I frequently talk about using the commercial traders as a proxy for fundamental information. Commercial traders’ pinpoint focus on the markets they trade takes into account the supply and demand structure within their individual markets, including stocks and bonds. Furthermore, their actions within the markets they trade literally, tell us what they expect to happen within their market going forward. Thus, our thesis that, “No one knows the markets they trade like those whose livelihood is based directly upon the correct forecasting of their market.” All things being equal, when my analysis of the fundamentals seems confounded, I defer to the respective experts within their markets. Finally, when the market sectors are analyzed in total, commercial traders’ actions can lead to a bigger picture. The recent shift in their positions within the financial markets leads me to believe Continue reading Expected Turbulence in the Financial Markets
The recent action in the equity markets has been volatile and confusing to say the least. Today, we’ll focus on the S&P 500 futures and the COT buy signal generated by the recent sell off. Later in the week, we’ll examine the decoupling between the Nasdaq 100 and the S&P 500 which could very well be the most obvious clue to the bigger picture.
This week, we took a step back and looked at the markets in groups. We focused on the metal and meat markets in general while only discussing specifically, a soybean meal trade.
Re-Shuffling the Metal Markets which we wrote for TraderPlanet focused on the growing commercial trader position in the precious metals. There’s no question they’ve been big buyers on the recent decline and their total positions are controlling a larger percentage of open interest with each additional contract they buy.
See our mechanical Soybean Meal program’s Equity Curve
We ended the week with a broad outline of the interaction between commercial traders and seasonal analysis in hogs and cattle. We featured the current seasonal charts by Moore Research and combined them with our own Commitment of Traders charts to demonstrate effectiveness of these tools when combined.
See all 9 charts and commentary in Hogs and Cattle Bottoming Out.
See the equity curve for the Meats Sample Portfolio.
There are three markets in the meat futures sector with enough volume and liquidity to attract both hedging and speculative activity. These are the lean hog futures along with the feeder and live cattle markets. The live cattle market is best thought of as cattle on the farm while feeders are the cattle that have made the journey from the farm to the feedlot for fattening prior to slaughter. We’ve written extensively on the broad nature of global supply and demand fundamentals within these markets and included links to our previous research at the end. This week, however, these three markets appear to be setting up for a classic trading opportunity.
The grain markets may finally be perking up in spite of declining energy costs and record harvests. We’ve previously mentioned the oat futures as the first of the grain markets to budge in, “Combining Buy Signals in the Oat Futures.” Today, we’re looking at soybean meal and the set of indicators we use to drown out the voices of hyperbole both in print and on TV. Quantitatively speaking, the soybean meal futures have triggered a COT Buy Signal. More importantly, you can see the consistency and magnitude of these plays on the chart below.
This was a busy week. We began on Monday with an exclusive follow up on last week’s “Equity Rally Waves a Caution Flag”, for TraderPlanet in, “Commercial Traders Turn Negative Towards Equity Rally” which focused specifically on the Dow.
Meanwhile, our main piece for the week focused on, “Copper Traders Bailing Out of Record Position.” Specifically, what was going on with the record commercial net long position in the face of a market that appears to be rolling over.
Finally, the equity curve for our commercial live cattle trading program has been updated to show its recent success.
The copper market is frequently referred to as the, “economist of the metals markets” because the supply and demand issues associated with this market lead directly to construction and manufacturing. Therefore, commercial long hedgers actively locking in prices for their future usage is seen as a bullish sign for the economy because construction and manufacturing managers are trying to lock in their production supplies for an expected growth in demand. Obviously, commercial long hedgers setting a record net long position would be indicative of Continue reading Copper Traders Bailing Out of Record Position
Our Commitment of Traders live cattle trading program continues to excel having won 5 out of its last 7 trades. Furthermore, it looks like the current trade could be another big winner!
This is one of 33 completely mechanical programs whose instructions we deliver by email, nightly.
Once registered, you have access to all 33 which can be combined as you choose on our site to compile an equity curve that meets your trading needs.
We discussed the growing imbalance in the unleaded gasoline market last week here at Equities.com. Our primary focus was based on two points. First, the fundamentals in the petroleum sector are bearish. Secondly, the commercial traders as a group have now turned negative on their own product at these prices. These two factors have grown in strength over the last week and Monday’s weakness finally triggered an official COT Sell signal.