The COT reporting period is from Wednesday February 19 through Tuesday February 25.

Soybeans:

For the week, March soybeans advanced 43.50 cents, May +53.75, July +40.50. The COT report revealed that managed money added 3,221 contracts to their long positions and also added 1,081 contracts to their short positions. Commercial interests added 7,962 contracts to their long positions and added 23,784 contracts of their short positions. As of the latest report, managed money is long soybeans by ratio of 9.20:1, which is slightly below the previous week’s ratio of 9.50:1 but above the ratio of 2 weeks ago of 8.91:1.

In the February 27 report we gave some reasons for thinking that soybeans have put in a top. However, with the release of the most recent COT report, we have additional facts to add that supports this position. Note that the long to short ratio in soybeans has not changed much during the past 3 reporting periods (February 11, 18, 25). During this time, which encompasses the tabulation dates of Wednesday February 5 through Tuesday February 25, May soybeans have advanced 89.75 cents, yet the net long position of managed money has barely changed.

In short, though prices have advanced smartly, managed money has been reluctant to make new commitments. Additionally, commercial interests have been increasing their short positions. On February 11, the short to long ratio of commercial interests stood at 2.55:1 and by February 25 had increased to 2.64:1. In the category of “Other Reportables,” the long to short ratio has risen from 1.21:1 on February 11 to 1.38:1 on February 25.

For prices to continue to advance, commercials need to start covering their short positions or increase their buying. Speculators need to increase their buying substantially because their short position is de minimis. “Other Reportables” must be willing to massively liquidate their short positions, and/or add new long positions. We think it is unlikely that managed money and “Other Reportables” would be willing to add new long positions at current stratospheric prices. We cannot conceive that commercials would cover short positions at the top of the range. Combine this with the parabolic move on Thursday on the highest volume in over one year (427,926 contracts), and OIA thinks in all likelihood the top is in place.

Based upon the preliminary stats from the exchange, though May soybeans advanced 24 cents on Friday, total open interest declined by 644 contracts on volume of 194,661 contracts. Although preliminary open interest stats change from the preliminary  to the final report, volume stats generally do not. Volume traded on Friday would be the lowest since February 3. Poor volume on an advance of 24 cents after a blow off move the previous day, does not bode well for further advances.

In the February 27 report, we advised clients to consider writing out of the money calls, and we think this position makes a terrific sense, especially in the light of new data provided in this report.

 From the February 27 report:

“When we look at the parabolic move combined with the spike high on heavy volume, OIA thinks we have a tradable top in soybeans. With the key reversal day yesterday, we are confident that rallies will be met by nervous longs looking to exit the market, which will cap any substantial rally. Although we have not advocated bullish positions, if clients are long soybeans, we strongly advise them to take partial profits and tighten stops. Also, consider writing out of the money calls in soybeans. Soybeans remain on a short and intermediate term buy signal.”

Soybean meal:

For the week, March soybean meal advanced $12.10, May +17.50, July +15.30. The COT report revealed that managed money added 760 contracts to their long positions and also added 1,462 contracts to their short positions. Commercial interests added 509 contracts to their long positions and also added 4,322 contracts to their short positions. As of the latest report, managed money is long soybean meal by ratio 4.23:1, which is down from the previous week of 4.49:1 but up slightly from the ratio of 2 weeks ago of 4.11:1.

Soybean oil: On February 26, May soybean oil generated an intermediate term buy signal after generating a short-term buy signal on February 7.

 For the week, March soybean meal oil advanced 57 points, May +56, July +43. The COT report revealed that managed money added 1,842 contracts to their long positions and liquidated 12,572 contracts of their short positions. Commercial interests liquidated 7,144 contracts of their long positions and added 1,553 contracts to their short positions. As of the latest report, managed money is short soybean oil by ratio of 1.39:1, which is down from the previous week of 1.72:1 and the ratio of 2 weeks ago of 2.13:1.

Note that the decline in the short to long ratio was primarily due to the liquidation of short positions by managed money. The short to long ratio is the lowest since the COT tabulation date of November 5. During the tabulation period of October 30-November 5, May soybean oil traded in a range of 41.92-43.07. In short, the current COT ratio is quite positive considering that on Tuesday February 25, May soybean oil closed at 40.85 and the high made during the reporting period was 41.42.

Corn:

For the week, March corn advanced 4.50 cents, May +4.50, July +4.75. The COT report revealed that managed money added 19,464 contracts to their long positions and liquidated 25,093 contracts of their short positions. Commercial interests liquidated 34,475 contracts of their long positions and added 22,554 contracts to their short positions. As of the latest report, managed money is long corn by ratio of 1.68:1, which is up significantly from the previous week of 1.33:1 and the ratio of 2 weeks ago of 1.30:1.

Remarkably, the current long to short ratio is the highest since the COT tabulation date of June 25, 2013 when the ratio for managed money was 1.67:1. During the COT tabulation period of June 19-June 25, July 2013 corn traded in a range of $6.50 1/2-6.83 1/2. In short, managed money is stratospherically long corn currently, however corn prices are approximately $2.00 lower than they were in late June 2013 when the COT ratio was the same as today’s.

Chicago wheat:

For the week, March Chicago wheat lost 10.75 cents, May -3.25, July – 1.00. The COT report revealed that managed money liquidated 5,869 contracts of their long positions and also liquidated 21,500 contracts of their short positions. Commercial interests liquidated 10,558 contracts of their long positions and also liquidated 8,176 contracts of their short positions. As of the latest report, managed money is short Chicago wheat by ratio of 1.24:1, which is down from the previous week of 1.40:1 and the ratio of 2 weeks ago of 1.46:1.

Remarkably, managed money liquidated 5,869 contracts of their long positions during the COT reporting period of February 19 through February 25 when May wheat advanced 10.50 cents. This tells us that managed money has little confidence in wheat’s ability to continue to move higher. Additionally, commercial interests liquidated long and short positions as wheat prices advanced.

Kansas City wheat:

For the week, March Kansas City wheat lost 5.75 cents, May -1.50, July +3.50. The COT report revealed that managed money added 590 contracts to their long positions and liquidated 4,130 contracts of their short positions. Commercial interests liquidated 3,189 contracts of their long positions and also liquidated 546 contracts of their short positions. As of the latest report, managed money is long Kansas City wheat by ratio of 2.42:1, which is up significantly from the previous week of 1.91:1 and the ratio of 2 weeks ago of 1.51:1.

February grain performance: May soybeans +11.47%, May soybean meal +11.34%, May Kansas City wheat +10.31%, May bean oil +10.18%, May Chicago wheat +7.88%, May corn +5.46%

Grain performance year to date: May soybean meal +12.29%, May soybeans +10.73%, May corn +7.73%, May bean oil +5.82%, May Kansas City wheat +4.82%, May Chicago wheat -1.59%

Cotton:

For the week, March cotton lost 50 points, May -1.21 cents, July -1.34. The COT report revealed that managed money liquidated 4,523 contracts of their long positions and added 220 contracts to their short positions. Commercial interests liquidated 1,547 contracts of their long positions and also liquidated 4,888 contracts of their short positions. As of the latest report, managed money is long cotton by ratio of 7.79:1, which is a decline from the previous week of 8.61:1, but above the ratio of 2 weeks ago of 7.45:1.

Sugar #11: On February 24, May sugar generated an intermediate term buy signal after generating a short-term buy signal on February 19.

For the week, May sugar advanced 59 points, July +50, October +46. The COT report revealed that managed money added 11,316 contracts to their long positions and liquidated a massive 42,446 contracts of their short positions. Commercial interests liquidated 8,013 contracts of their long positions and added 38,949 contracts to their short positions. As of the latest report, managed money is long sugar by ratio of 1.25:1, which is a complete reversal from the previous week when managed money was short by a ratio of 1.10:1 and the ratio of 2 weeks ago when they were short by a ratio of 1.19:1.

The switch to a net long position by managed money was the result of the liquidation of 42,446 contracts of short positions rather than the addition of 11,316 contracts to their long positions.

Coffee:

For the week, May coffee advanced 10.80 cents, July +10.90, September +11.15. The COT report revealed that managed money liquidated 1,469 contracts of their long positions and also liquidated 5,314 contracts of their short positions. Commercial interests liquidated 3,284 contracts of their long positions and also liquidated 2,113 contracts of their short positions. As of the latest report, managed money is long coffee by ratio of 3.00:1, which is up significantly from the previous week of 2.27:1 and nearly double the ratio of 2 weeks ago of 1.67:1.

Cocoa:

For the week, May cocoa advanced $7.00, July +10.00, September +15.00. The COT report revealed that managed money liquidated 1,335 contracts of their long positions and also liquidated 794 contracts of their short positions. Commercial interests added 2,689 contracts of their long positions and also added 202 contracts to their short positions. As of the latest report, managed money is long cocoa by ratio 7.07:1, which is up from the previous week of 6.76:1 and the ratio of 2 weeks ago of 6.43:1.

In past reports, we have written about the negative spread action between the front month of cocoa versus the forward months. On February 28, the May-July 2014 spread closed at $9.00 premium to July. This is the lowest close for the spread since July 8, 2013, and as we have said before, spreads often foretell the next directional move. During the month of February, cocoa advanced 1.20%, or $35.00 and managed money is massively long cocoa. The market will need new aggressive longs to push prices higher. If there is significant tightness in cocoa, May should not be selling at a major discount to the July contract. If long cocoa, we continue to urge caution.

Softs February performance: May coffee +41.75%, May sugar +12.06%, May Cocoa +1.20%, May cotton + 0.94%.

Softs year to date performance: May coffee +59.63%, May Cocoa +8.87%, May sugar +6.64%, May cotton +3.25%.

Live cattle:

For the week, April cattle advanced 3.52 cents, June +1.48, August +1.32. The COT report revealed that managed money liquidated 671 contracts of their long positions and also liquidated 197 contracts of their short positions. Commercial interests added 1,116 contracts to their long positions and liquidated 4,218 contracts of their short positions. As of the latest report, managed money is long cattle by ratio of 10.70:1, which is up from the previous week of 10.59:1 and about the same as 2 weeks ago of 10.73:1.

The February contract, which is expiring made an all time high of 1.53000.

Lean hogs:

April lean hogs advanced 7.50 cents, June +4.20, August + 5.13. The COT report revealed that managed money added 4,561 contracts to their long positions and liquidated 2,384 contracts of their short positions. Commercial interests liquidated 3,287 contracts of their long positions and added 5,403 contracts to their short positions. As of the latest report, managed money is long lean hogs by ratio of 5.94:1, which is up substantially from the previous week of 4.71: 1 and the ratio of 2 weeks ago of 3.72:1.

This week, April lean hogs reached the highest price since August 11, 2011 (107.20) The PED virus is taking its toll by reducing supplies while demand has remained steady. The market is massively overbought and is going to be subject to increased volatility as speculators take profits and new longs attempt enter the market. We think the volatility is too great making it difficult to trade because the price swings can cause a viable position to lose money rapidly. We much prefer the long side of cattle due to its very favorable fundamentals and the orderly way the market has advanced. This is not to say that cattle will not enter a highly volatile stage at a later date, but at least clients will have sufficient profits to guard against adverse moves.

February livestock performance: April lean hogs +12.71%, April cattle +3.24%.

Year to date livestock performance: April hogs +17.84%, April cattle +7.15%.

WTI crude oil:

For the week, April WTI crude oil advanced 39 cents, May +52, June +47. The COT report revealed that managed money added 7,938 contracts to their long positions and also added 2,581 contracts to their short positions. Commercial interests liquidated 5,229 contracts of their long positions and added 1,059 contracts to their short positions. As of the latest report, managed money is long WTI crude oil by ratio of 13.97:1, which is down in the previous week of 15.20:1 but up substantially from the ratio of 2 weeks ago of 10.53:1.

Heating oil:

For the week, April heating oil lost 2.26 cents, May -2.67, June -2.59. The COT report revealed that managed money added 6,998 contracts to their long positions and liquidated 3,571 contracts of their short positions. Commercial interests liquidated 15,101 contracts of their long positions and also liquidated 2,945 contracts of their short positions. As of the latest report, managed money is long heating oil by ratio of 4.49:1, which is up substantially from the previous week of 3.11:1 and the ratio of 2 weeks ago of 2.66:1.

Gasoline:

For the week, April gasoline lost 2.56 cents, May -2.27, June -2.14. The COT report revealed that managed money added 10,538 contracts to their long positions and liquidated 4,282 contracts of their short positions. Commercial interests liquidated 14,006 contracts of their long positions and also liquidated 539 contracts of their short positions. As of the latest report, managed money is long gasoline by ratio of 4.76:1, which is up substantially from the previous week of 3.14:1 and more than double the ratio of 2 weeks ago of 1.99:1.

Ethanol:

For the week, April ethanol advanced 19.2 cents and made a new contract high at $2.235.

Natural gas:

For the week, April natural gas declined 40.3 cents, May -21.6, June -20.5. The COT report revealed that managed money added 7,876 contracts to their long positions and also added 13,379 contracts to their short positions. Commercial interests liquidated 13,468 contracts of their long positions and also liquidated 16,359 contracts of their short positions. As of the latest report, managed money is long natural gas by ratio 2.30:1, which is down from the previous week of 2.50:1, but up from the ratio of 2 weeks ago of 2.22:1.

February performance for petroleum and products: April ethanol +23.39%, April WTI crude oil +6.03%, April gasoline +5.79%, April natural gas +3.50%, April Brent crude oil +2.98%, April heating oil +2.90%.

Year to date performance for petroleum and products: April ethanol +28.01%, April natural gas +12.30%, April WTI crude oil + 4.14%, April gasoline +0.51%, April heating oil – 0.75%, April Brent crude oil – 1.30%

Copper:

For the week, May copper lost 7.25 cents. The COT report revealed that managed money added 2,148 contracts to their long positions and liquidated 8,275 contracts of their short positions. Commercial interests liquidated 4,706 contracts of their long positions and also liquidated 1,549 contracts of their short positions. As of the latest report, managed money is long copper by ratio of 1.05:1, which is a complete reversal from the previous week when they were short by a ratio of 1.28:1 and the ratio of 2 weeks ago when managed money was short by ratio of 1.50:1.

Surprisingly, managed money increased their net long position despite a lower week for copper prices. As we stated in last week’s report, we thought copper would struggle to move above OIA’s pivot point and the 50 day moving average and this proved to be correct. The March contract held up fairly well, which reflects near term tightness in refined copper. With the increase of new longs, we think a test of the November 19 low of $3.1500 is inevitable.

From the February 23 Weekend Wrap:

“The 50 day moving average for the May contract is $3.2936, which is close to our pivot points of 3.2969 and 3.2940. We think copper will struggle to move above this, and after more speculative shorts have been blown out, the May contract may be a candidate for bearish positions. Total copper open interest has increased by 1,860 contracts from February 4 through February 20 while May copper has advanced 7.55 cents. This is not much of an increase considering the magnitude of the advance, but the March contract is losing open interest as it approaches 1st notice day. Copper is the only commodity we follow that is on a short and intermediate term sell signal.”

Palladium:

For the week, June palladium advanced $2.25. The COT report revealed that managed money added 792 contracts to their long positions and liquidated 65 contracts of their short positions. Commercial interests added 680 contracts to their long positions and also added 1,978 contracts to their short positions. As of the latest report, managed money is long palladium by ratio of 4.55:1, which is slightly above the previous week of 4.32:1, but substantially above the ratio of 2 weeks ago of 3.48:1.

Platinum: On February 24, April platinum generated an intermediate term buy signal after generating a short-term buy signal on February 14.

For the week, April platinum gained $18.90. The COT report revealed that managed money added 645 contracts to their long positions and added 50 contracts to their short positions. Commercial interests liquidated 248 contracts of their long positions and added 2,649 contracts to their short positions. As of the latest report, managed money is long platinum by ratio of 4.21:1, which is up from the previous week of 4.15:1 and the ratio of 2 weeks ago of 3.46:1.

Gold:

For the week, April gold lost $2.00. The COT report revealed that managed money added 4,006 contracts to their long positions and liquidated 23,480 contracts of their short positions. Commercial interests liquidated 4,288 contracts of their long positions and added 6,049 contracts to their short positions. As of the latest report, managed money is long gold by ratio of 4.10:1, which is up substantially from the previous week of 2.26:1 and more than double the ratio of 2 weeks ago of 1.80:1.

Note that the increase in the long to short ratio was due primarily to the liquidation of 23,480 contracts of short positions.

Silver:

For the week, May silver lost 57.4 cents. The COT report revealed that managed money added 3,830 contracts to their long positions and liquidated 2,654 contracts of their short positions. Commercial interests added 1,025 contracts to their long positions and also added 2,669 contracts to their short positions. As of the latest report, managed money is long silver by ratio of 3.81:1, which is up substantially from the previous week of 2.66:1 and significantly above the ratio of 2 weeks ago of 1.44:1.

Like gold, the increase in the long to short ratio was due primarily to the liquidation of 2,654 of managed money short positions.

February performance metals: May silver +10.72%, April gold +6.58%, June palladium +5.25%, April platinum +4.94%, May copper -0.11%.

Year to date performance metals: April gold +9.99%, May silver +9.30%, April platinum + 5.41%, June palladium +3.64%, May copper -5.78%.

Canadian dollar:

For the week, the March Canadian dollar advanced 52 pips. The COT report revealed that leveraged funds liquidated 3,916 contracts of their long positions and also liquidated 9,698 contracts of their short positions. As of the latest report, leveraged funds are short the Canadian dollar by a stratospheric ratio of 10.20:1, which is up substantially from the previous week of 7.48:1 and the ratio of 2 weeks ago of 8.09:1.

The current ratio is the highest that we’ve seen during the past 2 years.

Australian dollar:

For the week, the March Australian dollar lost 39 pips. The COT report revealed that leveraged funds added 846 contracts to their long positions and liquidated 4,163 contracts of their short positions. As of the latest report, leveraged funds are short the Australian dollar by ratio 4.66:1, which is down from the previous week of 6.00:1 and the ratio of 2 weeks ago of 5.84:1.

Swiss franc:

For the week, March Swiss franc advanced 1.14 cents. The COT report revealed that leveraged funds added 4,768 contracts to their long positions and also added 1,372 contracts to their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio of 1.39:1, which is up from the previous week of 1.20:1, but below the ratio of 2 weeks ago of 1.55:1.

British pound:

For the week, the March British pound advanced 1.14 cents. The COT report revealed that leveraged funds added 465 contracts to their long positions and liquidated 2,782 contracts of their short positions. As of the latest report, leveraged funds are long the British pound by ratio 3.47:1, which is up from the previous week of 3.25:1, but down from the ratio of 2 weeks ago of 3.58:1.

Euro:

For the week, the March euro gained 78 pips. The COT report revealed that leveraged funds added 3,787 contracts to their long positions and liquidated 2,058 contracts of their short positions. As of the latest report, leveraged funds are long the euro by ratio of 1.86:1, which is up from the previous week of 1.70:1 and the ratio of 2 weeks ago of 1.27:1.

Yen:

For the week, the March yen advanced 70 pips. The COT report revealed that leveraged funds liquidated 1,840 contracts of their long positions and added 3,339 contracts to their short positions. As of the latest report, leveraged funds are short the yen by ratio of 2.06:1, which is up from the previous week of 1.90:1 and the ratio of 2 weeks ago of 1.96:1.

We have been friendly to the yen, and there are a number of reasons for it. First, year to date, the March yen has been the best performing currency of those covered in our reports and two, the yen has had a classic garden-variety pullback after making its high at .9927 on February 4. The low in the March yen occurred on February 21 at .9725, which was its lowest price since January 31 (.9717), and since then has had a series of higher lows and higher highs with the exception of February 26, when the high was below the previous day. From February 21 through February 27, total open interest has declined by 1,753 contracts while the March yen has advanced 34 pips, which we don’t see as significant relative to the advance. The March contract will be entering expiration, and managed money is short the yen by a 2 to 1 margin.

The key pivot points to watch: .9837 and .9793. If the daily low in the March yen is above one or both pivot points, the March yen will continue its advance. If not, it will remain range bound.

Dollar index:

For the week, the March dollar index declined 55 points. The COT report revealed that leveraged funds liquidated 603 contracts of their long positions and also liquidated 612 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 4.36:1, which is slightly above the previous week of 4.10, but down from the ratio of 2 weeks ago of 5.02:1.

February currency performance: March Swiss franc +3.32%, March euro +2.51%, March Australian dollar +2.29%, March British pound +2.00%, March Canadian dollar +0.62%, March yen +0.52%, March dollar index -1.95%.

Year to date currency performance: March yen +3.39%, March British pound +1.99%, March Swiss franc +1.20%, March Australian dollar +0.43%, March euro +0.25%, March dollar index -0.63%, March Canadian dollar -3.81%.

S&P 500 E mini:

For the week, the March S&P 500 E mini gained 13.30 points. The COT report revealed that leveraged funds added 16,544 contracts to their long positions and liquidated 17,414 contracts of their short positions. As of the latest report, leveraged funds are short the S&P 500 E mini by ratio of 1.75:1, which is down from the previous week of 1.83:1 and the ratio of 2 weeks ago of 1.81:1.

AAII Index                     Recent week         2 weeks ago   3 weeks ago
  Bullish 39.7% 42.2% 40.2%
  Bearish 21.1 22.8 27.3
  Neutral 39.2 35.0 32.5
Source: American Association of Individual Investors