Soybeans:
For the week, January soybeans lost 35 cents, March -50.75, May -51.00. The COT report showed that managed money liquidated 5,183 contracts of their long positions and also liquidated 1,601 contracts of their short positions. Commercial interests liquidated 11,497 contracts of their long positions and also liquidated 13,436 contracts of their short positions. As of the latest report, managed money is long soybeans by a ratio of 5.67:1 which is slightly higher than the previous week of 5.52:1, but lower than the ratio of 2 weeks ago of 6.36:1. Stand aside.
Soybean meal:
For the week, January soybean meal lost $29.50, March -25.80, May -24.00. The COT report showed that managed money liquidated 2,080 contracts of their long positions and added 359 contracts to their short positions. Commercial interests liquidated 5,671 contracts of their long positions and also liquidated 12,595 contracts of their short positions. As of the latest report, managed money is long soybean meal by a ratio of 4.28:1, which is down slightly from the previous week of 4.57:1 and the ratio of 2 weeks ago of 4.89:1. Stand aside.
Corn:
For the week, March corn lost 13.75 cents, May -16.00, July -26.75. The COT report showed that managed money liquidated 11,553 contracts of their long positions and also liquidated 4596 contracts of their short positions. Commercial interests liquidated 7,959 contracts of their long positions and also liquidated 11,579 contracts of their short positions. As of the latest report, managed money is long corn by a ratio of 3.49:1, which is up slightly from the previous week of 3.43:1, but sharply lower than the ratio of 2 weeks ago of 4.40:1. In the January 2 report, we dissected the long to short ratios of corn going back to late June, early July 2012, and compared them to the current ratio. As we pointed out in the report, the very low long to short ratio, is another a cautionary signal to anyone short corn. Stand aside.
In the January 2 report, we commented on the massive 16,148 contract increase of open interest in corn when it declined 7.50 cents, which was a 275% increase of open interest above average, relative to volume. Additionally, after checking our records, we found the next highest open interest increase on a price decline occurred on September 12 when corn declined 8.25 cents and open interest increased 14,025 contracts, which was 55% above average. We pointed out that major increases of open interest near the bottom of a trading range often indicates that speculators who are late to the party are getting aggressively short. We have cautioned clients to cover short positions prior to the January 11 USDA report,
However, there is another very important reason why shorts should exercise considerable caution at current levels. On December 19, the March-May spread closed at 4.00 cents premium to May. This was the lowest close for the spread since July 3, 2012 when it closed at 4.00 cents. From December 19 through January 4, March corn lost 39.75 cents or 5.52%, but May corn lost 43 cents, or 5.94%, which means the contango between March and May narrowed to the smallest level since December 3 when March corn sold at a 0.50 premium to May. The fact that corn’s price had a significant decline, while the spread between March and May narrowed to 0.50 cents premium to May is potentially bullish. Commercials dominate spread activity, and the fact that the March contract is getting close to inverting against May is a signal that corn may be close to a bottom, if only temporarily. This is not to say that a new bull market in corn is at hand, just a possible reversal.
Wheat:
For the week, March wheat lost 31.50 cents, May -31.75, July -31.75. The COT report showed that managed money liquidated 2,162 contracts of their long positions and added 5,094 contracts to their short positions. Commercial interests added 5,834 contracts to their long positions and also added 5,285 contracts to their short positions. As of the latest report, managed money is short by a ratio of 1.29:1, which is slightly above the previous week of 1.20:1 and the ratio of 2 weeks ago of 1.10:1. Stand aside.
Performance for the grain complex 2009-2012
Soybeans Soybean meal Corn Wheat Soybean oil
2012 +18.38% +35.94% +8.00% +19.10% -5.62%
2011 -14.01% -16.45% +2.78% -17.82% – 9.79%
2010 +34.05% +17.97% +51.75% +46.68% +43.10%
2009 +6.94% +4.46% +1.84% -11.34% +21.21%
Total+73.38% +74.82% +64.37% +59.30% +48.90%
Crude oil:
For the week, February crude oil gained $2.29. The COT report showed that managed money added 3,133 contracts to their long positions and liquidated 15,859 contracts of their short positions. Commercial interests liquidated 10,441 contracts of their long positions and also liquidated 12,133 contracts of their short positions. As of the latest report, managed money is long by a ratio of 3.59:1, which is up substantially from the previous week of 2.72:1 and the ratio of 2 weeks ago of 2.26:1. It is nearly double the ratio of 3 weeks ago of 1.86. Stand aside.
In the January 2 report, we stated from December 11 through January 2, crude oil had advanced $6.80 while open interest had declined by 66,975 contracts. During the past 3 COT reports, (December 18, December 24, December 31) commercial interests have liquidated a total of 43,879 contracts of their long positions, and also liquidated 48,257 contracts of their short positions. The COT tabulation time frame that reflects this decline is from December 12 through December 31. In short, the decline of open interest during the rally that began on December 12 is indicative of commercials heavily liquidating long and short positions. We checked the short to long ratios of each report and found there little change in the short to long ratio of commercial interests. For example, the commercial short to long ratio on December 18 was 1.06:1, December 24, 1.08:1, December 31, 1.07:1. From December 12 through January 4, crude oil has been leading the petroleum complex higher having gained 7.97% in this time frame, while gasoline advanced 5.18% and heating oil in 3rd place with a gain of 2.99%. It is somewhat unusual that crude oil is outperforming the products during the 2 week rally.
As we have said in previous reports, we are bullish crude oil, but not at this juncture. The market remains considerably overbought relative to its 50 day moving average on the continuation chart of $87.67. However, there is another compelling reason not to be long at current levels, which is the negative trading history of crude in January. Although Brent performs much better, it is best to stand aside while the market moves through its corrective phase. See the tables below.
Performance of March WTI Crude Oil 2007-2012 month of January.
2012 -0.59%
2011 -0.10%
2010 -8.99%
2009 -14.34%
2008 -4.27%
2007 -6.89%
Average decline in January 2007-2012 – 5.86%
Performance of March Brent Crude Oil 2007-2012 month of January.
2012 +3.79%
2011 +6.63%
2010 -9.22%
2009 -6.15%
2008 -1.61%
2007 -7.60%
Average decline in January 2007-2012 – 2.36%
Natural gas:
For the week, February natural gas lost 18.2 cents. The COT report showed that managed money added 1,404 contracts to their long positions and liquidated 1,047 contracts of their short positions. Commercial interests liquidated 1,423 contracts of their long positions and also liquidated 635 contracts of their short positions. As of the latest report, managed money is short by a ratio of 1.42:1, which is about the same as the previous week of 1.43:1, but up slightly from the ratio of 2 weeks ago of 1.31:1. Stand aside.
Energy Performance 2009-2012
Crude oil Gasoline Ethanol Heating Oil Natural Gas
2012* -7.33% +4.68% -1.35% +3.75% +12.98%
2011 +8.25% +9.50% -4.64% +15.38% -32.02%
2010 +14.87% +19.52% +20.62% +20.05% -20.35%
2009 +77.30% +103.58% + 17.75% +46.92% – 2.19%
Total: +107.75% +137.28% +35.08% +86.10% -41.58%
*2012 was the first time since 2008 (-51.04%) that crude oil prices declined for the calendar year. Since the year 2000, there have only been 2 other years when crude oil declined for the year: 2001 (-25.93%) and 2006 (0.033%).
Copper:
For the week, March copper gained 10.40 cents. The COT report showed that managed money liquidated 1,103 contracts of their long positions and also liquidated 2,039 contracts of their short positions. Commercial interests added 115 contracts to their long positions and also added 1,945 contracts to their short positions. As of the latest report, managed money is long copper by a ratio of 1.85:1 which is up slightly from the previous week of 1.72:1, but down from the ratio of 2 weeks ago of 2.39:1. Stand aside.
Gold:
For the week, February gold lost $7.00. The COT report showed that managed money liquidated 3,436 contracts of their long positions and also liquidated 1,661 contracts of their short positions. Commercial interests liquidated 894 contracts of their long positions and also liquidated 2,413 contracts of their short positions. As of the latest report, managed money is long gold by a ratio of 4.49:1, which is up slightly from the previous week of 4.35:1, but down substantially from the ratio of 2 weeks ago of 5.75:1. Stand aside.
According to Mining.com and numerous other news outlets, the Indian Central Bank is determined to slow the importation of gold due to the negative impact these imports are having on India’s trade deficit. Last week, India’s finance minister said that measures are urgently needed as gold imports are causing a 64 billion dollar deficit. The Reserve Bank of India warned that the nation must moderate its gold imports or its economic stability may be jeopardized. The government has been talking about taxing gold, which undoubtedly is going to have a major impact on gold consumption. “According to figures from the World Gold Council, India is currently the world’s main gold consumer and it is estimated that about 10% of the global supply of gold is in India’s hands.” The yellow precious metal contributes to nearly 30% of the country’s trade deficit.”
Silver:
For the week, March silver lost 2.9 cents. The COT report showed that managed money liquidated 124 contracts of their long positions and added 340 contracts to their short positions. Commercial interests added 717 contracts to their long positions and also added 205 contracts to their short positions. As of the latest report, managed money is long silver by a ratio of 5.62:1, which is down from the previous week of 6.06:1 and down substantially from the ratio of 2 weeks ago of 9.08:1. Stand aside.
Metals Performance 2009-2012
Gold Platinum Silver Copper
2012* +6.96% +10.55% 8.24% +6.15%
2011 +10.08% -21.50% -8.82% -22.74%
2010 +29.61% +21.28% +83.75% +33.42%
2009 +24.47% +55.37% +48.92% +138.53%
TotaL +71.12% +108.70% +149.73 +200.84%
*Gold’s performance for 2012 was the lowest since 2008 (+5.29%)
Canadian dollar:
For the week, the March Canadian dollar gained 97 points. The COT report showed that leveraged funds added 770 contracts to their long positions and liquidated a massive 2,925 contracts of their short positions. As a result of the heavy liquidation of the short position, leveraged funds are currently long the Canadian dollar by a ratio of 9.00:1, which is up substantially from the previous week of 6.30:1 and the ratio of 2 weeks ago of 3.46:1. Stand aside.
Australian dollar:
For the week, the March Australian dollar gained 1.09 cents (109 points). The COT report showed that leveraged funds added 1,342 contracts to their long positions, but liquidated 1,816 contracts of their short positions. As of the latest report, leveraged funds are long the Australian dollar by a ratio of 3.37:1 which is up slightly from the previous week of 3.16:1 and the ratio of 2 weeks ago of 3.27:1. Stand aside.
British pound:
For the week, the March British pound lost 89 points. The COT report showed that leveraged funds liquidated 5,992 contracts of their long positions and also liquidated 4,809 contracts of their short positions. As of the latest report, leveraged funds are long the British pound by a ratio of 3.25:1, which is up from the previous week of 2.98:1 and up substantially from the ratio of 2 weeks ago of 2.46:1. Stand aside.
Euro:
For the week, the March euro lost 1.51 cents (151 points). The COT report showed that leveraged funds added 6,336 contracts to their long positions and liquidated 839 contracts of their short positions. As of the latest report, leveraged funds are long by a ratio of 1.15:1 which is up from the previous week of 1.03:1 and up substantially from the ratio of 2 weeks ago when leveraged funds were short by a ratio of 1.08:1.
Performance for 2009-2012
Cad/Usd Aud/Usd Gbp/Usd Eur/Usd
2012 +2.65% +1.51% +4.77% +1.80%
2011 -2.18% +0.30% -0.52% -3.04%
2010 +5.50% +13.73% -3.50% -6.70%
2009 15.39% +27.44% +10.92% -2.88%
S&P 500 E mini:
For the week, the March S&P 500 E mini gained 73.70 points. The COT report showed that leveraged funds added 34,006 contracts to their long positions and liquidated 5,035 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 1.69:1 which is below the previous week of 1.85:1, but up substantially from the ratio of 2 weeks ago of 1.20:1. Stand aside.
The latest survey by the American Association of Individual Investors shows a major drop in sentiment to 38.7% from 44.4% the week prior. This is the lowest sentiment reading since the week of November 19. During that week, the S&P 500 E mini traded from a low of 1360.40 on November 19 and advanced through the week to close at 1405.30 on November 23. On January 4, the E mini closed at 1457.70, 52 points higher than November 23, but current sentiment is only a couple of percentage points above sentiment for the week of November 19 when the market was trading lower. It is puzzling to see that investor sentiment rose during the past several weeks when the S&P 500 was basically flat, but has fallen sharply when the rally began on December 31 on the alleged resolution of the fiscal cliff issue.
American Association of Individual Investors
Recent week 2 wks ago 3 wks ago
Bulls 38.7% 44.4% 46.4%
Bears 36.2% 30.2% 24.8%
Neutral 25.1% 25.4% 28.8%
Performance Major Cash Stock Indices 2009-2012
SPX DJIA NDX RUT
2012 +13.41% +7.26% +15.91% +14.64%
2011 -.003% +5.26% +2.70% -5.46%
2010 +12.78% +11.02% +19.22% +25.31%
2009 +23.45% +18.82% +53.54% +25.22%
Total +49.67% +42.36% +91.37% +59.71%
