Is The Downside Getting Overdone?

Posted by Nogger - a legend in his own mind at 17:35 | Categorized as

07/01/13 -- As the big fund sell-off continued across the festive period, CFTC data released Friday showed than funds cut their net long in corn for a fourth week in a row. They now hold their smallest corn long since June, their lowest soybean long since mid-February and their largest wheat short since the middle of May.

For what it's worth at the beginning of June corn was below USD6/bu, soybeans were around USD12.50/bu in mid-Feb and wheat was bubbling under USD6/bu mid-May. All three took off like a rocket shortly after.

The CFTC numbers do not include trades since the New Year break. According to Agrimoney funds have sold an estimated additional 9,000 Chicago wheat lots, 16,000 soybean lots and 23,000 corn contracts since then.

Whilst our mates the funds are regularly guilty of over-egging the pudding to the upside, there is certainly reason to suggest that they do likewise on the downside too. Is this one such occasion? It may be prudent to wait for a clear sign that they market has turned before diving in and filling your boots IMHO.