For Bloomberg access:{OIAR<GO>}

The time frame for this week’s Commitments of Traders report is from Wednesday, October 8 through Tuesday, October 14.

Soybeans:

For the week, November soybeans advanced 29.25 cents, January 2015 +29.25, March 2015 + 29.25. The COT report revealed that managed money added 8,626 contracts to their long positions and liquidated 330 of their short positions. Commercial interests liquidated 570 contracts of their long positions and added 11,016 to their short positions. As of the latest report, managed money remains long soybeans by ratio 1.33:1, which is up from the previous week of 1.24:1, but down from the ratio of 2 weeks ago of 1.45:1.Commercial interests remain long soybeans by ratio 1.17:1, which is down from the previous week of 1.22:1 and the ratio of 2 weeks of 1.31:1.

Soybean meal: On October 16, December soybean meal generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, December soybean meal advanced $19.50, January 2015 +17.60, March 2015 +15.70. The COT report revealed that managed money added 2,903 contracts to their long positions and liquidated 4,011 of their short positions. Commercial interests added 3,966 contracts to their long positions and also added 9,230 to their short positions. As of the latest report, managed money remains long soybean meal by ratio of 2.10:1, which is up substantially from the previous week of 1.78:1, but up by a fractional amount from 2 weeks ago of 2.03:1.

Soybean oil:

For the week, December soybean oil lost 42 points, January 2015 -42, March 2015 -40. The COT report revealed that managed money added 1,236 contracts to their long positions and also added 1,190 to their short positions. Commercial interests added 5,184 contracts to their long positions and also added 3,128 to their short positions. As of the latest report, managed money remains long soybean oil by ratio 1.04:1, which is exactly the same as the previous week of 1.04:1, but a complete reversal from 2 weeks ago when managed money was short by 1.10:1.

Corn:

For the week, December corn advanced 14.00 cents, March 2015 +14.50, May 2015+14.25. The COT report revealed that managed money liquidated 4,653 contracts of their long positions and liquidated a massive 30,544 of their short positions. Commercial interests liquidated 1,382 contracts of their long positions and added 5,734 to their short positions. As of the latest report, managed money is long corn by ratio of 1.36:1, which is up from the previous week of 1.22:1, but up fractionally from the ratio of 2 weeks ago of 1.28:1.

Chicago wheat:  On October 17, December Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, December Chicago wheat advanced 17.50 cents, March 2015 +18.50, May 2015+19.25. The COT report revealed that managed money liquidated 229 contracts of their long positions and also liquidated 7,561 of their short positions. Commercial interests liquidated 1,337 contracts of their long positions and added 760 to their short positions. As of the latest report, managed money remain short Chicago wheat by ratio of 1.71:1, which is down from the previous week of 1.80:1 and the ratio of 2 weeks ago of 1.77:1.

Kansas City wheat: On October 17, December Kansas City wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, December Kansas City wheat advanced 24.00 cents, March 2015 +23.00, May 2015+19.75. The COT report revealed that managed money added 270 contracts to their long positions and liquidated 1,699 of their short positions. Commercial interests liquidated 2,597 contracts of their long positions and also liquidated 1,261 of their short positions. As of the latest report, managed money remains long Kansas City wheat by ratio of 1.30:1, which is up from the previous week of 1.22:1 and the ratio of 2 weeks ago of 1.24:1.

We wanted to bring your attention that the Kansas City wheat term structure has inverted this past week with December 2014 (6.01 3/4) and March 2015 (6.01 3/4) contracts closing at a premium to May 2015 (5.98 1/2) and July 2015 (5.88 1/4). The December 2014-May 2015 spread on October 16 closed at a 4.00 cent premium to December, which is the highest close for the spread since May 15, 2014 when the spread closed at 4.00 cent premium to December 2014 and the December contract closed at $7.96.

The high for the spread going back 150 days has been 13.50 cents premium to December and the low has been 16.25 cents  premium to May 2015 on August 14 when December closed at 6.23 1/4. In short, it appears that Kansas City wheat prices are headed higher, and now that it is on a short-term buy signal, we recommend to waiting for a pullback before initiating bullish positions. Also, a pullback should narrow the spread: buying December 2014 and selling May 2015, or July 2015. A long Kansas City -short Chicago wheat spread makes sense, however, we caution the spread is very volatile and clients must have a high risk tolerance in order to trade it.

From a fundamental point of view, stocks of hard red winter wheat are tight, however the prevailing narrative has been there is more than enough supply on a global basis to offset the short fall of US hard red winter wheat. The estimated stocks to usage ratio for the 2014-2015 US crop in the is 27%, which is lower than 2008-2009 of 28% and the lowest since 2007-2008 when stocks to usage ratio made a historic low of 14%.

Additionally, stocks of other high protein wheat: white wheat and durum wheat are also at record low levels.  For example, the stocks to usage ratio for white wheat for the 2014-2015 season is 15%, the lowest since the 2006-2007 season of 15%. Stocks to usage for durum wheat is 14% for 2014-2015 , which is the lowest since 2007-2008 when stocks to usage made a record low of 7%.

Thus far in the 4th quarter, December soybean meal is the out performer with a gain of 10.57%, December corn +8.50%, December Chicago wheat +8.01%, December Kansas City wheat +7.84%, January 2015 soybeans +4.18%, December soybean oil             – 1.08%.

Year to date, December soybean meal is the out performer with a loss of 5.52%, December Kansas City wheat -10.09%, January 2015 soybeans -15.85%, December Chicago wheat -19.44%, December soybean oil -20.09%, December corn -22.71%.

Cotton:

For the week, December cotton lost 1.10 cents, March 2015 -11 points, May 2015-13. The COT report revealed that managed money added 3,993 contracts to their long positions and liquidated 2,318 of their short positions. Commercial interests liquidated 1,577 contracts of their long positions and added 6,223 to their short positions. As of the latest report, managed money remains long cotton by a ratio of 1.28:1, which is up substantially from the previous week of 1.08:1 and a complete reversal from 2 weeks ago when managed money was short cotton by ratio of 1.12:1.

The current ratio of 1.28:1, is the highest since the COT tabulation date of September 16 when managed money was long cotton by a ratio of 1.33:1. December cotton remains on a short and intermediate term sell signal.

Although December cotton has been unable to generate a short-term buy signal, it has been displaying a considerable amount of weakness lately and on Friday closed (63.00) below OIA’s key pivot point of 63.13. With the relatively high net long position of manage money, there is plenty of fuel to fund the downside move and test the contract low of 60.83 made on September 25.

Sugar #11:

For the week, March 2015 sugar advanced 7 points, May 2015+5, July 2015 +1. The COT report revealed that managed money liquidated 706 contracts of their long positions and also liquidated 1,024 of their short positions. Commercial interests added 696 contracts to their long positions and also added 4,786 to their short positions. As of the latest report, managed money remains short sugar by ratio of 1.27:1, which is exactly the same as the previous week of 1.27:1, but down from the high ratio of 1.30:1, which has been the largest net short position since the beginning of the current bear market.

Coffee:

For the week, December coffee lost 3.30 cents, March 2015 -3.15, May 2015-3.00. The COT report revealed that managed money added 4,954 contracts to their long positions and liquidated 1,193 of their short positions. Commercial interests added 354 contracts to their long positions and also added 4,445 contracts to their short positions. As of the latest report, managed money is long coffee by a stratospheric 11.39:1, which is up substantially from the previous week of 8.18:1 and the ratio of 2 weeks ago of 6.66:1.

The current ratio of 11.39:1, is the highest since the COT report of May 6, 2014 when managed money was long coffee by ratio of 13.38:1.

On Friday, December coffee closed at 2.1065, which was the lowest close since 2.0650 made on October 3. We have been concerned about the massive build of speculative long positions, especially since advances were not accompanied by increases of volume. Additionally, on days when the market declined, open interest wasn’t declining indicating that participants were liquidating. With the stratospheric net long position of manage money, the market has the impetus to move lower, especially if prices decline by a greater amount than is currently anticipated.

In the current COT report, commercial interests increased their net short position by 4,091 contracts and in the previous week’s report (October 7), increased their net short position by 4,531 contracts. We have been concerned about the increased amount of trade selling, and in our report of October 16, this became all too apparent when total open interest increased by a massive 2573 contracts on volume of 16,804 when December coffee advanced just 1.10 cents.

Even though December coffee lost 3.30 cents for the week, the July 2015-March 2016 spread widened by 50 points and on Friday closed at a 90 point premium to July.We want to see July contract continuing to sell at a premium to March 2016, and if the spread reverses, could be an indication that the decline is going to be more severe.The spread between September 2015 and September 2017 has widened dramatically in just the past 2 weeks.

For example, on October 1 the September 2015- September 2017 spread closed at a 20 point premium to September 2017. By October 14, the September 2015-September 2017 spread closed at 6.80 cent premium to September 2015. This is extremely bullish and bodes well for a longer-term bull market in coffee. The widening of the spreads should continue with the nearby months eventually selling at a premium to forward contracts.

We think coffee has the fundamentals to challenge the May 2011 high of 3.0625 and the May 1997 high of 3.1800. One reason is that consumers no longer cut back their consumption when coffee prices are high as they did in decades past. This thesis also has been proven true in the cattle market when stratospheric prices have not discouraged consumption even though the finances of the average consumer are in terrible shape.With consumption continuing at a record pace and a supply deficit of coffee down the road coffee prices should continue to rise. Recently, arabica production was downgraded by 127,000 bags to near a five-year low of 32.11 million. Production for the 2014-2015 season is the lowest since 2011-2012. Robusta supplies are plentiful and have been revised  upwards to 13.03 million bags, which is an all time high. The New York coffee contract trades arabica beans only.

From the October 16 report:

“Although we think coffee prices are headed higher, the resistance at the 2.25 level, is a barrier the market has been unable to overcome.We think that further declines are likely ahead and this will undoubtedly pressure the long July 2015-short March 2016 spread.If the July contract loses its premium to March 2016, we think it is wise to liquidate the spread and look to initiate it again under more favorable circumstances. There are large numbers of speculative longs in the market, and it is apparent they have not liquidated on price advances or declines. If coffee begins to decline in a significant way, the forced liquidation by speculative longs could take the market much lower than anyone thinks.”

Cocoa:

For the week, December cocoa lost $71.00, March 2015 -58.00, May 2015-53.00. The COT report revealed that managed money liquidated 5,885 contracts of their long positions and also liquidated 19 of their short positions. Commercial interests added 512 contracts to their long positions and liquidated 3,332 contracts of their short positions. As of the latest report, managed money is long cocoa by ratio of 3.74:1, which is down from the previous week of 4.01:1 and the ratio of 2 weeks ago of 4.64:1.

The current ratio of 3.74:1 is the lowest since the COT report of August 12, 2014 when managed money was long cocoa by ratio of 3.69:1.

Cocoa has seen a massive amount of liquidation ever since it peaked at 3,399 on September 25, however, we have not seen increases of open interest, which would indicate that new short sellers are entering the market. In short, potential market participants are not willing to bet on lower cocoa prices, especially because of the possible expansion of the Ebola contagion and its impact on the distribution of cocoa. On September 11, December cocoa made its low for the move at 3,019 and came close to testing that low on October 14 (3022). If reports begin to surface about the virus spreading to the Ivory Coast and Ghana, the market could take off like a rocket, especially with the very low net long position of manage money.

The March 2015-short December 2015 bull spread widened by $8.00 on Friday and now stands at a 57.00 premium to March 2015, which is above our exit point for the spread of 46.00, which was the low made on October 7. The market remains inverted, which is a bullish set up going forward. Additionally, cocoa’s moving averages are in a bullish set up with the 20 day moving average standing at 3,173, 50 day, 3,172, 100 day 3,141 and the 200 day moving average of 3,034. Continue to hold the spread.

Thus far in the 4th quarter, December coffee is the out performer with a gain of 8.95%, December cotton +2.66%, March 2015 sugar +1.03%, December cocoa -5.52%.

Year to date, December coffee is the out performer with a gain of 75.40%, December cocoa +14.97%, March 2015 sugar -6.37%, December cotton -19.67%.

Live cattle:

For the week, December live cattle lost 25 points, February 2015 -98, April 2015 -3.12 cents. The COT report revealed that managed money liquidated 240 contracts of their long positions and added 553 to their short positions. Commercial interests liquidated 2,590 contracts of their long positions and also liquidated 4,130 of their short positions. As of the latest report, managed money remains long live cattle by ratio of 11.51:1, which is down from the previous week of 12.17:1, but up substantially from the ratio of 2 weeks ago of 8.49:1.

Lean hogs: On October 15, December lean hogs generated a short-term sell signal and generated an intermediate term sell signal on September 17.

For the week, December lean hogs lost 3.83 cents, February 2015 -3.67, April 2015 -4.00. The COT report revealed that managed money added 266 contracts to their long positions and liquidated 1,386 of their short positions. Commercial interests liquidated 1,148 contracts of their long positions and also liquidated 204 of their short positions. As of the latest report, managed money remains long lean hogs by ratio of 6.89:1, which is up substantially from the previous week of 6.04:1 but down from the ratio of 2 weeks ago of 7.21:1.

Although, December hogs have not had a counter trend rally after generating the short-term sell signal on October 15, it is overdue for a bounce, however after this, we expect the downtrend to continue. Managed money is massively long lean hogs, and there is plenty of fuel to fund the continued downside move.

Thus far in the 4th quarter, December live cattle is the out performer with a gain of 1.07%, February live cattle + 0.29%, February lean hogs -3.42%, December lean hogs -4.36%.

Year to date, December live cattle is the out performer with a gain of 25.20%, February live cattle + 24.17%, December lean hogs +13.93%, February lean hogs +8.69%.

WTI crude oil:

For the week, November WTI crude oil lost $3.07, December -3.05, January 2015 -3.11. The COT report revealed that managed money added 10,141 contracts to their long positions and also added 7,925 to their short positions. Commercial interests added 30,996 contracts to their long positions and also added 23,072 to their short positions. As of the latest report, managed money is long WTI crude oil by ratio of 3.49:1, which is down from the previous week of 3.73:1 and the ratio of 2 weeks ago of 4.23:1.

The current ratio of 3.49:1, is the lowest since the COT tabulation date of September 2 when managed money was long WTI crude oil by ratio 3.39:1.

Heating oil:

For the week, November heating oil lost 6.26 cents, December -7.10, January 2015 -7.52. The COT report revealed that managed money added 3,515 contracts to their long positions and also added 5,329 to their short positions. Commercial interests added 10,126 contracts to their long positions and also added 4,966 to their short positions. As of the latest report, managed money remain short heating oil by ratio of 1.92:1, which is down slightly from the previous week of 1.97:1 and the ratio of 2 weeks ago of 1.99:1.

Gasoline:

For the week, November gasoline lost 2.48 cents, December -6.92, January 2015 -8.26. The COT report revealed that managed money added 5,201 contracts to their long positions and also added 1,457 to their short positions. Commercial interests added 11,890 contracts to their long positions and also added 14,866 to their short positions. As of the latest report, managed money remains long gasoline by ratio of 1.64:1, which is up slightly from the previous week of 1.56:1 and up substantially from the ratio of 2 weeks ago of 1.24:1.

Natural gas:

For the week, November natural gas lost 9.3 cents, December -8.6, January 2015 -8.4. The COT report revealed that managed money liquidated 6,341 contracts of their long positions and also liquidated 1,349 of their short positions. Commercial interests liquidated 10,052 contracts of their long positions and also liquidated 7,036 of their short positions. As of the latest report, managed money remains long natural gas by ratio of 1.02:1, which is down from the previous week of 1.04:1 and down substantially from the ratio of 2 weeks ago of 1.13:1.

Thus far in the 4th quarter, December ethanol is the out performer with a gain of 8.71%, December heating oil -6.41%, December natural gas -7.84%, December WTI crude oil -9.13%, December gasoline -9.50%, December Brent crude oil -9.78%.

Year to date, December ethanol is the out performer with a gain of 4.88%, December natural gas -10.37%, December WTI crude oil -11.17%, December heating oil -16.48%, December gasoline -16.54%, December Brent crude oil -18.96%.

Copper:

For the week, December copper lost 3.15 cents. The COT report revealed that managed money added 3,575 contracts to their long positions and liquidated 6,257 of their short positions. Commercial interests liquidated 2,477 contracts of their long positions and also liquidated 1,482 of their short positions. As of the latest report, managed money remains short copper by ratio of 1.31:1, which is down substantially from the previous week of 1.64:1 and the ratio of 2 weeks ago of 1.67:1.

Palladium:

For the week, December palladium lost $28.35. The COT report revealed that managed money liquidated 788 contracts of their long positions and also liquidated 195 of their short positions. Commercial interests liquidated 15 contracts of their long positions and added 51 to their short positions. As of the latest report, managed money remains long palladium by ratio of 7.40:1, which is up from the previous week of 7.17:1 and the ratio of 2 weeks ago of 6.45:1.

Platinum:

For the week, January platinum lost 10 cents. The COT report revealed that managed money liquidated 86 contracts of their long positions and also liquidated 203 of their short positions. Commercial interests added 48 contracts to their long positions and liquidated 381 of their short positions. As of the latest report, managed money remains long platinum by ratio of 2.33:1, which is about the same as the previous week of 2.30:1, but up substantially from the ratio of 2 weeks ago of 1.96:1.

Gold:

For the week, December gold advanced $17.30. The COT report revealed that managed money added 13,518 contracts to their long positions and also added 1,185 to their short positions. Commercial interests added 2,837 contracts to their long positions and also added 4,378 to their short positions. As of the latest report, managed money is long gold by ratio of 1.52:1, which is up from the previous week of 1.37:1 and the ratio of 2 weeks ago of 1.38:1.

Silver:

For the week, December silver advanced 2.8 cents. The COT report revealed that managed money liquidated 572 contracts of their long positions and added 1,226 to their short positions. Commercial interests liquidated 585 contracts of their long positions and also liquidated 1,098 of their short positions. As of the latest report, managed money is short silver by ratio of 1.12:1, which is up from the previous week of 1.07:1 and the ratio of 2 weeks ago of 1.06:1.

The managed money short position of 1.12:1, is the highest short ratio since the beginning of the current bear market. This may be an indication that silver is bottoming. 

Thus far in the 4th quarter, December gold is the out performer with a gain of 2.43%, December silver +1.62%, December copper -0.22%, December palladium -2.57%, January 2015 platinum -3.07%.

Year to date, December palladium is the out performer with a gain of 4.43%, December gold + 2.69%, January 2015 platinum -8.53%, December copper -10.51%, December silver -11.47%.

Canadian dollar:

For the week, the December Canadian dollar lost 45 pips. The COT report revealed that leveraged funds liquidated 4,015 contracts of their long positions and added 5,295 to their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio of 2.31:1, which is up substantially from the previous week of 1.75:1 and the ratio of 2 weeks ago of 1.76:1.

Australian dollar:

For the week, the December Australian dollar advanced 57 pips. The COT report revealed that leveraged funds liquidated 14,527 contracts of their long positions and also liquidated 7,064 contracts of their short positions. As of the latest report, leveraged funds are short the Australian dollar by ratio of 1.42:1, which is up substantially from the previous week of 1.08:1 and dramatically higher than the ratio of 2 weeks ago when leveraged funds were long the Australian dollar by ratio of 1.65:1.

Swiss franc:

For the week, the December Swiss franc advanced 1.38 cents. The COT report revealed that leveraged funds liquidated 4,254 contracts of their long positions and added 723 to their short positions. As of the latest report, leveraged funds remain short the Swiss franc by ratio of 2.40:1, which is up substantially from the previous week of 1.73:1 and the ratio of 2 weeks ago of 1.84:1.

British pound:

For the week, the December British pound advanced 57 pips. The COT report revealed that leveraged funds liquidated 7,555 contracts of their long positions and also liquidated 2,060 contracts of their short positions. As of the latest report, leveraged funds are long the British pound by ratio 2.42:1, which is down slightly from the previous week of 2.52:1, but up from the ratio of 2 weeks ago of 2.39:1.

Euro:

For the week, the December euro advanced 1.59 cents. The COT report revealed that leveraged funds liquidated 3,958 contracts of their long positions and added 10,560 to their short positions. As of the latest report, leveraged funds are short the euro by ratio of 3.15:1, which is up from the previous week of 2.76:1 and the ratio of 2 weeks ago of 2.50:1.

Yen: On October 14, the December yen generated a short-term buy signal, but remains on an intermediate term sell signal.

For the week, the December yen advanced 99 pips. The COT report revealed that leveraged funds liquidated 4,891 contracts of their long positions and also liquidated 11,297 of their short positions. As of the latest report, leveraged funds are short the yen by ratio of 4.61:1, which is up from the previous week of 4.21:1 and up substantially from the ratio of 2 weeks ago of 3.66:1.

Dollar index:

For the week, the December dollar index lost 82 points. The COT report revealed that leveraged funds liquidated 547 contracts of their long positions and also liquidated 2,509 of their short positions. As of the latest report, leveraged funds remain long the dollar index by ratio of 1.09:1, which is up from the previous week of 1.02:1, but a complete reversal from 2 weeks ago when leveraged funds were short by ratio of 1.002:1.

Thus far in the 4th quarter, the December yen is the out performer with a gain of 2.60%, December euro +1.13%, December Swiss franc +0.97%, December Australian dollar +0.32%, December British pound -0.55%, December Canadian dollar -0.55%, December dollar index -0.86%.

Year to date, the December dollar index is the out performer with a gain of 5.73%, December Australian dollar +0.11%, December yen -1.73%, December British pound -2.50%, December Canadian dollar -5.07%, December Swiss franc -6.29%, December euro -7.38%.

S&P 500 (250 x):

For the week, the December S&P 500 futures contract lost 13.30 points. The COT report revealed that leveraged funds added 792 contracts to their long positions and liquidated 5,960 of their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 1.75:1, which is a dramatic drop from the previous week of 3.16:1, but above the ratio of 2 weeks ago of 1.53:1.

Thus far in the 4th quarter, the Russell 2000 cash index is the out performer with a loss of 1.76%, S&P 400 cash index -3.56%, Dow Jones Industrial Average cash index -3.89%, New York Composite cash index -4.21%, S&P 500 cash index -4.34%, NASDAQ 100 cash index -5.78%.

Year to date, the NASDAQ 100 cash index is the out performer with a gain of 6.22%, S&P 500 cash index + 2.08%, Dow Jones Industrial Average cash index -1.18%, New York Composite cash index -1.44%, S&P 400 cash index -1.52%, Russell 2000 cash index -6.99%.