Welcome to the Hedge Fund Telemetry Commodity Weekly note! We are very excited about this weekly note that will be a good overview of the major commodity markets using our charts with DeMark analysis, charts of bullish sentiment, and the weekly Commitment of Traders data. We have been urged for a while by our subscribers to launch this stand-alone research product offering. We also launched a Currency Weekly with a similar analysis. Both of these new research weekly reports will require a separate subscription and as a current subscriber to Hedge Fund Telemetry, we have discounted the notes by 50%. These are available “a la carte” for a yearly rate of $500 each however we are offering them at $250 each. For “small institutions” and “large institutions” subscribers these reports are included in your subscription.
If you would like to sign up now (which would be most appreciated) here is the link to find the offerings. Your discount will apply at checkout.
There are also detailed explanations of Commitment of Trader data and a DeMark Sequential primer at the bottom of this note.
Commitment of Traders – The Basics
The Commitments of Traders (CoT) is a weekly report released by the Commodity Futures Trading Commission (CFTC). The CoT report outlines how different types of traders are positioned in the futures markets. There are two main types of traders in a CoT report: commercials and money managers.
Commercials are the actual producers and users of a commodity that use the futures markets to hedge. A commercial producer in the corn market could be a farmer who sells corn futures to lock in his selling price. Commercial traders are thought of as the “smart money” since they are in tune with the physical commodity business and likely have superior supply/demand information. The other main CoT trader type, money managers, is composed of hedge funds, mutual funds, and commodity trading advisors. These are speculative traders who have no interest in the underlying physical commodity business.
CoT data is most meaningful at extremes when either commercial traders or speculators are super net long or net short. The charts below are mostly self-explanatory by looking at the color-coded type of traders. For a more detailed explanation please see the bottom of this note.
themes and highlights
After the Bloomberg Commodity Index had drifted higher it finally broke down with energy the leading commodity gave way to the downside. Energy still has risk lower on several of the markets. Metals made new lows last week with gold now in downside wave 3. A break of last week’s lows would confirm lower. Copper has been very oversold with sentiment and will have a strict Combo 13 this week. Livestock remains choppy with no trend. Corn could continue lower while there will be likely buy Countdown 13’s with wheat, cocoa, and cotton.
This is a new chart I was shown by a commodities-focused trader. It’s the net positions in futures and options held by managed money. At this point there is potential for a bounce with the buy Setup 9 however there is more risk of downside Sequential and Combo Countdowns.
BLOOMBERG COMMODITY INDEX DAILY AND WEEKLY
Bloomberg Commodity Index daily had been in a slow drift with the majority of commodity markets already decreasing with just the energy markets keeping it buoyant. Now that energy has given way so has this index. Risk lower remains with Sequential in play and this could be the start of 5 waves down.
Bloomberg Commodity Index Weekly really illustrates the quick drop
COMMODITY SENTIMENT OVERVIEW
OIL AND ENERGY
Bloomberg Energy Subindex daily with a Sequential in progress with downside wave 1 of 5 pattern potential.
The weekly had plenty of upside exhaustion signals
WTI Crude futures daily still has a Sequential however if this breaks the TDTS line again the pending Sequential will cancel.
The weekly had several upside exhaustion sell Countdown 13’s
Brent Crude futures daily
WTI Crude futures bullish sentiment has started to weaken with the 20-day moving average of sentiment now declining. A break of 60% at the low end of the range would shift more convincingly bearish.
WTI Crude futures Commitment of Traders shows speculators increasing long exposure
Natural Gas futures daily has a Sequential in progress at the 200 day moving average
Natural Gas futures bullish sentiment bounced off 50% midpoint and now is the key support to watch
Natural Gas futures Commitment of Traders shows speculators increasing long exposure
Gold futures daily broke to a new low under the TDST level at 1794 now in downside wave 3. I still am not a buyer of gold with this pattern
On GLD I said last week to discount the latest Sequential 13 since it did not make a new low. I’ll be watching the Combo on day 10 of 13
Gold futures bullish sentiment remains above the 50% and that is a little surprising. Breaking 50% and this becomes a short.
Gold futures Commitment of Traders shows speculators decreasing long exposure
Silver futures bullish sentiment really broke down last week. A higher probability trade is when the 20 day moving average of sentiment is increasing.
Silver futures Commitment of Traders shows speculators decreasing (barely) long exposure
Copper futures daily with a new more strict version of the Combo 13 in downside wave 5. Watch for a potential bounce
Copper futures bullish sentiment has been under pressure for the last few weeks and very oversold.
Copper futures Commitment of Traders shows speculators increasing SHORT exposure
Platinum daily broke to a new low
Platinum bullish sentiment is breaking down too
Platinum Commitment of Traders shows speculators increasing SHORT exposure
Palladium bullish sentiment oddly bouncing despite price action is nominal
Palladium Commitment of Traders shows speculators decreasing very small SHORT exposure
Corn futures daily broke after the sell Setup 9 in corrective wave 2 of 5. Now with buy Setup 9 and a bounce needs to happen or else the Sequential will continue
Corn futures bullish sentiment still is holding 50% after a few lower high bounces
Corn futures Commitment of Traders shows speculators decreasing long exposure SIGNIFICANTLY
Wheat futures daily breaking and could see the buy Countdown 13’s this week.
Wheat futures bullish sentiment is now at extreme low levels
Wheat futures Commitment of Traders shows speculators decreasing long exposure significantly
Soybean futures daily went sideways and with the others gave way to the downside.
Soybean futures bullish sentiment broke 50% with steep declines
Soybean futures Commitment of Traders shows speculators decreasing long exposure significantly
Cattle futures daily continues to chop
Cattle futures bullish sentiment has been under pressure
Cattle futures Commitment of Traders shows speculators decreasing long exposure significantly
Lean Hogs futures daily
Lean Hogs bullish sentiment with a break of 50% last week
Lean Hogs Commitment of Traders shows speculators increasing long exposure
Cotton futures daily could see the Sequential buy Countdown 13 this week
Cotton futures bullish sentiment is in oversold territory
Cotton Futures Commitment of Traders shows speculators decreasing long exposure
Coffee futures daily still in a range
Coffee futures bullish sentiment is at 50% holding here. Sorry about the pricing on the sentiment chart. The data feed is causing gremlins
Coffee futures Commitment of Traders shows speculators decreasing long exposure
Sugar futures daily should get the buy Countdown 13 this week
Sugar futures bullish sentiment is not oversold however perhaps this will be another higher low
Sugar futures Commitment of Traders shows speculators decreasing long exposure significantly
Cocoa futures daily should get the more strict version of the Combo 13 this week
Cocoa futures bullish sentiment is at new lows and very oversold
Cocoa futures Commitment of Traders shows speculators increasing long exposure barely