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The time frame for this week’s Commitments of Traders report is from Wednesday, September 3 through Tuesday, September 9.

This week, there are two major events taking place, and either one could have a major impact on the financial markets. First up is the FOMC meeting on Tuesday and Wednesday. On Thursday September 18, Scotland holds its vote on seceding from the United Kingdom.We recommend that risk parameters be tightened and extra caution exercised. We think the equity market looks terrible and is headed lower.

From the September 7 Weekend Wrap:

“The Greenhaven Continuous Commodity Index made its low this week at 25.74, and appears headed to the 2014 low of 25.32 made in early January. The 52-week low of 25.09 was made on November 19, 2013.”

Last week, the Greenhaven Continuous Commodity Index took out the previous week’s low of 25.32 with another new low of 25.23. The deflationary cycle in the commodity complex has become well entrenched, and we expect the 52-week low of 25.09 made on November 19, 2013 to be taken out shortly.

Soybeans:

For the week, November soybeans lost 36.25 cents, January 2015 -35.75, March 2015 -36.50. The COT report revealed that managed money liquidated 8,863 contracts of their long positions and added 3,596 contracts to their short positions. Commercial interests added 14,748 contracts to their long positions and also added 2,734 contracts to their short positions. As of the latest report, managed money is long soybeans by ratio of 1.10:1, which is down significantly from the previous week of 1.24:1 and the ratio of 2 weeks ago of 1.28:1. Commercial interests increased their long positions in the latest report and as a result, commercial interests are long soybeans by ratio of 1.16:1.  This is an unusually large ratio considering the massive decline in the market.

The current ratio of 1.10:1 of managed money is the lowest ratio since the beginning of the current bear market and the ratio of 1.16:1 for commercial interests is the highest since the beginning of the current bear market.

During the past week, November, January 2015 and March 2015 soybean contracts made new contract lows of $9.69 1/2, 9.76 3/4, 9.82  3/4 respectively.

Soybean meal:

For the week, October soybean meal lost $18.80, December -21.20, January 2015 -20.90. The COT report revealed that managed money liquidated 10,063 contracts of their long positions and added 650 contracts to their short positions. Commercial interests added 5,117 contracts to their long positions and liquidated 6,398 of their short positions. As of the latest report, managed money is long soybean meal by ratio of 2.68:1, Which is down from the previous week of 3.19:1 and the ratio of 2 weeks ago of 2.74:1.

During the past week, October, December and January 2015 soybean meal contracts made new contract lows of 335.00,  325.10, and 322.70 respectively.

Soybean oil:

For the week, October soybean oil advanced 27 points, December +29, January 2015 +27. The COT report revealed that managed money liquidated 571 contracts of their long positions and added 2,656 to their short positions. Commercial interests added 3262 contracts to their long positions and also added 3,800 to their short positions. As of the latest report, managed money remain short soybean oil by ratio of 1.32:1, which is up from the previous week of 1.27:1 and the ratio of 2 weeks ago of 1.25:1.

During the past week, October, December and January 2015 soybean oil contracts made new contract lows of 31.05, 31.52, and 31.80 respectively.

The October contract low of 31.05 made this week, was the lowest print since February 2009. That month, soybean oil made a low of 29.76 on February 20 and the low for 2008 occurred on December 5, 2008 when soybean oil on the continuation chart made a low of 28.28 at the height of the financial crisis. It should be noted that on December 5, 2008, soybeans on the continuation chart made a low of $7.78 7/8, approximately $2.00 lower than Friday’s close of 9.85 1/4.

We bring this up because Malaysian palm oil began its rally on September 2 after making a reversal on that day from a low of 1,914 (Malaysian Ringgits) per metric ton to a high of 2,088 ringgits on September 12. This, is approximately a 9% advance from the September 2 low.December soybean oil advanced 2.02% in the same time frame. Clearly palm oil is the leader and will generate a short-term buy signal if the low of the day for the November contract is above 2,112 ringgits.November palm oil closed Friday at 2084 ringgits.

Additionally, the September through November palm oil contracts are inverted, indicating near-term demand. On September 12, soybean oil rallied strongly with the December contract closing 1.06 cents higher.December soybean oil closed at 32.77, which is the highest close since August 28 (32.79).The rally occurred against a backdrop of a lower December soybean meal close of -1.30 and a minor advance of 4.25 cents in the November soybean contract.

Preliminary stats for Friday’s trading show that total open interest declined by 228 contracts, however the October contract lost 3,070 of open interest and there were sufficient open interest increases in the forward months (December 2014 through August 2015) to offset most of the decline in the October contract.From July 29 through September 12, December soybean oil prices have declined 4.82 cents while total open interest has increased 42,603 contracts. This is bearish open interest action relative to the price decline and indicates that short sellers are in control.

We will monitor the activity of palm oil and notify clients when and if it generates a short-term buy signal. Additionally, it is important to see continued strength in soybean oil. November palm oil remains on a short and intermediate term sell signal and December soybean oil remains on a short and intermediate term sell signal.

Corn:

For the week, December corn lost 17.50 cents, March 2015 -17.75, May 2015 – 17.50. The COT report revealed that managed money liquidated 6,275 contracts of their long positions and also liquidated 1,400 of their short positions. Commercial interests added 6,372 contracts to their long positions and liquidated 6,539 of their short positions. As of the latest report, managed money remains long corn by ratio of 1.32:1, which is down slightly from the previous week of 1.34:1, and up slightly from the ratio of 2 weeks ago of 1.30:1.

During the past week, December, March 2015 and May 2015 corn contracts made new contract lows of 3.35 3/4, 3.48 1/4 and 3.56 3/4 respectively.

Chicago wheat:

For the week, December Chicago wheat lost 33.25 cents, March 2015 -34.00, May 2015-30.75. The COT report revealed that managed money liquidated 1,742 contracts of their long positions and added 5,192 to their short positions. Commercial interests added 3,951 contracts to their long positions and liquidated 4,223 of their short positions. As of the latest report, managed money is short Chicago wheat by ratio of 1.78:1, which is up from the previous week of 1.68:1 and the ratio of 2 weeks ago of 1.59:1.

During the past week, December March 2015 and May 2015 Chicago wheat contracts made new contract lows of 5.00, 5.17 1/2, and 5.27 3/4 respectively.

Kansas City wheat:

For the week, December Kansas City wheat lost 35.25 cents, March 2015 -34.00, May 2015-30.75. The COT report revealed that managed money added 129 contracts to their long positions and also added 1,326 to their short positions. Commercial interests liquidated 485 contracts of their long positions and added 2,676 to their short positions. As of the latest report, managed money remains long Kansas City wheat by ratio of 1.51:1, which is down slightly from the previous week of 1.59:1 and the ratio of 2 weeks ago of 1.56:1.

During the past week, December, March 2015 in May 2015 Kansas City wheat contracts made new contract lows of 5.90 1/4, 5.98 1/2, and  6.03 1/2.

Thus far in the 3rd quarter, December soybean meal is the out performer with a loss of 10.75%, November soybeans -14.86%, December Chicago wheat -16.01%, December Kansas City wheat -16.03%, December soybean meal -16.30%, December corn -20.40%.

Year to date, December soybean meal is the out performer with a loss of 6.26%, December Kansas City wheat -11.36%, November soybeans – 13.19%, December soybean oil -18.22%, December Chicago wheat-21.55%, December corn -24.82%.

Cotton:

For the week, December cotton advanced 3.69 cents, March 2015 +3.29, May 2015+2.47. The COT report revealed that managed money added 2,475 contracts to their long positions and liquidated 4,927 of their short positions. Commercial interests added 2,066 to their long positions and also added 4,022 to their short positions. As of the latest report, managed money is long cotton by ratio of 1.22:1, which is up substantially from the previous week when managed money was short cotton by ratio of 1.00.2: 1. Two weeks ago, managed money was long by ratio of 1.01:1.

The current ratio in cotton is quite positive, and the dominant action in this week’s report was the liquidation of short positions, rather than the addition of new long positions.

Sugar #11:

For the week, October sugar lost 1.22 cents, March 2015 -91 points, May 2015-95. The COT report revealed that managed money liquidated 1,108 contracts of their long positions and added 6,537 to their short positions. Commercial interests added 17,119 contracts to their long positions and also added 3,380 to their short positions. As of the latest report, managed money is short sugar by ratio of 1.08:1, which is up from the previous week of 1.05:1 and the ratio of 2 weeks ago of 1.05:1.

During the past week, October and March 2015 sugar#11 contracts made new contract lows of 13.75 and 16.31 respectively. The May contract did not make a new contract low.

Coffee: On September 11, December coffee generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, December coffee lost 13.50 cents, March 2015 -13.50, May 2015-13.25. The COT report revealed that managed money added 1,327 contracts to their long positions and also added 1,507 to their short positions. Commercial interests added 2,693 contracts to their long positions and also added 797 to their short positions. As of the latest report, managed money remains long coffee by ratio of 6.84:1, which is down substantially from the previous week of 8.34:1 and the ratio of 2 weeks ago of 7.62:1.

The current ratio of 6.84:1, is the lowest since the July 29 COT tabulation date when managed money was long coffee by a ratio of 6.79:1.During that report, December coffee traded in a range from 1.7085 to 1.8710.December coffee closed at 1.8455 on Friday.

Cocoa: On September 8, December cocoa generated an intermediate term sell signal after generating a short-term sell signal on September 5

For the week, December cocoa lost $49.00, March 2015 -42.00, May 2015-41.00. The COT report revealed that managed money liquidated 5,432 contracts of their long positions and also liquidated 2,261 of their short positions. Commercial interests added 1,373 contracts to their long positions and liquidated 326 of their short positions. As of the latest report, managed money remains long cocoa by ratio of 4.07:1, which is up from the previous week of 3.93:1 and the ratio of 2 weeks ago of 3.81:1.

The reason for the increase in this week’s ratio was due to the liquidation of short positions, which represented a significant percentage of outstanding short positions.

Thus far in the 3rd quarter, December coffee is the out performer with a gain of 3.27%, December cocoa -2.30%, December cotton -7.50%, October sugar -23.49%.

Year to date, December coffee is the out performer with a gain of 53.66%, December cocoa +12.57%, December cotton -13.30%, October sugar -19.18%.

Live cattle:

For the week, October cattle lost 3.48 cents, December -1.67, February 2015 +37 points. The COT report revealed that managed money added 7,030 contracts to their long positions and liquidated 2,773 of their short positions. Commercial interests liquidated 6,707 contracts of their long positions and added 2,963 to their short positions. As of the latest report, managed money is long live cattle by ratio of 10.53:1, which is up substantially from the previous week of 7.88:1 and the ratio of 2 weeks ago of 8.29:1.

The current ratio of 10.53:1 is the highest since the COT tabulation date of August 19 when managed money was long by ratio of 10.67:1.

Lean hogs: On September 9, December lean hogs generated an intermediate term buy signal after generating a short-term buy signal on September 2.

For the week, October lean hogs gained 80 points, December +85, February 2015 +2.13 cents. The  COT report revealed that managed money added 2,978 contracts to their long positions and liquidated 1,674 their short positions. Commercial interests liquidated 713 contracts of their long positions and added 6,993 to their short positions. As of the latest report, managed money is long lean hogs by ratio 5.09:1, which is up from the previous week of 4.25:1 and up substantially from the ratio of 2 weeks ago of 3.27:1.

The current ratio of 5.09:1 is the highest since the COT tabulation date of August 12 when managed money was long lean hogs by ratio of 6.01:1.

Thus far in the 3rd quarter, December live cattle is the out performer with a gain of 3.38%, October live cattle +1.82%, December lean hogs -2.33%, October lean hogs -7.20%.

Year to date, October hogs is the out performer with a gain of 26.21%, December hogs +21.13%, December cattle +20.80%, October cattle +19.20%.

WTI crude oil:

For the week, October WTI crude oil lost $1.02, November -1.34, December -1.63. The COT report revealed that managed money added 11,890 contracts to their long positions and liquidated 4,066 of their short positions. Commercial interests added 2,550 contracts to their long positions and added 4,035 to their short positions.As of the latest report, managed money is long WTI crude oil by ratio of 3.75:1, which is up from the previous week of 3.39:1, but down from the ratio of 2 weeks ago of 4.01:1.

Our records show that the current ratio of 3.75:1 is the second lowest going back to September 3, 2013. The lowest ratio for the past year occurred last week (3.39:1). In short, managed money is as bearish today as they have been during the past year.

We want to bring your attention that the inversion in the front months of WTI versus the back months continues despite the sharp fall in WTI prices. This is bullish. Additionally, open interest action from the August 8 high of 97.35 through the September 11 low of 89.56 (basis the November contract) is positive. For example, from August 8 through September 11, November WTI prices fell $4.56 while total open interest declined by 24,494 contracts. This is healthy and when prices are declining. In short, WTI prices have been declining due to liquidation, not from new short sellers. We are not calling for a bottom because we do not predict the future. However WTI is not as bearish as it may appear on the surface.

Heating oil:

For the week, October heating oil lost 7.87 cents, November -7.77, December -7.58. The COT report revealed that managed money liquidated 4,503 contracts of their long positions and also liquidated 2,083 of their short positions. Commercial interests added 6,654 contracts to their long positions and also added 3,001 to their short positions. As of the latest report, managed money is short heating oil by ratio of 1.68:1, which is up from the previous week of 1.50:1 and the ratio of 2 weeks ago of 1.33:1.

Gasoline:

For the week, October gasoline lost 6.46 cents, November -6.60, December -6.47. The COT report revealed that managed money liquidated 2,177 contracts of their long positions and also liquidated 1,327 of their short positions. Commercial interests added 15,745 contracts to their long positions and also added 17,254 to their short positions. As of the latest report, managed money is long gasoline by ratio of 1.52:1, which is down slightly from the previous week of 1.53:1 and the ratio of 2 weeks ago of 1.60:1.

The current ratio is the lowest according to our records going back to September 3, 2013 and the previous lowest ratio we could find during the past year occurred on November 5, 2013 when managed money was long gasoline by ratio of 2.88:1. Managed money is extremely bearish on gasoline.

Natural gas:

For the week, October natural gas gained 6.4 cents, November +6.3, December +5.1. The COT report revealed that managed money liquidated 1,810 contracts of their long positions and added 611 to their short positions. Commercial interests liquidated 10,379 contracts of their long positions and also liquidated 8,781 of their short positions. As of the latest report, managed money is long natural gas by ratio of 1.06:1, about the same as the previous week of 1.07:1, but down slightly from the ratio of 2 weeks ago of 1.10:1.

Thus far in the 3rd quarter October ethanol is the out performer with a loss of 5.52%, October heating oil -8.48%, October WTI crude oil -11.31%, October gasoline -11.45%, November Brent crude oil -12.13%, October natural gas -13.33%.

Year to date, October ethanol is the out performer with a gain of 7.08%, October WTI crude oil -1.94%, October gasoline -5.40%, October natural gas -7.54%, November Brent crude oil -8.44%, October heating oil -8.64%.

Copper: On September 10, December copper generated an intermediate term sell signal, after generating a short-term sell signal on August 6.

For the week, December copper lost 6.30 cents. The COT report revealed that managed money added 135 contracts to their long positions and also added 8,854 to their short positions. Commercial interests added 2,784 contracts to their long positions and liquidated 3,536 of their short positions. As of the latest report, managed money is now short copper by ratio of 1.07:1, which is a complete reversal from the previous week when they were long by 1.27:1. Two weeks ago, managed money was long copper by ratio of 1.90:1.

Palladium:

For the week, December palladium lost $55.40. The COT report revealed that managed money added 167 contracts to their long positions and liquidated 59 of their short positions. Commercial interests liquidated 90 contracts of their long positions and also liquidated 636 of their short positions. As of the latest report, managed money is long palladium by ratio of 12.33:1, which is up from the previous week of 11.94:1 and the ratio of 2 weeks ago of 11.11:1.

Platinum:

For the week, October platinum lost $40.50. The COT report revealed that managed money liquidated 710 contracts of their long positions and added 1,733 to their short positions. Commercial interests added 1,656 contracts to their long positions and also added 765 to their short positions. As of the latest report, managed money is long platinum by ratio of 4.07:1, which is down from the previous week of 5.15:1 and down substantially from the ratio of 2 weeks ago of 6.31:1.

Gold:

For the week, December gold lost $35.80. The COT report revealed that managed money added 2,588 contracts to their long positions and also added 5,299 contracts to their short positions.Commercial interests added 4,472 contracts to their long positions and also added 4,810 to their short positions. As of the latest report, managed money is long gold by ratio of 2.03:1, which is down from the previous week of 2.18:1 and down substantially from the ratio of 2 weeks ago of 3.20:1.

The current ratio of 2.03:1 is the lowest since the COT report of June 17 when managed money was long gold by ratio of 1.89:1. Note that the gold ratio of 2.03:1 is considerably lower than platinum (4.07:1) even though platinum has been under performing gold during the 3rd quarter and year to date.

Silver:

For the week, December silver lost 55.0 cents. The COT report revealed that managed money liquidated 1,842 contracts of their long positions and added 1,457 to their short positions. Commercial interests added 2,553 contracts to their long positions and also added 2,340 to their short positions. As of the latest report, managed money is long silver by ratio of 1.11:1, which is down from the previous week of 1.21:1 and the ratio of 2 weeks ago of 1.50:1.

The current ratio of managed money longs of 1.11:1 is the lowest since June 10 when managed money was short silver by ratio of 1.11:1.

During the past week, December silver made a new contract low of 18.455.

Thus far in the 3rd quarter, December palladium is the out performer with a loss of 0.72%, December copper -3.06%, December gold -7.39%, October platinum -8.09%, December silver -11.70%.

Year to date, December palladium is the out performer with a gain of 15.93%, December gold +2.08%, October platinum -0.73%, December silver -4.45%, December copper -7.58%.

Canadian dollar:  On September 8, the December Canadian dollar generated a short-term sell signal, which reversed the short-term buy signal of August 28. The December Canadian dollar remains on an intermediate term sell signal.

For the week, the December Canadian dollar lost 1.72 cents. The COT report revealed that leveraged funds liquidated 940 contracts of their long positions and also liquidated 4,558 of their short positions. As of the latest report, leveraged funds are short by ratio of 1.02:1, which is down from the previous week of 1.19:1 and the ratio of 2 weeks ago of 1.37:1.

Australian dollar:

For the week, the December Australian dollar lost 3.29 cents. The COT report revealed that leveraged funds liquidated 2,715 contracts of their long positions and added 3,684 to their short positions. As of the latest report, leveraged funds are long the Australian dollar by ratio of 2.93:1, which is down from the previous week of 3.54:1 and the ratio of 2 weeks ago of 3.12:1.

Last week’s ratio of 3.54:1 was the high made during the run-up of the Australian dollar.

The collapse in the Australian dollar began last week, and despite the sharp move lower on Monday and Tuesday (Tuesday is the COT tabulation date) totaling 1.79 cents, managed money remained long the Australian dollar by a hefty amount according to the report. On September 10 and 11, open interest increased each day on the declines of Wednesday and Thursday.This is bearish. In short, speculative longs are not liquidating.This means that rallies will be muted and the inexorable pressure of selling by distressed longs will weigh on the market. The Australian dollar remains on a short and intermediate term sell signal.

Swiss franc:

For the week, the December Swiss franc lost 37 pips. The COT report revealed that leveraged funds added 825 contracts to their long positions and also added 1,294 to their short positions. As of the latest report, leveraged funds are short the Swiss franc by ratio of 1.99:1, which is down slightly from the previous week of 2.02:1 and the ratio of 2 weeks ago of 2.19:1.

British pound:

For the week, the December British pound lost 72 pips. The COT report revealed that leveraged funds liquidated 3,809 contracts of their long positions and also liquidated 1,357 of their short positions. As of the latest report, leveraged funds remain long the British pound by ratio of 1.84:1, which is down fractionally from the previous week of 1.86:1 and down from the ratio of 2 weeks ago of 1.95:1.

It is remarkable that the number of managed money longs remains at elevated level despite the collapse of the British pound. Consider that 3 weeks ago ( COT report of August 26), the net long position of leveraged funds stood at 52,998 contracts. By the September 9 report the net long position of managed money was 47,320 contracts or a decline of only 5,678 contracts. 

During the time frame encompassed by the August 26 report (August 20-September 9) through the September 9 COT tabulation, the December British pound lost a substantial 4.93 cents.  In short, large numbers of managed money longs are digging in and refusing to liquidate. This can be a potentially dangerous set up due to the upcoming referendum on Scotland seceding from the United Kingdom. However, if Scotland elects to stay in the UK, we expect the pound to rally sharply. The December pound remains on a short and intermediate term sell signal.

Euro:

For the week, the December euro lost 11 pips. The COT report revealed that leveraged funds added 6,444 contracts to their long positions and liquidated 2,210 of their short positions. As of the latest report, leveraged funds are short the euro by a ratio of 2.75:1, which is down from the previous week of 3.07:1 and the ratio of 2 weeks ago of 3.42:1.

Leveraged funds are becoming less bearish as the euro moves to new lows.

Yen:

For the week, the December yen lost 201 pips. The COT report revealed that leveraged funds added 2,444 contracts to their long positions and liquidated 14,632 of their short positions. As of the latest report, leveraged funds are short the yen by ratio of 4.00:1, which is down substantially from the previous week of 4.92:1, but up from the ratio of 2 weeks ago of 3.85:1.

During the past week, the December yen made a new contract low of .9318.

Dollar index:

For the week, the December dollar index gained 51 points. The COT report revealed that leveraged funds liquidated 3,021 contracts of their long positions and added 2,193 contracts to their short positions. Remarkably, leveraged funds remain short the dollar index by ratio of 1.51:1, which is up substantially from the previous week of 1.32:1 and the ratio of 2 weeks ago of 1.32:1.

During the past week, the December dollar index made a new contract high of 84.65.

Remarkably, managed money continues to pile in on the short side of the dollar index. As we said in last weekend’s report, we will not likely see a high in the dollar index until managed money is blown out of their short positions. 

Thus far in the 3rd quarter, the December dollar index is the out performer with a gain of 5.59%, December Australian dollar -3.59%, December Canadian dollar -3.67%, December British pound -4.88%, December Swiss franc -5.13%, December euro -5.43%, December yen -5.68%.

Year to date, the December dollar index is the out performer with a gain of 4.61%, December Australian dollar +2.97%, December British pound -1.64%, December yen -2.15%, December Canadian dollar -3.61%, December Swiss franc -5.08%, December euro -6.07%.

S&P 500 (250 x):

For the week, the S&P 500 futures contract lost 21.30 points. The COT report revealed that leveraged funds liquidated 1,128 contracts of their long positions and added 3,192 to their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 2.52:1, which is up substantially from the previous week of 1.95:1 and the ratio of 2 weeks ago of 1.84:1.

Thus far in the 3rd quarter, the NASDAQ 100 cash index is the out performer with a gain of 5.71%, S&P 500 cash index +1.29%, Dow Jones Industrial Average cash index + 0.96%, New York Composite cash index – 0.62%, S&P 400 cash index – 0.76%, Russell 2000 cash index – 2.71%.

Year to date, the NASDAQ 100 cash index is the out performer with a gain of 13.26%, S&P 500 cash index + 7.42%, S&P 400 cash index + 5.92%, New York Composite cash index +4.91%, Dow Jones Industrial Average cash index +2.48%, Russell 2000 cash index -0.26%.

10 year Treasury Note: On September 9, December 10 year Treasury Notes generated a short and intermediate term sell signal.