Weekend Wrap for April 28, 2013.

Live Cattle:

We are initiating coverage on the live cattle market because we believe the market is headed higher. We got our  first initial buy signal on April 26 and look to confirm this on April 29 or 30. Our initial target for June cattle is $1.2614 per pound. The June contract closed at $1.2260 on April 26. In short, we expect a move of move of approximately 3.50 cents in the initial thrust.

The cattle market began to rally on April 16 and through April 25, open interest has increased by 4,044 contracts. While this number is not robust, managed money is beginning to increase their long positions slowly. For example, the COT report of April 23 showed that managed money was long cattle by a ratio of 1.34:1, which is slightly below the April 9 and April 16 ratios of 1.37:1. However, these are the highest long to short ratios going back to February 19 when prices were trading at higher levels. In other words, though prices are at the lower end of the two-month trading range, managed money is slowly getting increasingly bullish. The table below shows the tabulation date of the COT report (every Tuesday) and we have listed the closing price of June cattle on each of the tabulation dates. The closing price is for the June contract and the year for all dates is 2013.

Although the technical picture of the market looks very promising, the demand side of the equation is lackluster to say the least. High beef prices have driven consumers away from the market, and it remains to be seen whether retailers will feature specials on beef for the upcoming Memorial Day holiday. Summertime in the United States usually heralds increased consumption of beef and if retailers decide to aggressively promote beef, we could see a shot in the arm on the demand side.  The cattle market has not seen evidence of increasing demand and therefore this has not been discounted by the market. In our view, price stability at the lower end of the trading range indicates that the bearish side has played itself out for the most part.

COT Tabulation Date       Closing Price            COT Long to Short Ratio
April 23                              $1.20825                  1.34:1
April 16                                 1.20450                  1.37:1
April 9                                   1.21700                   1.37:1
April 2                                   1.22400                  1.06:1
March 26                               1.21150                   1.12:1
March 19                               1.20975                   1.12:1
March 12                               1.23875                   1.00:1
March 5                                 1.24475                   1.04:1 Managed money was slightly net short on March 5
February 26                           1.24325                  1.02:1 
February 19                           1.25750                   1.07:1  

Soybeans:

For the week, May soybeans gained 2.50 cents, July -1.50, August -10.00. The COT report shows that managed money liquidated 3,026 contracts of their long positions and also liquidated 3,394 contracts of their short positions. Commercial interests added 16,784 contracts to their long positions and also added 19,837 contracts to their short positions. As of the latest report, managed money is long soybeans by a ratio of 3.21:1, which is up slightly from the previous week of 3.01:1 and the ratio of 2 weeks ago of 2.75:1.

Soybean meal:

For the week,, May soybean meal gained $5.50, July +2.20, August -2.40. The COT report showed that managed money added 2,357 contracts to their long positions and also added 146 contracts to their short positions. Commercial interests liquidated 7,620 of their long positions and also liquidated 1,577 contracts of their short positions. As of the latest report, managed money is long soybean meal by a ratio of 2.17:1, which is up slightly from the previous week of 2.06:1, and up substantially from the ratio of 2 weeks ago of 1.64:1.

Soybean oil:

For the week, May soybean oil gained 50 points, July +36, August +8. The COT report showed that managed money added 1,896 contracts to their long positions and liquidated 5,490 contracts of their short positions. Commercial interests liquidated 2,032 contracts of their long positions and also liquidated 9,316 of their short positions. As of the latest report, managed money is short soybean oil by a ratio of 1.73:1, which is down slightly from the previous week of 1.91:1 and the ratio of 2 weeks ago of 1.96:1.

Corn:

For the week, May corn lost 8 cents, July -13.25. The COT report showed that managed money liquidated 18,358 contracts of their long positions and added 13,704 contracts to their short positions. Commercial interests added 2,609 contracts to their long positions and liquidated 20,538 contracts of their short positions. As of the latest report, managed money is long corn by a ratio of 1.54:1, which is down from the previous week of 1.85:1 and the ratio of 2 weeks ago of 1.88:1. This week’s ratio is the lowest in a year.

Wheat:

For the week, May lost 20.25 cents, July -19.00. The COT report showed that managed money added 1,475 contracts to their long positions and liquidated 3,994 contracts of their short positions. Commercial interests liquidated 1,360 contracts of their long positions and added 60 contracts their short positions. As of the latest report, managed money is short wheat by a ratio of 1.34:1, which is down from the previous week of 1.41:1 and the ratio of 2 weeks ago of 1.35:1.

COT Report April 16-April 23   Year to Date.
July meal      +0.48                               -0.64%
July beans     -1.22%                             -1.02%
July bean oil -1.35%                              -2.13%
July wheat    -1.73%                             -12.76% 
July corn      -4.17%                              -11.12% 

Crude oil:

For the week, June WTI crude gained $4.73. The COT report showed that managed money added 18,244 contracts to their long positions and also added 15,210 contracts to their short positions. Commercial interests liquidated 9,736 contracts of their long positions and also liquidated 15,524 contracts of their short positions. As of the latest report, managed money is long crude oil by a ratio of 3.57:1, which is down from the previous week of 4.31:1 and the ratio of 2 weeks ago of 5.68:1.

Although, the long to short ratio of managed money has declined to a new low for the move, it remains above some recent historical ratios. In early March, the long to short ratio was 3.50:1 when crude oil made its low of $90.23, and 3.44:1 on March 12, 2013. Taking a look back to late November-mid December 2012, the long to short ratio got as low as 1.86:1 on December 11 2012. In this time frame, crude oil traded in a range between $88.00 and 91.00. In short, the long to short ratio should decline to recent historical levels, before crude oil is likely to put in a bottom, or temporary bottom.

From April 18 through April 25, June crude oil advanced $6.62, or 7.63%. However, open interest during this period declined by 18,055 contracts. This means as the market was recovering from the lows, both longs and shorts were liquidating.  This is bearish.The preliminary reading of open interest for Friday April 26 shows that a mere 7,606 contracts were added on volume of 466,803 contracts. The open interest stats in the preliminary report are completely unreliable, but it would indicate a minor degree of commitment if the final numbers are anywhere close to the preliminary stats.

Heating oil:

For the week, June heating oil gained 9.04 cents. The COT report showed that managed money liquidated 4,970 contracts of their long positions and added 10,306 contracts to their short positions. Commercial interests added 3,170 contracts to their long positions and liquidated 5,366 contracts of their short positions. As of the latest report, managed money is short heating oil by a ratio of 1.62 :1, which is up dramatically from the previous week of 1.03:1 and a major reversal from 2 weeks ago when managed money was long by a ratio of 1.15:1.

Gasoline:

For the week, June gasoline advanced 6.59 cents. The COT report showed that managed money liquidated 11,967 contracts of their long positions and added 1,576 contracts to their short positions. Commercial interests liquidated 8,939 contracts of their long positions and liquidated 20,932 contracts of their short positions. As of the latest report, managed money is long gasoline by a ratio of 4.03:1, which is down dramatically from the previous week of 5.61:1 and the ratio of 2 weeks ago of 6.80:1.

The current long to short ratio is the lower than the last time gasoline traded at much lower levels as the table below shows. Going back to September and October 2011, we found two COT reports where the long to short ratio was lower than the current ratio of 4.03:1. These reports were tabulated on September 27, 2011 when the ratio hit a low of 3.16:1, and on October 4, 2011 when the ratio made a low of 3.69:1, and gasoline traded at a low of $2.48. This was the lowest price for gasoline during 2011, with the exception of the low made in January of $2.36 on January 25, 2011. Ironically, on January 25 when gasoline made a major low, the long to short ratio was 13.06:1,  and the COT tabulation date was January 25, 2011. During the Weekend Wrap of April 21 and April 28, we have provided the hard data to show that managed money is as bearish as they have been during the past 2 years. As a result, we continue to believe that either the low is in, or there will be a test of the low. We believe the low will hold.

June 26, 2012             $2.4136            5.46:1 
July 3, 2012                 $2.5597            5.85:1
July 17, 2012               $2.6173             5.60:1 
October 23, 2012           $2.7285            12.09:1
October 30     ”               $2.7433              9.77:1   
November 6    ”              $2.8254              9.75:1

Natural gas:

For the week, June natural gas lost 21.4 cents. The COT report showed that managed money liquidated 3,333 contracts of their long positions and also liquidated 15,541 contracts of their short positions. Commercial interests added 701 contracts to their long positions and also added 7,490 contracts to their short positions. As of the latest report, managed money is long natural gas by a ratio of 1.32:1, which is up from the previous week of 1.26:1, but down slightly from the ratio of 2 weeks ago of 1.34:1.

COT Report April 16-April 23   Year to Date.
June natural gas +1.38%                   +21.07%
June ethanol       +0.77%                    +7.78%
June Brent          +0.39%                    -4.65%
June WTI            +0.28%                    -0.80%
June heating oil  -0.13%                      -4.84%
June gasoline      -2.23%                       -1.57%   

Copper:

For the week, July copper gained 2.30 cents. The COT report showed that managed money added 4,197 contracts to their long positions and liquidated 7,516 contracts of their short positions. Commercial interests liquidated 6,504 contracts of their long positions and also liquidated 5,168 contracts of their short positions. As of the latest report, managed money is short copper by a ratio of 1.52:1, which is down from the previous week of 2.05:1 and the ratio of 2 weeks ago of 2.33:1.

Gold:

For the week, June gold gained $58.00. The COT report showed that managed money liquidated 3,025 contracts of their long positions and added 12,718 contracts to their short positions. Commercial interests added 7,357 contracts to their long positions and liquidated 15,951 contracts of their short positions. As of the latest report, managed money is long gold by a ratio of 1.79:1, which is down from the previous week of 2.27:1 and the same as the ratio of 2 weeks ago of 1.79:1.

Platinum:

For the week, July platinum gained $52.60. The COT report showed that managed money added 734 contracts to their long positions and also added 1,119 contracts to their short positions. Commercial interests liquidated 157 contracts of their long positions and also liquidated 186 contracts of their short positions. As of the latest report, managed money is long platinum by a ratio of 2.96:1, which is down from the previous week of 3.23:1 and the ratio of 2 weeks ago of 3.20:1. The current ratio is the lowest in at least several months.

Palladium:

For the week, June Palladium gained $4.90. The COT report showed that managed money liquidated 1,066 contracts of their long positions and added 549 contracts to their short positions. Commercial interests added 20 contracts to their long positions and liquidated 731 contracts of their short positions. As of the latest report, managed money is long Palladium by a ratio of 8.99:1, which is down substantially from the previous week of 12.40:1 and the ratio of 2 weeks ago of 13.94:1. The current ratio is the lowest in several months.

Silver:

For the week, July silver gained 77.8 cents. The COT report showed that managed money liquidated 605 contracts of their long positions and added 1,196 contracts to their short positions. Commercial interests added 2,136 contracts to their long positions and liquidated 164 contracts of their short positions. As of the latest report, managed money is long silver by a ratio of 1.40:1, which is down from the previous week of 1.53:1, but up dramatically from the ratio of 2 weeks ago when managed money was short by a ratio of 1.02:1.

COT Report April 16-April 23   Year to Date.
June gold           +3.45%                     -13.19%
June palladium – 0.46%                      -3.10%
July silver           -2.09%                     -21.14%
July platinum    – 2.46%                      -4.43%
July copper         -6.74%                      -13.34%  

Canadian dollar:

For the week, the June Canadian dollar gained 93 points. The COT report showed that leveraged funds added 1,461 contracts to their long positions and liquidated 1,710 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 5.49:1, which is down from the previous week of 6.06:1, and down substantially from the ratio of 2 weeks ago of 7.09:1.

Australian dollar:

For the week, the June Australian dollar gained 10 points. The COT report showed that leveraged funds liquidated 13,767 contracts of their long positions and added 4,684 contracts to their short positions. As of the latest report, leveraged funds are long by a ratio of 2.01:1, which is down significantly from the previous week of 2.57:1 and the ratio of 2 weeks ago of 3.25:1.

Swiss franc:

For the week, the June Swiss franc lost 1.06 cents. The COT report showed that leveraged funds liquidated 1,703 contracts of their long positions and also liquidated 4,692 of their short positions. As of the latest report, leveraged funds are long the Swiss franc by a ratio of 1.51:1, which is up from the previous week of 1.13:1 and up dramatically from the ratio of 2 weeks ago when leveraged funds were short by a ratio of 1.68:1.

British pound:

For the week, the June British pound gained 2.57 cents. The COT report showed that leveraged funds liquidated 742 contracts of their long positions and also liquidated 6,852 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 3.03:1, which is down slightly from the previous week of 3.17:1 and down dramatically from the ratio of 2 weeks ago of 4.01:1.

Euro:

For the week, the June euro lost 33 points. The COT report showed that leveraged funds added 872 contracts to their long positions and also added 3,681 contracts to their short positions. As of the latest report, leveraged funds are short by a ratio of 1.76:1, which is up somewhat from the previous week of 1.71:1, but down dramatically from the ratio of 2 weeks ago of 3.18:1.

Japanese yen:

For the week, the June yen gained 134 points. The COT report showed that leveraged funds added 4,093 contracts to their long positions and liquidated 15,714 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 2.26:1, which is down substantially from the previous week of 2.96:1 and the ratio of 2 weeks ago of 2.44:1.

Dollar index:

For the week, the June dollar index lost 27 points. The COT report showed that leveraged funds liquidated 3,074 contracts of their long positions and added 3,326 contracts to their short positions. As of the latest report, leveraged funds are short by a ratio of 1.08:1, which is a reversal from the previous week when they were long by a ratio of 1.08:1 and the ratio of 2 weeks ago of 1.05:1.

COT Report April 16-April 23   Year to Date.
June dollar index  +1.56%                 +3.19%
June Canadian $   -0.48%                 -1.94%
June pound            -0.81%                  -4.64%
Australian dollar   -1.16%                   -0.16%
June euro               -1.38%                   -1.36%
Japanese yen         -1.99%                 -11.90%
June Swiss franc   -2.50%                  -3.23%

S&P 500 E mini:

For the week, the June S&P 500 E mini gained 28.90 points. The COT report showed that leveraged funds liquidated 11,275 contracts of their long positions and also liquidated 832 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 1.63:1, which is up slightly from the previous week of 1.59:1 and the ratio of 2 weeks ago of 1.61:1.

American Association of Individual Investors
        Recent week      2 weeks ago        3 weeks ago
Bullish       28.3%            26.9%           19.3%
Bearish      38.8%            40.2%          54.5%
Neutral      32.9%            24.9%          26.2%