This week’s COT report presents strong reversal opportunities in the grain complex and Silver, reports Andy Waldock.

Last week we were discussing when the grain complex would turn negative across the board. This week, a definitive reversal signal hit in the corn and oat market. The rest of the complex is positive, which may create spreading opportunities (see table below).

A positive reversal has been signaled in silver (analysis below).

COT Table

Corn

Last week discussed the extreme commercial selling on the current rally. This pushed commercial momentum to the short side of the market, and market movement pushed us into an overbought situation. This week, we got the sell signal. The commercial trader net position has since declined by more than 365k contracts in the last three weeks. This is a tremendous amount of selling going into the market.

Furthermore, the recent rally to $4.50 in the December contract was approximately a 25% run higher in three weeks. At a minimum, this market is due for a breather. Therefore, the new short position will be re-examined when the market trades nearer to $4. This is a tough balancing act between trade war demand destruction and a smaller projected corn crop due to late planting.

Oats

Not many traders follow the oat market because it’s so small. However, the low price of oats makes it a real value for new traders learning the game, as well as the occasional professional play. We sent a Daily COT Signals to short sell the oats last Monday, along with the corn, soybeans and soybean meal. Now, the oats have triggered a short sale on a weekly scale, as well.

Silver

The commercial traders were small sellers last week in the silver market after pushing their net position into the rare air of net long. Silver miners selling forward production historically dominate the silver market’s commercial trader net position. It makes sense that silver producers were sellers as the market reached its highest prices in eight weeks. We think this rally could have some legs as we’ve been calling for dollar weakness for a few weeks.

Open Positions

Energy: We took profits in crude oil and unleaded gasoline reached our profit target. The daily signals recognized the commercial buying on the markets’ declines. We issued daily buy signals in crude oil and unleaded for Friday’s trade.

Listen to Andy talk about seasonality and the COT Report at the recent TradersEXPO New York

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