Hedge funds have their lowest net position in Soybeans for the past 52 weeks. Soybean Oil and Cotton are very near their lowest level.

SpreadEdge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates.  SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.

Several indicators point to a rebound in Energy prices over the near term.  These indicators include hedge fund position estimates, the daily and weekly charts, and relative price and positioning.  Each of these indicators are reviewed in the following sections.

Hedge Fund Position Estimates Overview

The Commitment of Traders (COT) report, issued by the Commodity Futures Trading Commission (CFTC), offers a weekly snapshot of the positions taken by different market participants in the U.S. futures markets. This information aids traders and analysts in comprehending market sentiment and developments.  Published every Friday at 3:30 PM Eastern Time, the COT report reflects positions held as of the previous Tuesday's closing business hours.  Peak Trading Research assesses the latest COT report, examining alterations in price and open interest to provide an appraisal of net fund positioning daily.

Soybeans

Hedge funds are net short an estimated (197k) contracts.  Soybeans has been below the (190k) level in 4 of the past 5 weeks and is over 300k contracts from the high in early September last year.

Soybean Oil

Hedge funds are net short just under (90k) contracts.  This is just 3k from the lowest level in the past year.  Soybean Oil is 150k contracts from its highest level.

Brent Crude

Hedge funds added a small number of contracts for the week bringing Cotton net shorts to ~ (52k).

Technical Analysis

Soybean has declined nearly (24%) since the highs in late May of this year.  Based on the technical action, there does not appear to be an end in sight.

Spread Chart

I sold a January, March calendar spread in early July that has benefitted from the Soybean decline.  The extreme hedge fund positions usually suggest a reversal is imminent.  However, demand is weak, farmers have bins to empty, and seasonality is still broadly bearish.   I plan to stick with this trade while keeping a watchful eye for a reversal.

More Information

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More Information

The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets.  In addition, spread trade recommendations and follow-up on open trades is also provided.  For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

www.SpreadEdgeCapital.com

Disclaimer

SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.

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