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Corn:
For the week, May corn closed 14 1/4 cents higher. The Commitment of Traders Report, which is tabulated on Tuesday and released on Friday showed that in the managed money category, speculators liquidated 14,443 contracts of their long positions, and added 14,252 contracts to their short positions. Commercial interests added 20,809 contracts to their long positions and liquidated 2,579 contracts of their short positions. On April 10, 2012 the USDA will release its US And Global Supply Demand Report. All eyes will be on the stats for South American production. Do not enter new positions before the report.
Soybeans:
For the week, May soybeans closed 31 cents higher. The Commitment of Traders Report showed that in the money managed category, speculators added 16,129 contracts to their long positions and liquidated 1,942 contracts of their short positions. Commercial interests added 31,706 contracts to their long positions, and also added 47,479 contracts to their short positions. On April 10, 2012 the USDA will release its US And Global Supply Demand Report. This report, which is issued monthly is important in that it will give the market a clearer picture of South American bean production. Do not enter new positions prior to the report.
Sugar #11:
For the week, May sugar lost 13 points. The Commitment of Traders Report showed that in the money managed category speculators liquidated 13,517 contracts of their long positions, and added 3,343 contracts to their short positions. Commercial interests liquidated 1,133 contracts of their long positions, and also liquidated 15,487 contracts their short positions.
Crude oil:
For the week, May crude oil added 29 cents. The Commitment of Traders Report showed that in the money managed category speculators liquidated 16,049 contracts of their long positions, and added 1,846 contracts of their short positions. Commercial interests added 5,088 contracts to their long positions and also added 1,617 contracts to their short positions. The market generated a short-term sell signal on March 29. Stand aside.
Gasoline:
For the week, May gasoline closed 3.24 cents higher. The Commitment of Traders Report showed that in the money managed category speculators added 7,385 contracts of their long positions, and also added 1,750 contracts of their short positions. Commercial interests liquidated 27,381 contracts of their long positions, and also liquidated 24,210 contracts of their short positions.
I performed an open interest analysis for gasoline covering the time frame of February 29, 2012 when gasoline made a low at $3.1912 through April 4, 2012 when gasoline reached a high of $3.4113 per gallon and closed at $3.333. On February 28 2012 open interest totaled 356,533 contracts and as of April 4, open interest totaled 350,763 contracts. On February 29, open interest declined 3,822 contracts the day that gasoline reached its low. In essence the market moved approximately 21 cents from low to high, and open interest declined by 5,770 contracts. This open interest action is not bullish because speculators, both long and short are unwilling to hold their positions. Remember, open interest increases when longs and shorts disagree about the direction the market. For open interest to build, new longs and shorts have to be willing to hold their positions. During the February 29 through April 4 timeframe, speculators on both sides of the market have been liquidating as the market has moved higher. Stand aside.
Gold:
For the week, June gold lost $41.80. The commitment of traders report showed that in the money managed category speculators liquidated 9,659 contracts of their long positions and added 1,384 contracts to their short positions. Commercial interests added 2,832 contracts to their long positions and liquidated 5,928 contracts of their short positions. Gold has been on a sell signal since March 15, and speculators should use this as an opportunity to acquire gold at lower prices. The key simple moving averages are as follows: 50 day $1705.70, 150 day, $1699.78, 200 day $1688.68
Silver:
For the week, May silver lost 75 cents. The Commitment of Traders Report showed that in the managed money category, speculators added 1,823 contracts to their long positions and added 60 to their short positions. Commercial interests added 491 contracts of their long positions, and added 788 contracts of their short positions.
On Thursday, April 5, May silver generated a sell signal. This is not to say that short positions should be implemented. However, long positions should be avoided at this juncture.
Euro:
For the week, the June Euro lost 2.71 cents. In the leveraged funds category, speculators added 7,350 contracts of their long positions and liquidated 6,800 contracts of their short positions. The Euro generated a sell signal on April 4. Wait for a rally before implementing bearish positions.
Australian dollar:
For the week, the Australian dollar lost 58 points. In the leveraged funds category speculators liquidated 9,002 contracts of their long positions, and added 4,217 contracts to their short positions. The market is on a short-term sell signal, which was generated on March 28. Although it appears that the market may have generated a longer-term sell signal, I want to watch the market a little longer before confirming it.
S&P 500 E mini:
For the week, the June S&P 500 E mini lost 13.00 points. In the leveraged funds category, speculators added 50,676 contracts of their long positions and liquidated 33,015 contracts of their short positions. It appears that large speculators added to long positions, and liquidated short positions at precisely the wrong time. From March 28 through April 3, which is the reporting period for the commitment of traders report, the June S&P 500 E mini was 2.30 points higher. Long put protection should be in place.
Dow Jones Industrial Average:
The performance of the Dow Jones 30 Industrials has been one of the weakest links of all major indices. For example, year to date, the S&P 500 is +11.17% and the Dow Jones Industrial Average is +6.90%. The reason I bring this up is that the Dow 30 Industrials are about to break below their 50 day moving average of 12976. The market closed at 13060.14 on April 5. A break under the 50 day moving average would be significant because this would be the first time since December 19 that the Dow has broken under the 50 day average moving average.
As mentioned above, the performance of the Dow Jones Industrial Average from January 1 through April 5 has been +6.90%. Below, I have listed all stocks in the Dow 30 that underperformed the index. First, a couple of items struck me immediately. There are 13 underperformers out of 30, and yet of the 13, 10 stocks are heavily weighted in the index. The Dow 30 is a price weighted index, which means the more expensive stocks have a greater impact on the movement of the index than do less expensive stocks. The underperformance of these 10 stocks are dragging down the Dow 30 because of their hefty weighting in the index.
Year to Date Performance of 13 stocks In the Dow Jones Industrial Average
Dow Jones Industrial Average +6.90%
Minnesota Mining Manufacturing +6.78%
Coca-Cola +5.00%
Pfizer +3.23%
Merck +3.13%
AT&T +2.31%
Procter & Gamble +.90%
Boeing +.33%
Exxon Mobil +07.1%
Johnson & Johnson -.37%
Travelers Insurance -49%
Chevron -1.55%
McDonald’s -1.70%
Verizon -6.13%
Hewlett-Packard -10.29%
Another observation is that all the underperformers yield good returns. The 13 underperforming stocks yield an average of 4.03%. Below, I break out the numbers.
Annual Yield Of The Above Stocks By Symbol
MMM 2.70%
KO 2.78%
PFE 3.94%
MRK 4.32%
T 5.69%
KFT 3.05%
WMT 2.62%
PG 3.12%
BA 2.39%
XOM 2.22%
JNJ 3.49%
TRV 2.79%
CVX 3.09%
MCD 2.84%
VZ 5.31%
HPQ 2.08%
The reason I listed the performance and yield of the above stocks is because the current advice by Wall Street analysts and advisors is that investors should purchase high-yielding stocks. That strategy may have made sense last year, but for the first three months of 2012, it has been a loser for the most part. The weakness of the blue chips with high yields should be of concern to the investor because they may be the the proverbial “canary in the coal mine” that foretells lower prices. Another interesting aspect of the Dow 30’s performance is that the index made a high of 13289.51 on March 16. There was a subsequent rally attempt on March 27 when the index reached 13264.98. On April 2, there was the final thrust that took out the March 16 high by 7.6 points. From that high, the Dow has sunk 263.50 points. Going forward, it appears there is going to be significant resistance for the Dow at 13330. With the market poised to break under its 50 day moving average, anyone long this market should be in a defensive mode.
Interest Rates:
For the week, the 10 year treasury note gained 15.6 points. In the leveraged funds category, speculators liquidated 56,363 contracts and liquidated 9,826 of their short positions. In previous posts, I stated that the exit point for bearish note positions should be in the 130-02 area. On Thursday, April 5, I suggested that speculators liquidate all bearish positions because it appeared there was a flight to quality due in part to the sloppy performance of the equity indices and more European financial problems. The large surge of open interest on the April 4 rally was the catalyst to liquidate bearish positions
Cotton:
In the April 1 weekend wrap, I wrote a short piece on cotton. I said that there was a significant amount of resistance at the 94.40 level going back to February 10, 2012. Furthermore, I said if the market could move above that 94.40 level, a further rally was possible. However, I cautioned that cotton was entering into a period of seasonal weakness, and recommended that speculators watch from the sidelines. Well, the market tanked and lost 4.98 cents for the week and generated a sell signal on April 5. This is not to suggest that speculators short the market, however it does mean long positions should be avoided
Greenhaven Continuous Commodity Index
One index that I follow very closely is the Greenhaven Continuous Commodity Index (ticker symbol GCC). The reason for this is that (1) it is a tradable index and and (2) the index is equally weighted. In essence speculators can spot the trend of the entire commodities complex because each commodity in the index has the identical weight of 5.88%. The 17 index components are as follows: live cattle, orange juice, cotton, natural gas, heating oil, crude oil, silver, gold, platinum, copper, cocoa, coffee, sugar, soybeans, wheat, corn, and lean hogs. Note that gasoline is not included in the index.
The chart shows the index has been performing poorly for quite some time. The index fell below its 200 day moving average on September 16, 2011, and has never been above it. From January 20 through March 5 GCC popped above the 50 day moving average, then on March 6 moved below it and hasn’t been above it since. On Thursday, April 5, the index closed at 29.90, which is the lowest price since December 29, 2011. The key moving averages as of April 5 are: 50 day 31.14, 150 day 31.34, 200 day 32.06.
The direction of the index is important because it is telling us that the direction of the commodity complex is down. The the downward trajectory of the index, may in the short term negatively impact a number of markets that are currently in a bullish mode.
