which is down from the previous week of 1.96:1 and the ratio of 2 weeks ago of 2.00:1.

Dollar index:

For the week, the March dollar index advanced 10 points. The COT report revealed that leveraged funds added 847 contracts to their long positions and liquidated 2,857 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 4.10:1, which is down from the previous week of 5.02:1 and the ratio of 2 weeks ago of 4.70:1.

S&P 500 E mini:

For the week, the March S&P 500 E mini lost 70 ticks (essentially unchanged for the week). The COT report revealed that leveraged funds added 4,708 contracts of their long positions and also added 21,734 contracts to their short positions. As of the latest report, leveraged funds are short the E mini by ratio of 1.83:1, which is up from the previous week of 1.81:1 and the ratio of 2 weeks ago of 1.53:1.