If you sat through a crop insurance meeting with me this year, I explained how despite the extreme bearish fundamentals and sentiment felt throughout the farm community that I was expecting a very strong rally. This was just the process of extreme short positions held by speculators unwinding and short covering. The speculators drive the market, not the farmers nor commercials. Each week, the Commodity Futures Trading Commission (CFTC) releases information on the long and short positions of three groups of traders in a couple of dozen different futures markets in a report known as the Commitments of Traders. Large speculators by and large take the opposite positions of commercial hedgers. Commercial hedgers positions are nearing extreme levels The chart below shows the net number of contracts (longs minus shorts) held by large commercial hedgers. The green dotted line is 1 standard deviation above the 3-year average; the red dotted line is 1 standard deviation below the 3-year average. I am expecting an event similar to that which happened in May of 2012. Perhaps it is me talking the position which I have held since this rally began that a pull back prior to a summer weather rally would occur. So far, that scenario looks to be a very real possibility.
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