COT should show trends shifting

The COT report is projected to show the first major fund net purchases in Corn and Soybeans since early May. The numbers will be released later this week but will report on positions as of July 24. This tends to make sense as we saw corn rally 14¢ last week and soybeans rally 31¢. Most major moves are led by funds in the short term and real trends and results in the long term. The funds are such a major factor that it is important to recognize their role and to monitor their activity.

Below are the COT reports for managed money for Corn and Soybeans from Late April to today. You can see here, and if we were able to go farther back, you would see better, than fund activity tends to trend.

Soybean COT report – Managed Money courtesy of Quik Strike
Corn COT report – Managed Money courtesy of Quik Strike

So what you might say. Well, because fund trend in their buying and selling, we could make a fairly reasonable judgment that today’s pullback in Corn and soybeans (based on crop conditions report yesterday) should be met with fund buying.

Not only that, but by getting a jump on the COT report, you can act before the market reacting algos, which are waiting for the information to trade off of.

Now, we’re not calling for crazy fund buying to push us to new highs, but we think its fair to say that funds will be reducing their position to take profits/reduce risk for the foreseeable future, probably until they get their net position back to zero. At that point, it would be fair to reevaluate. For now though, based on fundamentals and fund activity, it seems that the near term lows may be in, and path of least resistance is a grind higher.

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