Weekend Wrap for September 15, 2013

The report period for the current COT report is Wednesday September 4-Tuesday September 10.

Soybeans:

For the week, September soybeans advanced 51.75 cents, November +13.75. The COT report showed that managed money liquidated 1,191 contracts of their long positions and also liquidated 706 contracts of their short positions. Commercial interests added 13,031 contracts to their long positions and also added 4,363 contracts to their short positions. As of the latest report, managed money is long soybeans by a ratio of 7.30:1, which is up slightly from the previous week of 7.14:1 and the ratio of 2 weeks ago of 5.00:1.

The soybean balance sheet continued its steady decline to near to last year’s carry out with yield reduction. Without a cut in use of 36 million bushels, carry out would have dropped below 125 mb, instead of 150 mb. In August, the USDA estimated that carryout would be 220 mb. Soybean yield was scaled-back from 42.6 to 41.2. Total usage was estimated at 3.149 billion bushels versus the August estimate of 3.255 bb. It appears that US fundamentals are looking increasingly bullish, but keep in mind that Brazil has considerable inventory to sell, and is likely to increase plantings, especially if bean prices remain elevated. 

Soybean meal:

For the week, September soybean meal advanced $14.10, October +9.90, December +13.90. The COT report showed that managed money liquidated 1,902 contracts of their long positions and also liquidated 10,862 contracts of their short positions. Commercial interests added 2,461 contracts to their long positions and liquidated 450 contracts of their short positions. As of the latest report, managed money is long soybean meal by a ratio of 6.28:1, which is dramatically higher than the previous week of 3.49:1 and the ratio of 2 weeks ago of 2.94:1. The current ratio is the highest in at least a couple of months.

Soybean oil: On September 10, December soybean oil generated a short-term sell signal which reversed the short-term buy signal generated on August 27. Soybean oil remains on an intermediate term sell signal.

For the week, September soybean oil lost 1.14 cents, December -1.16. The COT report showed that managed money liquidated 1,408 contracts of their long positions and added 311 contracts to their short positions. Commercial interests added 4,354 contracts to their long positions and liquidated 2,001 contracts of their short positions. As of the latest report, managed money is short soybean oil by a ratio of 1.32:1, which is up from the previous week of 1.28:1 and about the same as the ratio of 2 weeks ago of 1.33:1.

Corn:

For the week, September corn lost 41.50 cents, December – 9.25. The COT report showed that managed money added 6,661 contracts to their long positions and liquidated 20,474 contracts of their short positions. Commercial interests liquidated 1,560 contracts of their long positions and also liquidated 9,610 contracts of their short positions. As of the latest report, managed money is long corn by a ratio of 1.04:1, which is a dramatic reversal from the previous week when they were short by a ratio of 1.09:1 and the ratio of 2 weeks ago of 1.08:1.

The USDA reported that corn yields were increased mostly the south and Iowa’s yield dropped only 1 bpa. On the demand side, old-crop corn stocks were cut with increases of exports which was expected. There was an unexpected increase to feed and residual use by 25 million bushels because of the late harvest and ethanol use was increased leaving ending stocks down 58 mb to 661 mb for 201-2013. Corn yield was raised from 154.4 to 155.3. US ending stocks for the 2013-2014 season are estimated at 1.855 bb versus the estimate in August of 1.837 bb. On a global basis, the fundamentals for corn look very bearish..

Chicago wheat:

For the week, September Chicago wheat lost 7.25 cents, December -6.25. The COT report showed that managed money liquidated 3,172 contracts of their long positions and added 3,541 contracts to their short positions. Commercial interests liquidated 2,365 contracts of their long positions and also liquidated 4,513 contracts of their short positions. As of the latest report, managed money is short Chicago wheat by a ratio of 1.55:1, which is up from the previous week of 1.46:1 and the ratio of 2 weeks ago of 1.36:1.

There were very minor changes made to be balance sheet in wheat, and the most notable factor was the projected carry out for the 2013-2014 season of 561 million bushels versus the 2012-2013 carry out of 718mb. On a global basis, there is a slight increase in carry out from 2012-2013, but the 2013-2014 carry out of 176.28 million tons is dramatically below the 2011-2012 carry out of 199.33 million tons. The bearish situation in corn will continue to weigh on wheat prices and US wheat must become more competitive on the world market. Despite this, Kansas City wheat has seen robust sales, and once managed money longs are washed out of the KC market, we expect prices to begin firming.

Kansas City wheat:

For the week, September Kansas City wheat lost 23.50 cents, December -3.50. The COT report showed that managed money added 1,234 contracts to their long positions and also added 1,047 contracts to their short positions. Commercial interests liquidated 864 contracts of their long positions and added 1,342 contracts to their short positions. As of the latest report, managed money is long Kansas City wheat by a ratio of 1.55:1, which is the same as the previous week of 1.56:1 and slightly above the ratio of 2 weeks ago of 1.53:1.

Although we are friendly to wheat, Kansas City wheat in particular, the problem is that managed money has been aggressively increasing their net long exposure, but KC wheat has been declining. For example, from July 31 through September 10, which encompasses 6 COT periods, KC wheat has declined 13.50 cents, (December Chicago wheat declined 21.25 cents in the same time frame) but the net long position of managed money increased from 1.06:1 to 1.55:1. On the other hand, the commercial short ratio has increased from 1.67:1 on July 30 to 2.72:1 on September 10. In short, managed money has not been able to move KC wheat higher after 6 weeks and commercial selling is driving prices lower. We think managed money bulls will be forced to liquidate before the market is ready to turn.

COT Report September 4-September 10 and Year to Date:

09/03/2013 – 09/10/2013
Excel Spreadsheet

Cotton:

For the week, December cotton advanced 1.25 cents. The COT report showed that managed money liquidated 6,341 contracts of their long positions and added 77 contracts to their short positions. Commercial interests added 199 contracts to their long positions and liquidated 7,078 contracts of their short positions. As of the latest report, managed money is long cotton by a ratio of 4.37:1, which is down from the previous week of 4.98:1, and dramatically lower than the ratio of 2 weeks ago of 644:1.

 The USDA estimated 2013-2014 carry out at 2.9 million bales, which is an increase of 100,000 bales from the August report. Global production increased to 117.42 million bales which is an increase of 1 million bales from the August report. The USDA estimated that 2013-2014 carry out for global supplies would total 94.7 million bales, which is a new record. In short, the outlook for cotton is bearish, but at this juncture cotton has not made a significant move lower. The number of managed money longs has been reduced dramatically, but an increase in managed money shorts would serve to drive prices lower. Cotton remains on a short and intermediate term sell signal, and we have advised those clients who are short futures to liquidate these positions if December cotton breaks above the August 26 high of 85.54.

Live cattle: On September 10, October cattle generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, October live cattle lost 32 points, December +13. The COT report showed that managed money liquidated 8,716 contracts of their long positions and added 5,794 contracts to their short positions. Commercial interests added 1,472 contracts to their long positions and liquidated 16,037 contracts of their short positions. As of the latest report, managed money is long cattle by a ratio of 2.08:1, which is down dramatically from the previous week of 2.75:1 and the ratio of 2 weeks ago of 2.90:1.

As we stated in the September 8 report, October cattle did in fact generate a short-term sell signal. The market looks lackluster and it appears it is only a matter of time before an intermediate term sell signal is generated. Based upon the number of managed money longs liquidating and the increasing numbers shorts, it is apparent this crowd is getting more bearish on cattle.   

From the September 8  Weekend Wrap:

We think cattle prices are headed lower and will generate a short-term sell signal within a couple of days. It is apparent that managed money is digging in and refusing to liquidate, and we suspect this is because the fundamentals for cattle are quite bullish moving into the 4th quarter and the 1st quarter of 2014. As we said in last week’s report, the gap that existed during trading on August 7 and 8 would be filled, and this occurred on Thursday September 5

WTI crude oil:

For the week, October WTI lost $2.32. The COT report showed that managed money liquidated 10,121 contracts of their long positions and added 4,113 contracts to their short positions. Commercial interests added 17,424 contracts to their long positions and also added 15,381 contracts to their short positions. As of the latest report, managed money is long crude by a ratio of 5.45:1, which is down from the previous week of 6.08:1 and the ratio of 2 weeks ago of 6.40:1. The current ratio is the lowest in a couple of months.

The decline of managed money longs continued this week despite the fact that crude oil continues to trade at the upper end of its trading range. The long to short ratio has been reduced by 50% since July 23 when it stood at 11.16:1 and October crude oil closed at $105.79. On September 10, October crude closed at $107.39, or $1.60 higher than it was 8 weeks ago.

 From the September 8 Weekend Wrap:

 “It has been remarkable that as crude oil prices have advanced, the net long position of managed money has declined. For example, 7 weeks ago on July 23, October crude oil closed at $105.79 and on September 3 closed $108.54, or an advance of $2.75. On July 23, the long to short ratio of managed money stood at 11.16:1 and on September 3, 6.08:1 or a long position that has nearly been cut in half. On July 23, the long to short ratio for commercial interests stood at 1.13:1 and on September 3 it advanced somewhat to 1.14:1. Commercial interests have been net long crude oil for a number of months. In short, neither managed money nor commercial interests appear to be terribly bullish on crude oil during the past several weeks, but the market continues to move higher.”

Heating oil:

For the week, October heating oil lost 5.00 cents. The COT report showed that managed money liquidated 5,070 contracts of their long positions and also liquidated 851 contracts of their short positions. Commercial interests added 10,188 contracts to their long positions and also added 2,727 contracts to their short positions. As of the latest report, managed money is long heating oil by a ratio of 3.05:1, which is down from the previous week of 3.19:1, but up from the ratio of 2 weeks ago of 2.84:1.

Gasoline: On September 10, October gasoline generated a short-term sell signal, but remains on an intermediate term buy signal.

October gasoline lost 8.41 cents. The COT report showed that managed money liquidated 5,102 contracts of their long positions and added 1,788 contracts to their short positions. Commercial interests added 4,823 contracts to their long positions and also added 321 contracts to their short positions. As of the latest report, managed money is long gasoline by a ratio of 6.94:1, which is down substantially from the previous week of 9.03:1 and the ratio of 2 weeks ago of 8.40:1.

Natural gas:

For the week, October natural gas advanced 14.7 cents. The COT report showed that managed money liquidated 171 contracts of their long positions and added 2,032 contracts to their short positions. Commercial interests liquidated 6,765 contracts of their long positions and also liquidated 6,650 contracts of their short positions. As of the latest report, managed money is short natural gas by a ratio of 1.01:1, which is a slight change from the previous week when the number of longs and shorts were about equal (1.00:1) and the same as 2 weeks ago when managed money was short by a ratio of 1.01:1.

 COT  Report: September 4-September 10 and Year to Date

09/03/2013 – 09/10/2013
Excel Spreadsheet

Copper:

For the week, December copper lost 5.80 cents. The COT report showed that managed money liquidated 3,332 contracts of their long positions and added 2,872 contracts to their short positions. Commercial interests added 463 contracts to their long positions and liquidated 2,588 contracts of their short positions. As of the latest report, managed money is long copper by a ratio of 1.07:1, which is down substantially from the previous week of 1.34:1 and down dramatically from the ratio of 2 weeks ago of 1.61:1.

Palladium:

For the week, December palladium advanced $2.25. The COT report showed that managed money liquidated 1,364 contracts of their long positions and also liquidated 80 contracts of their short positions. Commercial interests added 651 contracts to their long positions and liquidated 1,250 contracts of their short positions. As of the latest report, managed money is long palladium by a ratio of 15.86:1, which is about the same as the previous week of 15.92:1, but down dramatically from the ratio of 2 weeks ago of 23.42:1.

Platinum: On September 10, October platinum generated a short-term sell signal, but remains on an intermediate term buy signal.

For the week, October platinum lost $51.20. The COT report showed that managed money liquidated 1,305 contracts of their long positions and added 525 contracts to their short positions. Commercial interests liquidated 1,280 contracts of their long positions and also liquidated 1,149 contracts of their short positions. As of the latest report, managed money is long platinum by a ratio of 7.94:1, which is down from the previous week of 9.34:1 and the ratio of 2 weeks ago of 8.65:1.

Gold: On September 12, December gold generated a short and intermediate term sell signal.

For the week, December gold lost $77.90. The COT report showed that managed money liquidated 7,284 contracts of their long positions and added 3,336 contracts to their short positions. Commercial interests added 3,328 contracts to their long positions and liquidated 4,443 contracts of their short positions. As of the latest report, managed money is long gold by a ratio of 2.82:1, which is down from the previous week of 3.34:1 and the ratio of 2 weeks ago of 3.00:1.

Silver: On September 12, December silver generated a short-term sell signal, but not an intermediate term sell signal.

For the week, December silver lost $2.171. The COT report showed that managed money liquidated 1,469 contracts of their long positions and added 1,082 contracts to their short positions. Commercial interests liquidated 197 contracts of their long positions and also liquidated 2,506 contracts of their short positions. As of the latest report, managed money is long silver by a ratio of 2.35:1, which is down from the previous week of 2.75:1 and slightly above the ratio of 2 weeks ago of 2.27:1.

COT Report: September 4-September 10 and Year to Date

09/03/2013 – 09/10/2013
Excel Spreadsheet

Australian dollar:

For the week, the December Australian dollar gained 65 points. The COT report showed that leveraged funds liquidated 3,327 contracts of their long positions and also liquidated 17,770 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 1.83:1, which is down from the previous week of 2.15:1 and the ratio of 2 weeks ago of 2.13:1.

Swiss franc:

For the week, the December Swiss franc advanced 98 points. The COT report showed that leveraged funds liquidated 144 contracts of their long positions and also liquidated 153 contracts of their short positions. As of the latest report, leveraged funds are long the Swiss franc by a ratio of 1.94:1, which is about the same as the previous week of 1.92:1, but up from the ratio of 2 weeks ago of 1.64:1.

British pound:

For the week, the December British pound advanced 2.45 cents. The COT report showed that leveraged funds added 16,684 contracts to their long positions and also added 3,298 contracts to their short positions. Remarkable as it is, leveraged funds still remain short the British pound by a ratio of 1.06:1, which is down substantially from the previous week of 1.41:1 and the ratio of 2 weeks ago of 1.54:1.

Euro:

For the week, the December euro advanced 1.23 cents. The COT report showed that leveraged funds liquidated 15,197 contracts of their long positions and also liquidated 2,334 contracts of their short positions. As of the latest report, leveraged funds are long the euro by a ratio of 1.18:1, which is down from the previous week of 1.41:1 and the ratio of 2 weeks ago of 1.84:1.

Yen:

For the week, the December yen lost 4 points. The COT report showed that leveraged funds liquidated 6,933 contracts of their long positions and added 6,073 contracts to their short positions. As of the latest report, leveraged funds are short the yen by a ratio of 4.01:1, which is up substantially from the previous week of 2.93:1 and the ratio of 2 weeks ago of 3.19:1.

Dollar index:

For the week, the December dollar index lost 76 points. The COT report showed that leveraged funds added 3,295 contracts to their long positions and liquidated 2,377 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by a ratio of 1.21:1, which is down significantly from the previous week of 1.54:1 and the ratio of 2 weeks ago of 1.31:1.

COT Report: September 4-September 10 and Year to Date

09/03/2013 – 09/10/2013
Excel Spreadsheet

S&P 500 E mini: On September 10, the December S&P 500 E mini generated a short-term buy signal, which reversed the short-term sell signal generated on August 27. the E mini remains on an intermediate term buy signal.

For the week, the December S&P 500 E mini gained 35.20 points. The COT report showed that leveraged funds liquidated 9,033 contracts of their long positions and added 21,304 contracts to their short positions. As of the latest report, leveraged funds are short by a ratio of 1.62:1, which is up slightly from the previous week of 1.56:1 and the ratio of 2 weeks ago of 1.56:1.

The American Association Of Individual Investors survey shows that the number of bulls has never been higher, which we consider to be a major danger sign considering that the Federal Reserve will be announcing whether and to what degree it is going to taper its bond buying program. Additionally, interest rates remain stubbornly high, and setbacks have been shallow ever since rates bottomed in May. Higher interest rates are translating into higher mortgage rates and higher rates for auto loans. If interest rates continue to rise as we expect, a slowdown in the economy is more than probable. We think the danger to investors remains on the downside and encourage long put protection, especially for those clients who hold long equity positions.