According to the weekly Commitment of Traders (COT) report issued by the Commodity Futures Trading Commission (CFTC), crude oil drillers have sold the most forward production since oil was trading at more than $100 per barrel. Considering that drillers are willing to sell just as much at half the price and that the recent rally to $50 per barrel has been purely speculative, how low will prices go once the speculators get forced out and the producers’ selling drives the market lower?
The Australian Dollar has slid nearly 9% in just the last month. We were exceptionally suspect of the rally that took place between February and April, as we didn’t see commercial trader confirmation of commodity demand, Australia’s primary industry, supporting higher commodity prices going forward. In fact, our data sources made us suspect of the entire metals and energy rallies we’re currently seeing come to an end. This is one of the primary values of tracking the Commitment of Traders (COT) report. It provides a tally sheet for fundamental supply and demand. Recently, we’ve seen some commercial traders nibbling at the long end of the Aussie Dollar and, given its recent decline, we feel it is due for a tradable, short-term pop.
The interest rate sector has been spooked back and forth between the Federal Open Market Committee’s (FOMC) desire to raise domestic interest rates and the global economy’s seeming inability to gain any significant traction. This has led to the conundrum we face as the FOMC raised interest rates for the first time in nearly a decade while, simultaneously, more of the First World’s economic powers slip deeper into negative interest rates. This begs the question, “How can an individual determine the path of interest rates even as the world’s most connected bankers and governments argue vehemently among themselves regarding the same topic?” Our answer in times like these has always been the effective implementation of commercial traders’ consensus combined with good old-fashioned technical analysis.
These trades in RBOB unleaded gasoline futures going back to October are a good example of using the Commitments of Traders report to spot turning points in the market.
This unleaded program is one of 35 markets followed. Register at CotSignals.com to see the Tradestation reports and combine the programs into a single equity curve for your evaluation.
The Canadian Dollar is primarily a commodity based currency. Whether the commodity is being extracted, processed or exported, the commodity itself touches a lot of Canadian hands on its way out the door. As such, it’s not surprising that the recent commodity rally has sparked a bid in the Canadian Dollar just as the oil and grain washout contributed to its oversold condition at the beginning of this year. This week, we’ll look at some fundamental background, then illustrate the current situation and the setup we see coming on the included Canadian Dollar weekly and daily charts.
This week, we’re going to take a step back and look at the big picture in the gold futures market through the eyes of the Commitments of Traders report. We’ll discuss how to use it to spot tops in the gold market, specifically but note that the fundamental thesis behind this piece holds just the same for every commodity market we trade. Finally, we’ll look at the current projections for the commercial traders’ most bearish net position since December of 2012 when gold was trading at $1,700 per ounce.
We’ve discussed the first quarter commodity rally in detail over the last two weeks. Our general opinion has been that these rallies are temporary as commodity producers use this opportunity to hedge forward production at decent prices for the first time in over a year. This week, we’ll discuss the metal markets – gold, silver, platinum and copper. We’ll detail how we used the Commitment of Traders report to pinpoint the market’s bias as well as how to factor external shocks into the current picture. Finally, we’ll provide some support levels as we look to take profits on the current decline.
We’ve discussed at length over the last two weeks that commercial producers in most of the commodity markets have come out in force to unload their future production on the first quarter commodity rally. Fore example, we’ve noted that gold producers haven’t been this bearish since 2013 and that the crude oil glut would take more than a year to work through. See, “Gold, Oil, Grains – Was that It?” for the background we discussed last week. Last night’s tragedy in Brussels has added a bit of a boost to the precious metals as expected. If this boost is insufficient to force short covering or, attract new buyers, it’s over until prices decline.
Coffee futures have been trending lower since October of last year. As always, coffee trends are anything but smooth as seen by the spikes in the included chart. Whether these spikes washed out short positions or simply forced them through some pain is not the point of these spikes. Today’s point is how to use these spikes, like the current one, to initiate new short positions inline with the commercial traders. Hopefully, this avoids being stopped out or having to endure too much pain while still participating in the opportunities that trading coffee futures presents.