cbotpittrading

Compressed Agricultural Commodities Set to Spring

The agricultural commodities produced and traded domestically have all fallen precipitously through this summer’s growing season. Maximum planted acreage and ideal growing conditions have combined to drive many of the agricultural commodities to multi-year lows. In fact some of the technical readings these markets have been registering are just as shocking as the growth in many commercial traders’ positions. Since no individual market really stands out, we’re going to discuss the current state of these markets while attempting to get a hold on what it means going forward.

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2014 wheat crop

Commercial Traders Support Wheat’s Seasonal Bottom

The Chicago Board of Trade soft red wheat contract has declined by nearly one third since the early May high near $7.50 per bushel in the current September contract. The mild summer has brought with it the classic seasonal May-July sell-off. We believe that this market may be ripe for a bounce based on demographic, seasonal and technical factors.

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record soybean harvest in 2014

Soybean Decline to End with USDA supply & Demand Report

The USDA reports their global Supply and Demand figures this Friday at noon Eastern. This report frequently sets the tone for the rest of the year with the fast and wild action affecting the beans in the bin while the long-term effects play out on the beans in the ground. There’s no denying the seasonal effects of this report on both markets. Post June USDA Supply and Demand leads to one of the most predictable declines in seasonal market forecasting as beans fall through the end of July. Finally, the table is already massively stacked against bean prices with record acreage being planted with the expectation of record yields. Barring any unforeseen weather catastrophes, which are unlikely in our part of the world in an el nino year like this one, the 2014 US soybean crop should be a record setter by a wide margin. But….

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Commercial Traders Pressure RBOB Unleaded Futures

rbob unleaded gas commercial trader sell signal
COT Signals commercial trader sell signal for RBOB unleaded gasoline.

We published this short sale in RBOB unleaded gasoline Monday night for COT Signals subscribers and followed it up with commentary for Equities.com on Tuesday morning. You can read, “Are Rising Gas Prices a Trading Opportunity?” at Equities.com. You can see the effects of commercial traders buying and selling RBOB unleaded gas and the summertime peak gas price on the chart we posted at COT Signals.

This trading setup is a classic Commitment of Traders Sell signal and shows why we use the CFTC Commitment of Trader reports as the primary basis for screening our trading opportunities. Follow the links to see how we do it or better yet, call us and ask us how.

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euro

Buying the ECB Rate Cut

The European Central Bank (ECB) is widely expected to cut their lending rates at the June 5th meeting. There are a couple of really interesting precedents setting up. First of all, the ECB is expected to
not only cut their discount rate but also the deposit rates paid to banks who park cash overnight at the ECB. Given the already low starting rate of .25% discount and 0% overnight, the expected cuts will cut the current discount rate in half and drive the overnight rate negative. Thus, the ECB will be charging banks to hold bank deposits. Secondly, the Euro currency market internals should be weakening ahead of the expected rate cut. After all, the rate cut should make owning Euros less attractive to the investing public’s hunt for yield. We’ll examine both of these situations as the former plays out on the
macro landscape while the latter presents an immediate trading opportunity.

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481275853

All Set for the Stock Market Top

John Mauldin recently wrapped up his annual Strategic Investment Conference and shared some insights from his illustrious speakers. In his world, the information he passed on in his summary was simply nuggets. In my world, I had to go digging for context to put it all together. As a trader, I live in a day-by-day world. As such, it’s easy to lose track of the big picture and at times, the proper context from which to view the macroeconomic landscape. Reading the notes from Mauldin’s speakers clearly illustrated two main points for my own trading.

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record soybean harvest in 2014

Bean Market Fear Shifts from Producer to Consumer

The soybean market has been held just under $15 per bushel since 2012’s US harvest. In fact, it traded all the way down to $11.50 last august before rallying through the harvest. Soybeans are up around 15% so far this year and based on a few factors, it appears that this rally could sustain itself. Currently, the market is sitting about where it is supposed to be; in a period of consolidation near the highs waiting to fall once the spring planting becomes more certain. I’m just not sure how much of a buying opportunity we’re going to get come the late June – July seasonal sell-off.

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American Investors Safe from Nickel’s Boom and Bust

There’s good news on the horizon for the average U.S. retail investor. There’s a bubble coming and for once, Joe Investor is going to miss out on the boom and crash. Two primary stories create the potential for a short-term meteoric rise in prices only to quickly plunge as macro economic forces and political issues sort themselves out. In a world full of financial instruments, global exchanges and products ranging from weather derivatives to technology indexes to silkworm futures, the base metal nickel is inaccessible to the average retail American trader.

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Commercial Short Selling in the Crude Oil Market

The United States is awash in domestically produced crude oil. U.S. crude oil inventories just hit a 26-year high. Heck, just last year North Dakota passed Ecuador’s production and Ecuador is a member of OPEC.  Furthermore, the U.S. is expected to takeover the crown as largest global oil producer from Saudi Arabia as early as 2020. The questions that keep coming up are two-fold. “Why hasn’t the price of oil fallen and why are gas prices still so high.” The answer is simply, politics and logistics.

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Gold and Bonds Getting Back to Normal

Gold, interest rates and the stock market have a very interesting relationship. Normally, declining interest rates are good for business and bad for gold. Post 9/11 and housing bubble, zero interest rate policies (ZIRP) created an artificial situation that fractured this relationship rendering it virtually useless over the last decade. This began to change last summer when the Federal Reserve Board stated that they would begin slowing the stimulus they’ve provided to the economy thus allowing interest rates to gradually rise. These relationships have begun to sort themselves out over the last three quarters and may actually be telling us something about the current pricing in the gold market.

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Commodity Futures Trading