Tag Archives: cftc commitment of traders

Sell Crude at $65 per Barrel

The crude oil trade thus far in 2015 has been a textbook example of the way we employ commercial trader activity to the commodity markets. Commercial traders in the crude oil market were relatively nonplussed about the market’s decline through the end of 2014. Time progresses, and as the market built its base and forward demand for summer gasoline blends from refiners began to take shape, their purchases quickly dominated the playing field and pushed the market higher through spring. However, I believe the bigger story is the dramatic forward selling by the commercial drillers who clearly believe this rally will be short-lived.

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What Inflation?

The recent bond market sell off came on the heels of Bill Gross’ comments regarding the German 10-year Bund as, “The short of a lifetime.” We had already noted the negative yield situation in mid-
March along with the increasingly negative tone that commercial traders were taking. Positioned accordingly, the bond sell off was a profitable experience. Over the last two weeks, however, there has been more and more talk about inflation and frankly, I just don’t see it coming. Therefore, the generational bond rally may not have come to the screeching halt that the media is leading us to believe.

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Expected Turbulence in the Financial Markets

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

Weekly Commodity Strategy Review

This has been a tremendously active week with big volatility and important market turns. We have to begin with last week’s gold platinum spread. We outlined the case in our Gold, Silver, Platinum and Copper Outlook. This week, April platinum traded down to nearly a $50 per ounce discount to April gold. Currently, this spread has rebounded to approximately a $5  discount. That’s as much as $4,500 profit depending on the entry point.

Moving to this week’s activities, we published a COT Buy signal in the crude oil market for TraderPlanet on Monday morning in,

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Combining Buy Signals in Oat Futures

We’ve been following the oat futures market carefully while waiting for an actual buy signal to setup for us to enter. There are multiple confirming factors of the market trying to put in a low before rallying through the expiration of the March contract. We initially began looking at this oat trade based on the seasonal pattern, commercial build in position and the sideways technical action in a declining volatility environment. This trade never materialized as the market feel through the bottom of its consolidation. This time around, the market has provided a classic COT long entry.

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Is the Canadian Rout Over?

The Canadian Dollar was trading above $.94 as recently as June. This has provided a clear picture of what can happen to an unevenly balanced economy whose currency value has become pegged to any individual sector. The global economy slow down and the associated decline in oil has absolutely pounded the Canadian Dollar to the tune of a 15% haircut in six months. That’s a very large move in a first world currency. Fortunately, we can use the commercial traders’ forecasts derived from the CFTC’s weekly Commitment of Traders report to keep us on the look out for the big moves and out of harm’s way.

The first point to make is that we only take trades in the established direction of the commercial traders’ momentum. Therefore, we spent the first half of the year looking for selling opportunities as the commercial traders sold more than 100,000 contracts through June of 2014 between $.89 and $.93 cents to the U.S. Dollar.

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You can see on the chart below that commercial traders were quick to cover a little more than half of their short position through fall’s decline between $.87 and $.91 cents to the Dollar. This left them comfortably short for most of the decline and leads us to our current situation.

Commercial traders predicting and taking advantage of Canadian Dollar's decline.
Commercial traders predicting and taking advantage of Canadian Dollar’s decline.

Commercial traders now appear to be once again interested in the long side of the Canadian Dollar trade. Their recent purchases of approximately 15,000 contracts has been strong enough to turn momentum’s tide and put us on the lookout for buy signals like the one generated last night. We’re not sure how all of the global banking variables are going to sort themselves out over the coming year but, we do see this as a supported trading opportunity on the long side of an oversold first world currency.

The USD Index – A Speculative Bull Trap?

This was our U.S. Dollar Index piece posted at TraderPlanet on Monday. It seems there was an issue with the chart.

The piece actually begins with our January 5th article when we saw the commercial trading position getting out of whack as based on the Commodity Futures Trading Commission’s weekly Commitment of Traders reports. Our initial discussion can be found here.

The USD – A Small Washout Coming?

We updated it this week with the following piece, chart and trading signal.

The USD Index – A Speculative Bull Trap?

The commercial traders now control 70% of the total open interest. Official COT Sell Signal issued.
The commercial traders now control 70% of the total open interest. Official COT Sell Signal issued.

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A Final Flush in Soybean Oil

The entire soybean complex had been holding its collective breath ahead of yesterday’s USDA reports. As is typically the case, it quickly became a case of, “Buy the rumor. Sell the fact.” That said, yesterday’s post report action created a strong enough reversal downwards and away from the building overhead resistance to generate a COT Sell Signal. Normally, our chart would include a fourth pane labeled, “Short-Term Market Momentum.” However, for clarity’s sake, we left that pane out of the chart to focus instead on the commercial trader action illustrating their sensitivity to price.

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Trading the 2015 Cattle Market

The live cattle market was up 28% in 2014 and the Feeder cattle market was up 32% for the year. The cattle markets made all-time highs in 2014 as the U.S. had its smallest slaughter in 20 years. This came as no surprise as we’ve discussed the declining trend in the domestic herd several times. Based on the cheap feed prices, cheap fuel costs and a strong Dollar, this should be another year of declining supply as the U.S. begins to grow its herd to meet the growing foreign demand.

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Oat Futures Fully Supported

This morning we look at a classic example of the commercial trader category putting their knowledge to work. In a classic case of, “chicken vs. the egg,” do the commercial traders drive the seasonal tendencies or, do the seasonal tendencies drive the commercial traders?

The March oat futures contract is typically, the first of the bullish U.S. grain markets as you can see in the seasonal analysis provided by Moore Research.

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