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The COT reporting period spans July 16-July 22. 

From the July 13 Weekend Wrap:

“When evaluating the possibility of a bottom, or temporary bottom in the grains, the focus should be less on price than the imbalance of supply and demand for futures contracts.”

“Beginning on July 8, we placed the above sentence in each report to remind clients that the focus should not be on price, but rather the imbalance of supply and demand for futures contracts. The reason; this is going to be the primary driver of prices until the distorted position of managed money aligns itself with market conditions. Once this occurs, prices should begin to stabilize.”

“We have been asked by clients and others when the current carnage in the grain markets will dissipate and the time frame for a bottoming process. We will be discussing individual commodities below, but the grain complex is trading in an environment that we have not seen in recent memory. Remarkably, despite being at new contract lows, soybeans, soybean meal, soybean oil, corn, Kansas City wheat, cotton have one data point in common: Managed money is net long all of these commodities and in certain cases heavily net long.”

Remarkably, as of the July 22 COT tabulation, soybeans, soybean meal, corn, cotton, Kansas City wheat still show managed money holding net long positions. The only commodity that has moved to a net short position is soybean oil, and this occurred this week as soybean oil traded to its lowest level since July 2010.There is no question that the aforementioned markets are massively oversold and due for a rally. However, with farmers having product to sell and speculators looking to liquidate long positions on rallies, advances will likely disappoint.

Soybeans:

For the week, August soybeans gained 35.50 cents, November -1.75, January 2015 -3.25. The COT report revealed that managed money liquidated 2,638 contracts of their long positions and added 6,605 contracts to their short positions. Commercial interests added 22,830 contracts to their long positions and also added 14,447 contracts to their short positions. As of the latest report, managed money is long soybeans by ratio of 1.33:1, which is down from the previous week of 1.47:1 and the ratio of 2 weeks ago of 1.58:1.

Soybean meal:

For the week, August soybean meal advanced $17.70, September +6.60, December -1.60. The COT report revealed that managed money liquidated 3,186 contracts of their long positions and also liquidated 2,748 contracts of their short positions. Commercial interests added 904 contracts to their long positions and also added 4,006 contracts to their short positions. As of the latest report, managed money is long soybean meal by ratio of 2.40:1, which is up from the previous week of 2.13:1 and the ratio of 2 weeks ago of 2.19:1.

Soybean oil:

For the week, August soybean oil lost 48 points, September -48, December -47. The COT report revealed that managed money liquidated 1,670 contracts of their long positions and added 6,824 contracts to their short positions. Commercial interests liquidated 3,892 contracts of their long positions and also liquidated 1,656 contracts of their short positions. As of the latest report, managed money is now short soybean oil by a ratio of 1.11:1, which is a complete reversal from the previous week when they were long by 1.02:1 and the ratio of 2 weeks ago when managed money was long by 1.15:1.

Corn:

For the week, September corn lost 8.25 cents, December -6.75, March 2015 -7.25. The COT report revealed that managed money liquidated 4,068 contracts of their long positions and added 20,432 contracts to their short positions. Commercial interests added 7,010 contracts to their long positions and liquidated 5,401 contracts of their short positions. As of the latest report, managed money is long corn by ratio of 1.50:1, which is down from the previous week of 1.69:1 and the ratio of 2 weeks ago of 1.73:1.

Chicago wheat:

For the week, September Chicago wheat advanced 5.75 cents, December +3.50, March 2015 +3.75. The COT report revealed that managed money added 4,843 contracts to their long positions and also added 14,704 contracts to their short positions. Commercial interests liquidated 1,465 contracts of their long positions and also liquidated 5,088 contracts of their short positions. As of the latest report, managed money is short Chicago wheat by ratio of 1.69:1, which is up from the previous week of 1.60:1 and the ratio of 2 weeks ago of 1.57:1.

Kansas City wheat:

For the week, September Kansas City wheat lost 2.50 cents, December -0.50, March 2015 +0.50. The COT report revealed that managed money added 683 contracts to their long positions and also added 791 contracts to their short positions. Commercial interests added 334 contracts to their long positions and liquidated 649 contracts of their short positions. As of the latest report, managed money remains long Kansas City wheat by ratio of 1.58:1, which is down slightly from the previous week of 1.60:1 and the ratio of 2 weeks ago of 1.89:1.

Thus far in the 3rd quarter, November soybeans is the out performer with a loss of 6.37%, September Chicago wheat -6.84%, August soybean oil -7.34%, August soybean meal -7.59%, August soybeans -8.84%, September Kansas City wheat -9.85%, corn -13.31%.

Year to date, August soybean meal is the out performer with a gain of 2.18%, August soybeans -1.80%, September Kansas City wheat -3.77%, November soybeans -4.54%, August soybean oil -9.66%, September wheat -14.13%, September corn -18.15%.

Cotton:

For the week, December cotton lost 3.47 cents, March 2015 -2.39, May 2015-2.36. The COT report revealed that managed money added 214 contracts to their long positions and also added 4,692 contracts to their short positions. Commercial interests added 3,317 contracts to their long positions and liquidated 1,268 contracts of their short positions. As of the latest report, managed money remains long cotton by ratio of 1.26:1, which is down significantly from the previous week of 1.47:1 and the ratio of 2 weeks ago of 1.61:1.

Sugar #11:

For the week, October sugar gained 17 points, March 2015 +43, May 2015 +45. The COT report revealed that managed money liquidated 1,414 contracts of their long positions and added 23,291 contracts to their short positions. Commercial interests added 14,505 contracts to their long positions and liquidated 5,044 contracts of their short positions. As of the latest report, managed money is long sugar by ratio of 1.32:1, which is down from the previous week of 1.59:1 and down dramatically from the ratio of 2 weeks ago of 2.23:1.

Coffee: On July 24, September coffee generated a short-term buy signal and remains on an intermediate term sell signal.

For the week, September coffee gained 6.75 cents, December +6.55, March 2015 +6.35. The COT report revealed that managed money added 414 contracts to their long positions and liquidated 938 contracts of their short positions. Commercial interests liquidated 905 contracts of their long positions and added 1,154 contracts to their short positions. As of the latest report, managed money is long coffee by ratio of 4.64:1, which is up from the previous week of 4.18:1 (which is the lowest reading since coffee’s contract high on April 23), but significantly below the ratio of 2 weeks ago of 6.08:1.

We are highly enthusiastic about the coffee trade and think it offers the best chance of an out sized gain compared to any other commodity traded. On Friday, the September contract closed at 1.7915, which is the highest weekly close since May 19 when September coffee closed at 1.8190.In the July 24 report written on July 25, OIA recommended the initiation of a small bullish position, even though the market had not had its pullback, which is typical after the generation of a buy signal.

Below, we have reprinted a partial extract of the July 24 report. Our concern (further described in the July 24 report) was that coffee, being as volatile as it is could possibly have a sharp run to the upside leaving clients on the sidelines. If clients chased the rally they would subject themselves to significant risk when coffee corrects the overbought condition.With the very low net long position of managed money, much of the selling pressure has been diminished. Any further downside would likely come from new short sellers and this universe is declining in our opinion.

From the July 24 report:

As clients know, our standard operating procedure is to wait for a pullback of at least a day and possibly 2 or 3 before recommending bullish positions. This is why we are recommending a small position and each client should take into account that coffee can certainly pull back from here and some temporary losses maybe sustained as a result.For September coffee to reverse the buy signal, the high for the day would have to be below OIA’s key pivot point of 1.6970. This is not to say it cannot happen, because signals occasionally reverse. However, with fundamentals of coffee being what they are, we think the worst is over and that prices will move higher during 2014.

From the July 13 Weekend Wrap:

“We think coffee may be one of our best trades in calendar year 2014, but the market has to shake out the hefty number of longs and build a base before coffee is ready to resume its uptrend. On April 23, September coffee topped out at $2.2060, and closed on Friday at 1.6140, after making a new low for the move at 1.5955, which is the lowest print since February 19 (1.5665). In short, the market has collapsed 61.05 cents from high to low and coffee is undergoing a liquidation cycle that is seen commonly in commodities. July coffee generated a short-term sell signal on May 12 and an intermediate term sell signal on June 3. During this time, we have been advising a stand aside posture and continue to do so until coffee generates a short-term buy signal.”

Cocoa:

For the week, September cocoa gained $112.00, December +77.00, March 2015 +64.00. The COT report revealed that managed money liquidated 1,211 contracts of their long positions and also liquidated 810 contracts of their short positions. Commercial interests added 4,855 contracts to their long positions and also added 5,258 contracts to their short positions. As of the latest report, managed money is long cocoa by ratio of 3.92:1, which is up slightly from the previous week of 3.84:1, but down slightly from the ratio of 2 weeks ago of 4.09:1.

Thus far in the 3rd quarter, September coffee is the out performer with a gain of 2.31%, September cocoa +2.14%, October sugar -4.83%, December cotton -11.10%.

Year to date, September coffee is the out performer with a gain of 52.92%, September cocoa +17.04%, October sugar +0.53%, December cotton -16.68%.

Live cattle:

For the week, August live cattle gained 7.48 cents, October +5.48, December +4.22. The COT report revealed that managed money liquidated 3,340 contracts of their long positions and added 4,194 contracts to their short positions. Commercial interests added 59 contracts to their long positions and liquidated 1,986 contracts of their short positions. As of the latest report, managed money is long live cattle by ratio of 7.91:1, which is down dramatically from the previous week of 11.21:1 and down from the ratio of 2 weeks ago of 8.71:1.

The current ratio is the lowest since January 21, 2014 when managed money was long live cattle by ratio of 8.88:1. The low ratio tells us the move in cattle is not over yet. However, we are troubled by a fairly regular pattern of open interest declines on advances.

Lean hogs: On July 24, October lean hogs generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, August lean hogs lost 3.45 cents, October -6.28, December -5.45. The COT report revealed that managed money added 2,155 contracts to their long positions and also added 2,159 contracts to their short positions. Commercial interests liquidated 1,268 contracts of their long positions and also liquidated 1,957 contracts of their short positions. As of the latest report, managed money is long lean hogs by ratio of 5.29:1, which is down significantly from the previous week of 6.16:1 and the ratio of 2 weeks ago of 8.46:1.

Thus far in the 3rd quarter, August cattle is the out performer with a gain of 5.71%, October cattle +4.12%, December cattle +3.07%, December hogs -0.46%, October hogs -5.82%, August hogs -6.93%.

Year to date, October hogs is the out performer with a gain of 28.09%, August hogs + 27.35%, August cattle +24.37%, December hogs +23.46%, October cattle +21.89%, December cattle +20.44%.

WTI crude oil:

For the week, September WTI crude oil advanced 14 cents, October +7, November +10. The COT report revealed that managed money liquidated 7,355 contracts of their long positions and also liquidated 4,064 contracts of their short positions. Commercial interests liquidated 34,154 contracts of their long positions and also liquidated 37,986 of their short positions. As of the latest report, managed money remains long WTI crude oil by ratio of 8.21:1, which is up from the previous week of 7.45:1, but down slightly from the ratio of 2 weeks ago of 8.61:1.

Heating oil:

For the week, September heating oil gained 6.61 cents, October +6.11, November +5.79. The COT report revealed that managed money liquidated 3,335 contracts of their long positions and added 6,715 contracts to their short positions. Commercial interests added 18,511 contracts to their long positions and also added 11,269 to their short positions. As of the latest report, managed money is now short heating oil by ratio of 1.01:1, which is a complete reversal from the previous week when they were long by ratio of 1.41:1. Two weeks ago managed money was long heating oil by ratio of 2.54:1.

Gasoline:

For the week, September gasoline gained 53 points, October +1.46 cents, November +1.61. The COT report revealed that managed money liquidated 7,818 contracts of their long positions and added 1,656 contracts to their short positions. Commercial interests added 2,149 contracts to their long positions and liquidated 9,036 contracts of their short positions. As of the latest report, managed money is long gasoline by ratio of 2.13:1, which is down from the previous week of 2.52:1 and down dramatically from the ratio of 2 weeks ago of 3.51:1.

Natural gas:

For the week, September natural gas lost 16.8 cents, October -16.5, November -16.2. The COT report revealed that managed money liquidated 7,607 contracts of their long positions and added 3,054 contracts to their short positions. Commercial interests added 6,466 contracts to their long positions and also added 5,342 contracts to their short positions. As of the latest report, managed money remains long natural gas by ratio of 1.10:1, which is down from the previous week of 1.15:1 and the ratio of 2 weeks ago of 1.14:1.

The current ratio is the lowest since the COT tabulation date of December 3, 2013 when managed money was long natural gas by ratio of 1.10:1.The trading range encompassed by the December 3 report was from 3.834-4.017. The trading range of September natural gas in the current report was from 3.756-4.146.

Thus far in the 3rd quarter September ethanol is the out performer with a gain of 2.62%, September heating oil -2.11%, September WTI crude oil -2.67%, September Brent crude oil -3.53%, September gasoline -5.49%, September natural gas -14.84%.

Year to date, September ethanol is the out performer with a gain of 20.13%, September WTI crude oil +7.63%, September gasoline +1.10%, September Brent crude oil +0.32%, September heating oil -2.80%, September natural gas -8.64%.

Copper:

For the week, September copper gained 5.30 cents. The COT report revealed that managed money liquidated 3,920 contracts of their long positions and added 968 contracts to their short positions. Commercial interests added 888 contracts to their long positions and liquidated 822 contracts of their short positions. As of the latest report, managed money is long copper by ratio of 3.38:1, which is down from the previous week of 3.79:1, but up from the ratio of 2 weeks ago of 3.15:1.

Last week, we wrote about why we thought it was likely copper would generate a short-term sell signal. However, copper surprised us by showing continued strength and making a daily low at exactly OIA’s key pivot point of 3.2380 on July 25. Despite copper’s continuing strength, we remain leery about the long side of the market. For example, the 50 day moving average of 3.1570 remains below the 200 day moving average of 3.1815. Additionally, year to date, September copper is trading down 3.46% and is in last place YTD for the metals we follow.We continue to advise a stand aside posture.

From the July 23 report:

“We thought the spike high of 3.2360 made on July 22 would be a tradable high on the bearish side, but copper has broken decisively above it, which is positive and the next hurdle is that September copper must make a daily low above OIA’s key pivot point for July 24 of 3.2380 if it is to continue the rally.Despite our thinking that copper was headed for a sell signal, we have recommended a stand aside posture until the sell signal was confirmed.”

From the July 20 Weekend Wrap:

“OIA protocols indicate that a short-term sell signal is imminent, and for this to change, September copper must make a daily low above OIA’s key pivot point of 3.2394. Unless this occurs, the market will trade sideways to lower. On June 23, OIA announced that September copper generated a short and intermediate term buy signal.If currently long, we recommend lightening up on positions and, having sell stops in place (actual or mental).”

Palladium:

For the week, September palladium lost $1.70. The COT report revealed that managed money added 446 contracts to their long positions and liquidated 10 contracts of their short positions. Commercial interests added 218 contracts to their long positions and also added 946 contracts to their short positions. As of the latest report, managed money remains long palladium by ratio of 5.69:1, which is up slightly from the previous week of 5.58:1, but down slightly from the ratio of 2 weeks ago of 5.75:1.

Platinum:

For the week, October platinum lost $11.30. The COT report revealed that managed money liquidated 618 contracts of their long positions and also liquidated 410 of their short positions. Commercial interests liquidated 729 contracts of their long positions and also liquidated 370 contracts of their short positions. As of the latest report, managed money is long platinum by ratio of 14.49:1, which is up from the previous week of 12.93:1, but down dramatically from the ratio of 2 weeks ago (which has been the high) of 19.69:1.

October platinum will generate a short-term sell signal if the daily high is below OIA’s key pivot point of $1476.00.The move lower in platinum could be especially vicious because managed money is holding a net long position of 40,580 contracts and “Other Reportables” a net long position of 7430.This is a fairly large position considering that average daily volume year to date is 12,927 contracts.

Gold: On July 24, August gold generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, August gold lost $6.10. The COT report revealed that managed money liquidated 1,139 contracts of their long positions and also liquidated 4,778 contracts of their short positions. Commercial interests liquidated 633 contracts of their long positions and added 1,557 contracts to their short positions. As of the latest report, managed money is long gold by ratio of 6.61:1, which is up from the previous week of 5.49:1, but down from the ratio of 2 weeks ago of 7.39:1. This was the highest ratio recorded during the recent bull move in gold.

On July 25 August gold experienced the first rally day after generating the short-term sell signal on July 24.Volume traded on July 25 was 178,471 contracts, and preliminary stats from the exchange show that open interest increased by 26o contracts, but preliminary numbers for open interest are unreliable. Our daily reports only use final stats. We are looking for the second rally day, and this should be a reasonable point to enter bearish positions.The relatively large position held by managed money should fund and add fuel to the downside move.The net long position held by managed money is 125,726 contracts and the category listed as “Other Reportables“ show a net long position of 20,420 contracts.

If gold makes a daily low above OIA’s key pivot point of 1305.80, the August contract may rally to 1324.20, however we doubt the rally will carry this far.For gold to reverse the sell signal, the August contract would first have to close above OIA’s key pivot point of $1324.20 and then made a daily low above it. August gold has not closed above the pivot point since July 11.With the September dollar index on a short and intermediate term buy signal as of July 16, precious metals and gold in particular should have muted rallies especially since we see continued strength in the dollar going forward. In last weekend’s report we called your attention to the potentially bearish situation developing in gold and are reprinting it for your convenience.

From the July 20 Weekend Wrap:

“From June 20 (which was the day after the major move in gold + 41.40) through July 17, total open interest increased 21,879 contracts, however, August gold advanced only 30 cents in this time frame. This is bearish open interest action relative to the unchanged price from June 20 through July 17.In other words, the substantial increase of open interest was not moving prices higher. We think this spells potential trouble for gold and is vulnerable to further downside because speculators who acquired gold at higher prices will be forced to liquidate as prices move lower.In order for August gold to continue its advance, the daily low must be above OIA’s key pivot point of 1327.00. August gold remains on a short and intermediate term buy signal. Stand aside.”

We wanted to call your attention to the outstanding performance of the 2 major gold ETF’s, GDX and GDXJ. They have been dramatically outperforming the precious metal by a significant margin. For example since August gold topped out on July 10 through July 25, August gold lost 2.19% while GDX is actually up in this period, +0.79% while its sister GDXJ is trading 1.76% lower. However, on the year to date basis, the 2 ETFS are dramatically outperforming gold with GDX trading +26.93 and GDXJ +38.13% while August gold is only 8.59% higher year to date.

Silver: September silver will likely generate a short-term sell signal this coming week.

For the week, September silver lost 25 cents. The COT report revealed that managed money liquidated 1,628 contracts of their long positions and also liquidated 735 contracts of their short positions. Commercial interests liquidated 242 contracts of their long positions and also liquidated 1,183 contracts of their short positions. As of the latest report, managed money is long silver by ratio of 6.19:1, which is up from the previous week of 5.88:1 and the ratio of 2 weeks ago of 4.79:1.

Thus far in the 3rd quarter, September palladium is the out performer with a gain of 4.37%, September copper +1.40%,October platinum -0.48%, September silver -1.47%, August gold -1.54%.

Year to date, September palladium is the out performer with a gain of 22.13%, August gold +8.59%, October platinum +7.50%, September silver + 6.73%, September copper -3.46%.

Canadian dollar: September Canadian dollar near short-term sell signal.

For the week, the September Canadian dollar lost 70 pips. The COT report revealed that leveraged funds liquidated 788 contracts of their long positions and also liquidated 2,987 contracts of their short positions. As of the latest report, leveraged funds are long the Canadian dollar by ratio of 1.10:1, which is up slightly from the previous week of 1.04:1, but a complete reversal from 2 weeks ago when leveraged funds were short Canadian dollar by ratio of 1.07:1.

Remarkably, managed money managed to get net long at the very top of the move in the Canadian dollar. All during the rally, which began the week of March 24, 2014 until the July 8 COT report, managed money was net short the Canadian dollar. This group of trader assumed a net long position for the first time in the COT report of July 15.On July 3, the September Canadian dollar topped at 93.99 and since then has fallen to a low of 92.29 on July 25. From July 7 through July 24, total open interest has increased by 8,409 contracts while the September Canadian dollar has declined by 1.04 cents.

This is bearish open interest action relative to the price decline and is bad news for anyone long the Canadian dollar. However, it is particularly problematic for speculators who rushed into the Canadian dollar at the highest level since January 2014.We expect the September Canadian dollar to generate a short-term sell signal on July 28. The heavy net long position of manage money will fund and add fuel to the downside move.Wait until the short-term sell signal has been generated and after this a counter trend rally lasting 1-3 days before initiating bearish positions. The daily report will provide guidance regarding exit points for bearish positions.

Australian dollar:

For the week, the September Australian dollar advanced 2 pips. The COT report revealed that leveraged funds added 1,663 contracts to their long positions and also added 1,843 contracts to their short positions. As of the latest report, leveraged funds are long the Australian dollar by ratio of 2.57:1, which is down slightly from the previous week of 2.69:1 and the ratio of 2 weeks ago of 2.62:1.

Swiss franc:

For the week, the September Swiss franc lost 84 pips. The COT report revealed that leveraged funds added 854 contracts to their long positions and also added 1,961 contracts to their short positions. As of the latest report, leveraged funds are short the Swiss franc by ratio of 1.69:1, which is up slightly from the previous week of 1.64:1 and the ratio of 2 weeks ago of 1.59:1.

British pound:

For the week, the September British pound lost 1.17 cents. The COT report revealed that leveraged funds liquidated 14,674 contracts of their long positions and also liquidated 1,933 of their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 2.99:1, which is down from the previous week of 3.16:1 and the ratio of 2 weeks ago of 3.31:1.

Euro:

For the week, the September euro lost 95 pips. The COT report revealed that leveraged funds added 5,752 contracts to their long positions and also added 23,252 contracts to their short positions. As of the latest report, leveraged funds are short the euro by ratio of 2.14:1, which is up from the previous week of 1.93:1, but down from the ratio of 2 weeks ago of 2.28:1.

Yen:

For the week, the September yen lost 44 pips. The COT report revealed that leveraged funds added 3,398 contracts to their long positions and liquidated 5,057 contracts of their short positions. As of the latest report, leveraged funds are short the yen by ratio 3.17:1, which is down dramatically from the previous week of 5.01:1 and the ratio of 2 weeks ago of 4.63:1.

Dollar index:

For the week, the September dollar index gained 53 points. The COT report revealed that leveraged funds added 3,234 contracts to their long positions and also added 3,692 contracts to their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 1.39:1, which is down from the previous week of 1.45:1, but up slightly from the ratio of 2 weeks ago of 1.30:1.

Thus far in the 3rd quarter, the September dollar index is the out performer with a gain of 1.66%, September Australian dollar -0.14%, September yen -0.55%, September British pound -0.74%, September Canadian dollar -1.33%, September euro -1.94%, September Swiss franc -2.04%.

Year to date, the September Australian dollar is the out performer with a gain of 6.68%, September yen +3.23%, September British pound +2.65%, September dollar index +0.78%, September Canadian dollar – 1.24%, September Swiss franc -1.95%, September euro -2.60%.

S&P 500 (250 x):

For the week, the September S&P 500 futures contract closed essentially unchanged, down a fraction of a point (-0.20). The COT report revealed that leveraged funds added 4,631 contracts to their long positions and also added 3,325 contracts to their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 1.48:1, which is down from the previous week of 2.16:1 but up from the ratio of 2 weeks ago of 1.09:1.

Thus far in the 3rd quarter, the NASDAQ 100 cash index is the out performer with a gain of 3.01%, S&P 500 cash index +0.92%, Dow Jones Industrial Average cash index +0.80%, New York Composite cash index +0.06%, S&P 400 cash index -1.90%, Russell 2000 cash index -4.04%.

Year to date, the NASDAQ 100 cash index is the out performer with a gain of 10.39%, S&P 500 cash index +7.03%, New York Composite cash index +5.63%, S&P 400 cash index +4.71%, Dow Jones Industrial Average cash index +2.32%, Russell 2000 cash index -1.63%.

10 year Treasury Note: On July 23, the September 10 year Treasury Note generated a short-term buy signal and remains on an intermediate term buy signal.

If the September note is to continue its advance, it must make a daily low above 125-09. It is unable to accomplish this, the market will trade sideways to lower.Despite the short-term buy signal, we have no recommendation to make, because we think the market could reverse course.