Weekend Wrap for November 3, 2013

The stats from the October 22 COT report had been compiled and are now available for viewing in the October 27 Weekend Wrap.

OIA is announcing that there has been a major turn in some key currencies and are calling the yen, euro, British pound, and Australian dollar to have generated short term sell signals on November 1. Additionally, OIA has determined that the December dollar index generated a short-term buy signal. This has enormous implications for all commodities, and especially for those that have recently generated sell signals. With this new development, our opinion that precious may be turning around is likely to be modified. Additionally, though platinum has been acting well and is on a short and intermediate term buy signal, the rally in the dollar may serve to dampen enthusiasm for the white metal.

Soybeans: On November 1, January soybeans generated an intermediate term sell signal, and on September 30 generated a short-term sell signal.

For the week, November soybeans lost 34 cents, January -42, March -35. The COT report showed that managed money liquidated 15,874 contracts of their long positions and added 88 contracts to their short positions. Commercial interests liquidated 22,600 contracts of their long positions and also liquidated 39,311 contracts of their short positions. As of the latest report, managed money is long soybeans by a ratio of 6.52:1, which is down from the previous week of 7.28:1 and the ratio of 2 weeks ago of 8.77:1.

Soybean meal: On October 31, December soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, December soybean meal lost $28.60, January -26.20, March -21.50.The COT report showed that managed money added 3,743 contracts to their long positions and liquidated 207 contracts of their short positions. Commercial interests added 2,092 contracts to their long positions and also added 4,873 contracts to their short positions. As of the latest report, managed money is long soybean meal by a ratio of 3.95:1, which is up from the previous week of 3.72:1 and the ratio of 2 weeks ago of 3.50:1.

Soybean oil:

For the week, December soybean oil advanced 86 points, January +87, March +87.The COT report showed that managed money added 1,356 contracts to their long positions and liquidated 790 contracts of their short positions. Commercial interests added 4,933 contracts to their long positions and also added 8,501 contracts to their short positions. As of the latest report, managed money short soybean oil by a ratio of 1.33:1, which is down from the previous week of 1.39:1 and the ratio of 2 weeks ago of 1.58:1.

Corn:

For the week, December corn lost 12.75 cents, March -14.50, May -15.00.The COT report showed that managed money added 396 contracts to their long positions and also added 13,606 contracts to their short positions. Commercial interests added 17,085 contracts to their long positions and also added 13,484 contracts to their short positions. As of the latest report, managed money is short corn by a ratio of 1.37:1, which is above the previous week’s ratio of 1.31:1 and the ratio of 2 weeks ago of 1.30:1.

Chicago wheat: On November 1, December Chicago wheat generated a short and intermediate term sell signal.

For the week, December Chicago wheat lost 23.00 cents, March -22.00, May -21.75.The COT report showed that managed money liquidated 5,897 contracts of their long positions and added 8,159 contracts to their short positions. Commercial interests liquidated 1,815 contracts of their long positions and also liquidated 18,099 contracts of their short positions. As of the latest report, managed money is long Chicago wheat by a ratio of 1.16:1, which is down from the previous week of 1.35:1 and the ratio of 2 weeks ago of 1.25:1.

Kansas City wheat: On November 1, December Kansas City wheat generated a short-term sell signal, but has not generated an intermediate term sell signal.

For the week, December Kansas City wheat lost 25.50 cents, March -23.00, May -19.00.The COT report showed that managed money liquidated 168 contracts of their long positions and also liquidated 935 contracts of their short positions. Commercial interests added 599 contracts to their long positions and also added 386 contracts to their short positions. As of the latest report, managed money is long by a stratospheric 8.25:1, which is up from the previous week of 7.17:1 and the ratio of 2 weeks ago of 6.05:1.

Cotton:

For the week, December cotton lost 2.50 cents, March -1.89, May -1.92.The COT report showed that managed money liquidated 7,876 contracts of their long positions and added 12,517 contracts to their short positions. Commercial interests added 7,789 contracts to their long positions and liquidated 18,666 contracts of their short positions. As of the latest report, managed money is long cotton by a ratio of 1.63:1, which is down dramatically from the previous week of 3.88:1 and the ratio of 2 weeks ago of 4.75:1.

Sugar #11: On October 29, March 2014 sugar generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, March sugar lost 78 points, May -75, July -74.The COT report showed that managed money added 6,873 contracts to their long positions and liquidated 2,688 contracts of their short positions. Commercial interests liquidated 7,776 contracts of their long positions and also liquidated 9,158 contracts of their short positions. As of the latest report, managed money is long sugar by ratio of 3.91:1 , which is up from the previous week of 3.64:1 and the ratio of 2 weeks ago of 3.35:1.

From the October 27 Weekend Wrap:

“On October 18, March sugar topped out at 20.16 on extremely heavy volume of 399,832 contracts. This was the heaviest volume day of 2013. On that day, open interest increased by 5,887 contracts. On October 1, total open interest open interest in all contracts reached its low point of 787,891 contracts before it started to climb beginning on October 2. On October 2, March sugar closed at 18.51 and total open interest was 794,083 contracts. On October 22, total open interest increased to 830,021 contracts, or an increase of 35,938 contracts from October 2. On October 24, total open interest stood at 826,193 contracts and March sugar closed at 18.97. In short, as of October 24, open interest had increased 35,938 contracts from October 2, but since then, March sugar advanced only 46 points through October 24.”

As the extract from the October 27 report indicates, total open interest on October 2 stood at 794,083 contracts and March sugar closed at 18.51. On October 31, March sugar closed at 18.32, and open interest stood at 821,124 contracts, which is 27,041 contracts above the level of October 2, even though on October 31, March sugar closed 19 points lower than on October 2.  Sugar is on a short-term sell signal, and we know there are large numbers of longs that have yet to liquidate and will be forced to as prices move lower. In addition, the COT report, which was tabulated on October 22, showed that managed money is long sugar by a ratio of 3.64:1, which is an increase over the October 15 report of 3.35:1, and dramatically above the ratio on October 8 of 2.60:1. On October 8, March sugar closed at 18.62 or 30 points above the close on October 31, but the net long position of managed money has increased dramatically since October 8.

From a technical point of view, sugar has some definite positives. For example, the 50 day moving average crossed above the 200 day moving average on the continuation chart and the term structure of the market is in backwardation. Trends in sugar can last for extended periods of time, and we may be seeing the nascent signs of the longer-term bull market. However, the market is overbought from an open interest point of view due to the large numbers of managed money longs, who are likely holding positions from higher levels. The 50 day moving average on the March chart is 18.10 and 17.81 on the continuation chart. Sugar looks like it is overdue for a short-term rally, and we would use this as an opportunity to initiate bearish positions.

Live cattle:

For the week, December live cattle lost 90 points, February -55, April -1.00. The COT report showed that managed money added 5,469 contracts to their long positions and liquidated 2,206 contracts of their short positions. Commercial interests added 2,819 contracts to their long positions and also added 5,056 contracts to their short positions. As of the latest report, managed money is long cattle by ratio of 4.84:1, which is up from the previous week of 4.21:1 and the ratio of 2 weeks ago of 3.85:1.

An important new development occurred in the cattle market this week. For the first time in 2013, February 2014 cattle sold at a premium to April 2014 cattle, and reached a new high for the move at 42.5 points premium to February on October 29. The breakout actually occurred on October 25 when April cattle sold at a 42.5 point premium to February (spread was narrowing) which took out the previous high made on May 1  of 55 points. Ever since that breakout, the spread between February and April has narrowed to the extent that February now sells at a premium to April. This is a major development in the cattle market and confirms the bull market. While this is a very positive development, the fact remains there are huge numbers of managed money longs that have rushed into the market prematurely.

Lean hogs:

For the week, December lean hogs lost 2.07 cents, February -1.50, April 93.The COT report showed that managed money liquidated 484 contracts of their long positions and also liquidated 134 contracts of their short positions. Commercial interests added 158 contracts to their long positions and also added 1,623 contracts to their short positions. As of the latest report, managed money is long lean hogs by ratio of 7.20:1, which is about the same as the previous week of 7.17:1 but significantly above the ratio of 2 weeks ago of 6.68:1.

Crude oil:

For the week, December crude oil lost $3.24, January -2.99, February -2.59.The COT report showed that managed money liquidated 4,236 contracts of their long positions and added 2,022 contracts to their short positions. Commercial interests added 30,415 contracts to their long positions and also added 37,346 contracts to their short positions. As of the latest report, managed money is long crude oil by a ratio of 5.81:1, which is down slightly from the previous week of 6.17:1 and the ratio of 2 weeks ago of 6.04:1.

Heating oil:

For the week, December heating oil lost 2.67 cents, January -2.71, February -2.97. The COT report showed that managed money liquidated 5,173 contracts of their long positions and added 7,021 contracts to their short positions. Commercial interests added 3,644 contracts to their long positions and liquidated 12,663 contracts of their short positions. As of the latest report, managed money is long heating oil by a ratio of 1.07:1, which is down significantly from the previous week of 1.76:1 and the ratio of 2 weeks ago of 2.01:1. 

Gasoline:

For the week, December gasoline lost 2.20 cents, January -2.29, February -1.97. The COT report showed that managed money added 2,002 contracts to their long positions and liquidated 691 contracts of their short positions. Commercial interests liquidated 5,592 contracts of their long positions and also liquidated 4909 contracts of their short positions. As of the latest report, managed money is long gasoline by a ratio of 4.30:1, which is upfrom the previous week of 3.83:1 and the ratio of 2 weeks ago of 3.99:1.

Natural gas:

For the week, December natural gas lost 29.9 cents, January -29.5, February -29.3.The COT report showed that managed money liquidated 6,291 contracts of their long positions and added 27,188 contracts to their short positions. Commercial interests liquidated 4,296 contracts of their long positions and also liquidated 5,129 contracts of their short positions. According to the latest report, managed money is short natural gas by a ratio of 1.08:1, which is a complete reversal from the previous week when they were long by a ratio of 1.06:1 and the ratio of 2 weeks ago of 1 .08:1 area

Copper:

For the week, December copper advanced 2.55 cents.The COT report showed that managed money liquidated 4,459 contracts of their long positions and added 3,782 contracts to their short positions. Commercial interests added 6974 contracts to their long positions and liquidated 385 contracts of their short positions. As of the latest report, managed money is l,ong copper by a ratio of 1.50:1 , which is down significantly from the previous week of 2.10:1 , but up from the ratio of 2 weeks ago of 1.17:1.

Palladium:

For the week, December Palladium lost $9.65.The COT report showed that managed money added 1,153 contracts to their long positions and also added 331 contracts to their short positions. Commercial interests liquidated 399 contracts of their long positions and added 461 contracts to their short positions. As of the latest report, managed money is long palladium by a ratio of 18.94:1, which is down from the previous week of 23.87:1, but up substantially from the ratio of 2 weeks ago of 12.90:1.

Platinum: On October 29, January platinum generated a short and intermediate term buy signal.

For the week, January platinum lost $3.60. The COT report showed that managed money added 376 contracts to their long positions and liquidated 3408 contracts of their short positions. Commercial interests liquidated 838 contracts of their long positions and also liquidated 43 contracts of their short positions. As of the latest report, managed money is long by a ratio of 5.54:1, which is up significantly from the previous week of 3.36:1 and approximately double the ratio of 2 weeks ago of 2.78:1. 

We examined the performance of platinum against palladium from the October 2 through November 1 time frame, and platinum outperformed palladium by gaining 5.89 percent versus 5.47% for palladium. On a year-to-date basis, palladium is by far the stronger having gained 5.11% year to date, versus a loss of 6.34% for January platinum. Additionally, we compared the performance of platinum to gold and silver in the same time frame and found that gold lost 0.16% and silver gained 0.85%. Although we do not have the final stats for Friday’s trading, the preliminary numbers show that January platinum advanced $3.50 on volume of 13,566 contracts and that open interest increased by 1,716 contracts. If these numbers hold through the final report, it would be confirmation of solid support for January platinum at the 50 and 150 day day moving averages of 1448.20 and 1456.30 respectively.

Although, normally we would be recommending that clients initiate bullish positions, we caution them about this due to the short-term sell signals generated in the key currencies that comprise the dollar index. Additionally, the dollar index has generated a short-term buy signal, which will likely negatively impact both gold and silver, and have a negative psychological effect on platinum. In addition, a bearish attitude is likely to envelop the commodity markets due to the weakness in the grains, petroleum and products and precious metals. If long futures, use the area slightly below $1440 as an exit point. We would get concerned if January platinum closed below 1437.50 and 1432.50.

Gold:

For the week, December gold lost $39.30.The COT report showed that managed money added 4,553 contracts to their long positions and liquidated 17,252 contracts of their short positions. Commercial interests added 1,043 contracts to their long positions and also added 6,669 contracts to their short positions. As of the latest report, managed money is long gold by a ratio of 5.17:1, which is up dramatically from the previous week of 2.73:1 and the ratio of 2 weeks ago of 2.19:1.

Silver:

For the week, December silver lost 80.2 cents.The COT report showed that managed money added 2,249 contracts to their long positions and also added 574 contracts to their short positions. Commercial interests liquidated 94 contracts of their long positions and also liquidated 860 contracts of their short positions. As of the latest report, managed money is long silver by a ratio of 2.58:1, which is up from the previous week of 2.52:1 and the ratio of 2 weeks ago of 1.93:1.

For currencies listed below that have generated short-term sell signals, the usual 1-3 day pullback may not occur because all of them are trading near their 50 day moving average. This means that currencies generating short term sell signals are neither overbought nor oversold. 

Canadian dollar: On November 1, the December Canadian dollar remains on a short and intermediate term sell signal.

For the week, the December Canadian dollar advanced 23 points.The COT report showed that leveraged funds added 437 contracts to their long positions and also added 9,377 contracts to their short positions. As of the latest report, leveraged funds are short the Canadian dollar by a ratio of 1.91:1, which is up from the previous week of 1.47:1 and the ratio of 2 weeks ago of 1.76:1.

Australian dollar: On November 1, the December Australian dollar generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the December Australian dollar lost 1.43 cents. The COT report showed that leveraged funds added 1,956 contracts to their long positions and also added 4,283 contracts to their short positions. As of the latest report, leveraged funds are short the Australian dollar by a ratio of 1.55:1, which is up from the previous week of 1.50:1 but down from the ratio of 2 weeks ago of 1.70:1.

Swiss franc: On November 1, the December Swiss franc generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the December Swiss franc lost 2.46 cents. The COT report showed that leveraged funds added 660 contracts to their long positions and liquidated 40 contracts of their short positions. According to the latest report, leveraged funds are long the Swiss franc by a ratio of 2.03:1, which is up from the previous week of 1.96:1 and the ratio of 2 weeks ago of 1.96:1.

The Swiss franc closed at 1.0961 on November 1, and the 50 day moving average is 1.0955.

British pound: On November 1, the December British pound generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the December British pound lost 2.46 cents. The COT report showed that leveraged funds liquidated 6,710 contracts of their long positions and added 2,799 contracts to their short positions. As of the latest report, leveraged funds are long the British pound by a ratio of 3.08:1 , which is down from the previous week of 3.62:1 and the ratio of 2 weeks ago of 3.42:1.

According to the October 22 COT report, managed money was long the British pound by a ratio of 3.62:1, which was above the ratios for October 15 and October 8. From October 23 through October 31, open interest has declined only 1,904 contracts. The final stats aren’t in for November 1, but the preliminary numbers show open interest declined 2,174 contracts. Assuming this figure is in the ballpark, there remains large numbers of managed money longs who will be forced to liquidate as prices move lower. The December British pound closed at 1.5922 on November 1 and its 50 day moving average is 1.5933.

Euro: On November 1, the December euro generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the December euro lost 3.14 cents. The COT report showed that leveraged funds liquidated 1,329 contracts of their long positions and added 1,308 contracts to their short positions. As of the latest report, leveraged funds are long the euro by a ratio of 3.04:1, which is down from the previous week of 3.18:1 and the ratio of 2 weeks ago of 3.16:1.

According to the October 22 COT report, managed money is long the euro by a ratio of 3.18:1 which is above the ratio of October 15, but below the ratio of October 8 when it reached 3.61:1. From October 23 through October 31, open interest has declined by 4,608 contracts, and the preliminary stats for November 1 show that open interest declined by 13,758 contracts. Despite this decline, managed money has a considerable amount of liquidation ahead as prices move lower. The December euro closed at 1.3493 on November 1 and it’s 50 day moving average is 1.3494.

Yen: On November 1, the December Japanese yen generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, the December yen lost 147 points. The COT report showed that leveraged funds added 4,675 contracts to their long positions and liquidated 3,429 contracts of their short positions. As of the latest report, leveraged funds are short the yen by a ratio of 2.57:1, which is down from the previous week of 3.30:1 , but up from the ratio of 2 weeks ago of 2.02:1.

According to the October 22 COT report, managed money is short the yen by a ratio of 3.30:1, and this is further supported by an increase of open interest from October 23 through October 31 of 8,148 contracts. Preliminary stats for November 1 show an increase of 7,073 contracts, which relative to volume is approximately 110% above average. This means new shorts were entering the market aggressively and driving prices lower. On Friday, the December yen closed at 101.27 and the 50 day moving average is 101.66.

Dollar index: On November 1, the December dollar index generated a short-term buy signal and remains on an intermediate term sell signal.

For the week, the December dollar index advanced 1.57 points. The COT report showed that leveraged funds liquidated 2,267 contracts of their long positions and also liquidated 1,190 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by a ratio of 1.61:1, which is up from the previous week of 1.49:1 come up but down from the ratio of 2 weeks ago of 1.71:1.

On Friday, the December dollar index closed at 80.81 and the 50 day moving average is 80.76.

S&P 500 E mini:

For the week, the December S&P 500 E mini advanced 80 ticks, or 20 ticks shy of 1 full point.The COT report showed that leveraged funds added 898 contracts to their long positions and also added 16,301 contracts to their short positions. As of the latest report, leveraged funds are short the E mini by a ratio of 1.30:1, which is up slightly from the previous week of 1.27:1, but down from the ratio of 2 weeks ago of 1.35:1.