Weekly Commodity Strategy Review 09/19/2014

Our week started off with a bang. Monday, we discussed how we use the small speculator category of the weekly Commitment of Traders report to pick off failing moves in the markets. The rally in cotton futures set us up beautifully for the sell signal we published at TraderPlanet and we’ve got more than $1,500 per contract in the trade already.

COT Data: What can You Learn from Small Speculators

We spent the rest of the week focused on Thursday’s Scottish vote. There’s a very interesting angle playing out among the commercial traders in the currency markets. The Commitment of Traders Report clearly shows that commercial traders are expecting these currency markets to tighten rather than continuing to widen as they have for the last 5-6 weeks.

Our piece on Tuesday for Equities.com touched on the basics in, “Currency Trading the Scottish Secession Vote.”

Finally, our primary piece delved deeper into the same currency analysis, “Currency Reversal on Scottish Vote.” The primary factors for our currency expectations are still in play and we continue to look for the technical pattern that we outlined yesterday.

Currency Reversal on Scottish Vote

Today’s Scottish secession vote takes a 300-year-old issue and covers it with 21st century journalism. There’s hardly any angle that hasn’t been talked to death. Surprisingly, I’ve found something of major importance leading up to the vote that isn’t being discussed anywhere. The commercial traders in the Commodity Futures Trading Commission’s weekly Commitment of Traders report are making a clear point that they collectively feel that the currency markets are about to tighten, rather than continuing to widen as they have for the last month or so.

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scottish vote

Currency Trading the Scottish Secession Vote

Thursday’s landmark vote to return Scotland to its own sovereignty is becoming a tighter race with each passing day. The interesting part in the analysis is that the money has been flowing into the British Pound and Euro Currency and out of the U.S. Dollar Index. This places the commercial traders’ actions directly at odds with the currency markets’ collective movement over the last two to three months leading into the Scottish secession vote.

We cover the analysis of the following charts in Equities.com.

Currency Reversal on Scottish Vote

us dollar buying into scottish vote
US Dollar Index sees major commercial trader selling heading into Scottish vote.

See more of our Recent Trades at COTSignals.

Pound Sterling buying before scottish vote
Strong buying of British Pound Sterling heading into Scottish vote.

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buying the Euro into scottish vote
Strong buying of Euro Currency heading into Scottish vote.

Corn Market Analysis for Equities.com

Commercial corn traders have played this year’s market like the veteran traders they are. They collectively sold more than 370,000 contracts during planting season and have now come in as active buyers in the corn futures. recently repurchasing more than 120,000 contracts.

We discuss the impacts of the commercial corn traders via the CFTC’s Commitment of Traders report in this morning’s feature for Equities.com in , “Corn Market Finding Support.”

You can see other examples of our recently published analysis at COTSignals.com Recent Trades. You can also sign up for a FREE 30 day trial at COTSignals Signup and have our nightly worksheet delivered straight to your email.

commercial corn trader futures chart
Commercial corn users buying at value prices.

We also walked through the same scenario in the soybean market for TraderPlanet, yesterday in Global Food Dynamics Impact U.S. Grains: Soybeans at a Turning Point?

record soybean harvest in 2014

Soybean Analysis for TraderPlanet

The corn and soybean futures markets have both followed the same paths this year and both markets are seeing substantial commercial trader support. The primary reasons for the strong commercial buying in in these declining markets have been high cattle prices and the unexpected decline in the US hog population. We discussed the details as well as the current Commitment of Traders Buy Signal this morning in November soybeans in this piece for TraderPlanet.

You can see more of our analysis published for TraderPlanet and others at COTSignals.com.

COTSignals Recent Trades

Strong commercial trader buying in soybean futures supports $10.00 low.
Strong commercial trader buying in soybean futures supports $10.00 low.

Weekly Commodity Strategy Review 09/05/2014

This shortened holiday week began with our piece for Equities.com on the coffee futures market and the peculiarities of Coffee Futures Expiration Analysis. We discussed the roll from the July to December contract and the effect we thought it would have on the market as it made new highs for the move.

Our primary piece this week focused on the Live Cattle futures market and the spread between the expiring October and newly liquid December contracts. We noted the difference in the change in open interest and depth of decline between the two contract months and predicted, “One More All-Time High Coming in Cattle.” We also noted the similarities in the technical setup between the current live cattle situation and the False Breakout in Gold and Silver that we wrote about in July. The more often we see the same patterns reflect the same outcomes the easier they are to recognize going forward.

Lastly, the European Central Bank cut their interest rates and moved the overnight rate to negative. This is the same type of Quantitative Easing that our Federal Reserve has used over the last few years to pump money into a deflating economy. This move caught many traders off guard, but we wrote about it last week in, “Hand Quantitative Easing to Germany” as well as discussing how the US can use this our advantage.

Have a wonderful weekend and we’ll be back bright and early Monday morning with a new piece for TraderPlanet.

Sincerely, Andy Waldock.

2014 live cattle herd

One More All-Time High Coming in Cattle

The all-time high and ensuing fall in cattle prices brought a sigh of relief, as it appeared the cattle top was in. We sincerely thought we saw it coming in June when we discussed the “Beginning of a Cattle Top.” The fundamentals of the increased demand via the global growth of the foreign middle class demographic remains fully in play as well as this year’s supply issues as nothing has occurred on either of these fronts to change the market’s current dynamic. Therefore, the only question to ask going forward this year has been, “How high is high?” Recent action in the live cattle futures spread between the current, October contract and the next active contract in December provides us with some clues as to what’s next.

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Coffee Futures Expiration Analysis

Commercial coffee traders take advantage of speculative short covering in the July contract to create new short hedges in the December contract. The strength of their selling clearly states that coffee farmers are thrilled to sell their crops at these prices thus, hedging their forward risk.

negative commercial coffee trader position versus coffee futures market
Heavy commercial selling into July coffee futures expiration.

This is a very similar setup to the False Breakout in Gold and Silver. These are examples of why we track the weekly CFTC Commitment of Traders reports as we have determined that their actions, based on their fundamental sense of value in their own markets are the most consistent predictors of future market movement. Find out more and register for a free 30 day trial at COTSignals.

See the rest of our Coffee Futures Expiration Analysis for Equities.com

Commodity Futures Trading