The weekly Commitment of Traders report published by the Commodity Futures Trading Commission tracks the markets’ players of consequence. The report breaks down the actions of the commodity index funds, managed money, small speculators and finally, the commercial traders. For the purpose of this article, we’ll focus on the commercial trader category. I’ve been reading these reports for twenty years and there’s a phenomenon that I’ve counted now 13 times in the S&P 500 futures that is usually tied to the expiration of the quarterly contracts. This setup has had a 76% forecasting accuracy for the period in which we measured its effectiveness. Most importantly, we find ourselves in the middle of this rare event even as we speak.
Orange juice futures sold off this summer as is normal during the primary growing season. Fundamental analysis in this market by the commercial traders via the weekly Commitment of Traders report clearly shows that long hedgers are locking in future input prices as they believe that OJ is a buy under the $1.45 area. You can see their excitement kick in once the market fell below $1.45 in mid-June.
We went into more detail including orange juice futures seasonal and expiration analysis in our piece for Equities.com.