COT shows no short covering, now what?

Last week we saw the Corn market rally 7 3/4¢ and the Soybean market up 10 3/4¢. Not a huge move, but definitely a continuation of the grind higher.

Many “analysts” estimated funds buying futures (covering their shorts) every day last week, yet the COT report didn’t reflect that. It was fairly flat.

Now, we know the delay in the reporting days, but even still, “analysts” report buying on every up day, but we didn’t see that reflected in the report. So who is buying?

We don’t have a great answer to that, but what we can say is that with funds sitting short 59k beans and 99k corn, they are not too happy about this grind higher. we continue to expect them to liquate their shorts until they reach a much more neutral position. It could happen fairly aggressively, resulting in something similar to the almost limit wheat move from July 25th. Remember, in the short term, fund activity is a major driver of market action.

With the fund position still remaining short, we expect a vol crushing grind higher to continue, with an outside chance of a temporary blow up (which could then result in a short recommendation, but that is a post for another time).

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