Corn:
For the week, March corn closed $01 cent lower. The commitment of traders report, which was tabulated as of Tuesday and released on Friday showed that in the money managed category, they liquidated 18,646 contracts of their long positions and added 4,120 contracts to their short positions. Commercial interests liquidated 13,002 contracts of their long positions, and liquidated 6,176 contracts of their short positions.
Soybeans:
For the week, March soybeans closed 11 1/2 cents higher at 12.79, which was the highest close since October 14, 2011. The commitment of traders report showed that in the managed money category, they added 10,200 contracts to their long positions, and liquidated 6,877 contracts of their short positions. Commercial interests liquidated 7,810 contracts of their long positions, and added 5,572 contracts of their short positions.
Sugar #11:
For the week, May sugar closed 1.57 cents higher at 25.22, which was the highest close since November 8, 2011. The commitment of traders report showed that in the managed money category, they added 12,103 contracts to their long positions, and added 1,774 contracts to their short positions. Commercial interests liquidated 31,408 contracts of their long positions, and added 22,453 contracts to their short positions.
Crude oil:
For the week, April crude oil closed $6.17 higher at 109.77, which was the highest close since early May 2011. The commitment of traders report showed that in the money managed category, they added 11,881 contracts to their long positions, and liquidated 1,699 contracts of their short positions. Commercial interests liquidated 34,073 contracts of their long positions, and liquidated 34,875 contracts of their short positions.
Gasoline:
For the week, April gasoline closed 13.71 cents higher at 3.3247, which is the highest close for gasoline since early May of 2011. The commitment of traders report showed that in the money managed category, they added 2,565 contracts to their long positions, and liquidated 500 contracts of their short positions. Commercial interests added 1,467 contracts to their long positions and added 3,439 contracts to their short positions.
Last week, I measured the advance of the S&P 500 from the beginning of the year through February 17, and from that evaluated what might be in store for the index during the next 30 days based upon the past history of rallies of equal or greater magnitude. I am going to do the same with gasoline this week. In order to put the extraordinary 2012 rise in gasoline prices in perspective, I reviewed the last 12 years of data for gasoline covering the period of January 1, through February 22. There were only two years on a percentage basis when gasoline rose more than it has during 2012: (17.18%), January 1 through February 22, 2000 (23.47%), January 1 through February 22, 2003 (19.18%). Also, I included the years 2005 (15.74%) 2011 (8.70%) and 2004 (9.40%)
January 1–February 22 Percentage Increase
2000……………………………………….. + 23.47
2003………………………………………… + 19.18
2012………………………………………… + 17.82
2005………………………………………… + 15.74
2004…………………………………………. + 9.40
2011…………………………………………….+ 8.70
I then took the years listed above and compared how they performed in the subsequent 30 day timeframe.
February 23– March 21 Percentage Increase
2000…………………………………………+ 4.51
2003…………………………………………-20.77
2004………………………………………… +7.23
2005………………………………………..+16.72
2011…………………………………………..+8.70
Based upon a strong showing for gasoline in the January 1 through February 22 timeframe, there is a high likelihood that we will see higher prices a month from now, Possibly, we could see a sharp pullback as exemplified during 2003. It is interesting to note that March 7 was the high for the years 2011, 2003, and 2000 during the February 22 through March 21 timeframe. The 2004 high occurred on March 17 and the 2005 high was on March 21
Gold:
For the week, April gold closed $50.40 higher at 1776.40, which is the highest since November 16, 2011. The commitment of traders report showed that in the money managed category, 12,150 contracts were added to their long positions, and that 845 contracts were added to their short positions. Commercial interests liquidated 273 contracts of their long positions and added 12,412 contracts to their short positions.
From January 1, 2012 through February 22, April gold appreciated 12.83%. During the last 12 years there has been two other years when gold appreciated by approximately the same amount. The following table provides this data and then I evaluated the performance for the two previous years during the February 23 through March 21 timeframe.
January 1 through February 22 Percentage Increase
2008………………………………………………………….. + 13.14
2012…………………………………………………………… +12.83
2007…………………………………………………………… +12.16
February 23 through March 21 Percentage Decrease
2007……………………………………………………………. – 3.60
2008……………………………………………………………. – 3.14
Silver:
For the week, March silver closed $2.12 higher at 35.33, which is the highest close since October 28, 2011. The commitment of traders report showed that in the managed money category, 2,400 contracts were added to their long positions, and 305 contracts were added to their short positions. Commercial interests added 432 contracts of their long positions, and added 1,819 contracts to their short positions.
Euro:
For the week, the March Euro closed 3.01 cents higher at 1.3460, which is the highest close since December 1, 2011. The commitment of traders report showed that in the leveraged funds category, they liquidated 1,899 contracts of their long positions and liquidated 5,501 contracts of their short positions. As of Tuesday February 21, leveraged funds held a total of 49,974 contracts long and 143,547 contracts short. The heavy short position held by leveraged funds could definitely add fuel to an upside move. My key pivot point for the Euro is 1.3408. If the daily low in the Euro is no lower than the pivot point, I believe the Euro will continue to move higher. Normally, that would be a buy signal, but in this environment it would be unwise knowing the economic fragility of the euro zone. As the Euro moves higher, the dollar index will move lower, which should be bullish for commodities and stocks. However, if the Euro continues to appreciate, the economic impact on most euro zone countries will be severely negative. During the past week, the Euro breached the February 9 high of 1.3325 and as a result, all positions that sought to profit on a further slide in the Euro, should have been liquidated. I will continue to monitor the currency in order to ascertain when puts, and/or, short calls and/or short positions should be implemented again.
S&P 500 E mini:
For the week, the March S&P 500 E mini closed 3.55 points higher and made a new high for the move at 1369.50. The commitment of traders report showed that in the leveraged funds category, they added 27,417 contracts to their long positions, and added 36,980 contracts of their short positions. As of Tuesday, February 21 leveraged funds held a total of 447,449 contracts long, and 814,558 contracts short.
Whenever I analyze a market, I always review it in different time frames to provide some perspective. For example, at 1369.00 the S&P 500 cash index is approximately 200 points from its all-time high, and 200 points above its 520 week moving average (10 years) of 1169.20. In other words, the market currently is at the mid- point between its 10 year moving average fair value, and its all-time high. The significance of the 520 week moving average is that it represents long term value during a wide variety of economic conditions, and multiple bull & bear markets. In my view, this is one indication that risk is clearly weighted to the downside. Please see the Final Note at the bottom of this post.
By now, most of you know about the abysmal volume during the latest rally. Because it is so commonly known, I have stopped mentioning it except on occasion. On February 24, ZeroHedge posted some interesting historical perspective about the degree of volume weakness on February 24:”Both NYSE and ES (E-mini S&P futures) volumes were the lowest of the year so far. This is the lowest non holiday trading volume on the NYSEVOL (from Bloomberg) since its data began a decade ago and eyeballing ES volumes, this appears to be one of the lowest ever volumes of the last few years.” “For those who think this is irrelevant as the market’s price has risen and so total USD volume remains approximately equal-wrong! Today is the lowest USD volume day since the mid-2009 (which tended to coincide with holiday trading volumes around July 4) – making today’s volume less than 50% of their 2004-2007 average!”
Considering that we are at the top of the trading range where the market faltered in early May 2011, the consistent low volume is telling us that fewer participants are entering the market. Volume is the fuel that powers the market. The fact that volume continues to dry up as the market moves higher reinforces my view that the market has become very tired at these levels. I believe, (as do others) that indices/stocks start correcting (or something worse), not because there are smart sellers at the top, but because there is an absence of buyers at the top. This is rather logical because as prices go up, investors become wary of ever-increasing risk.
10 Year Treasury Notes:
For the week, March treasury notes closed 8 1/2 points higher. The commitment of traders report showed that in the leveraged funds category, they added 41,065 contracts of their long positions, and added 14,846 contracts to their short positions.
Final Note:
Although I follow economic data and fundamentals, I rarely comment on them because there are many terrific sites that are devoted to analyzing these. However, in this case I found the commentary on the condition of the US economy very compelling and wanted to share it with you. On September 30, 2011, the Economic Cycle Research Institute (ECRI) stated on its website: “Early last week, ECRI notified clients that the US economy is indeed tipping into a new recession. And there’s nothing that policymakers can do to head it off.”
“Last year, (2010) amid the double dip hysteria, we definitively ruled out an imminent recession based on leading indexes that began to turn up before QE2 was announced. Today, the key is that cyclical weakness is spreading widely from economic indicator to indicator in a telltale recessionary fashion.”
“Why should ECRI’s recession call be needed? Perhaps because, as The Economist has noted, we correctly called three recessions without any false alarms in between.”
“Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.”
I provided the above statements from the ECRI’s September report to give readers some background. On February 24, Laksman Achuthan, the cofounder of the ECRI gave interviews on CNBC and Bloomberg and stated that their forecast of a recession in mid-2012 has not changed. Additionally, he stated that economic conditions have gotten worse, not better, despite the consensus view that economic conditions are improving. The reason this is so compelling is that high gasoline prices are going to have a dramatic impact upon consumer spending this year. High crude oil and gasoline prices have always accounted for declines in consumer spending and have been the catalyst for previous recessions. The fact that the ECRI has not changed its view during the past five months because their indicators are worsening, combined with the fact that the US is facing additional headwinds from higher petroleum prices, lends additional credence to their recession forecast.
