Commodity Weekly July 3, 2022

Jul 3, 2022 | Commodity Markets

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.

spotlight chart

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

Metals

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 daily

Palladium bullish sentiment oddly bouncing despite price action is nominal

Palladium Commitment of Traders shows speculators decreasing very small SHORT exposure

Grains

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

Livestock

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

Softs

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

DeMark Sequential Basics

MORE DETAILED COMMITMENT OF TRADERS DEFINITIONS