Here’s How They Covered Their Shorts
There are better ways to cover shorts than the manner in which a large number of
commodity funds did today. You don’t want to cover when a market gaps up above a
psychological barrier such as the round 1000 level. You don’t want to cover
after the contract makes its biggest move in weeks to close at a one-month high.
You don’t want to cover on the high after a market moves 5.14%, or 51, to 1044.
But this is precisely what many funds did as volume in
the cocoa pit exceeded 10,000 contracts. What you do want to do is realize that
when an imbalance of positions — either too many longs or too many shorts —
exists in a futures market, than there will be few left to add to position
imbalances either long or short. There could also be a mad rush to the exit
doors in the event of an unexpected move. That is precisely what happened today
with funds heavily short cocoa today. You can look at the bi-weekly Commitment
of Traders Reports on TradingMarkets.com’s Futures Indicators Page when it is
made available from the CFTC every second Friday. Tuesday’s reports (with
options) showed that funds were short over 7,000 contracts, fanning the flames
under today’s upside rally.
T-bonds
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PowerRating) fell on today’s productivity numbers from the Labor
Department. If more hours are required to produce something (lower
productivity), the price goes up. Employers generally pass along these costs and
generate inflation. The report also said that labor costs rose. Higher inflation
makes the value of bonds worth less, and as a result, in order to generate a higher yield to
compensate, prices fell. The USM1 closed 14/32 lower at 101 21/32.
10-year notes
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PowerRating)Â closed down 4/32 at 104 25/32.
July sugar
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PowerRating), from the Momentum-5
List, continued its recent string of wins in a wide-ranging up-bar. Notice that on recent up days, sugar has had a
tendency to rally straight up from its opening tick. This makes entry using the 1090
Open viable. Sugar closed .15 higher at 9.10.
June lean hogs
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PowerRating) are in the fourth day of a
Pullback From Lows
setup out of a bigger-picture head-and-shoulders pattern. Look for a move below the low of the high pullback bar. Hogs
fell .150 to 67.500.
In the grains, soybean oil
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PowerRating) continued
making good on its Turtle Soup Plus One Buy setup that registered yesterday.
Follow-through from contract lows were more pronounced today with a gain of .2200 to 15.0900. Â
July wheat
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PowerRating) sank for a sixth
straight session and tapped a contract low, pulling back to close at a
contract low, down 2 1/2 at 266 3/4 and closing right at its Turtle Soup Plus One Buy
setup in choppy trade around the low and TS+1 trigger.