Futures Nervous About Funds

CHICAGO - Jan 9/07 - SNS -- International agriculture commodity markets are relatively quiet, though there remains a good level of activity as more buyers return to their desks after a lengthy holiday period.

Yesterday's Commitment of Traders report with options showed corn futures markets in a classic bullish setup with non-commercial traders net long 281,825 contracts and non-reportable traders net short 102,664. This leaves the market vulnerable to increased fund buying and increased small trader short covering if resistance levels are violated. argue Chicago Board of Trade (CBOT) analysts.

"If we take out commodity index fund traders, the new supplemental data shows that traditional trend following funds were net long near 247,000 contracts, not the 281,000 posted. From the fund and commercial positions, index fund traders were net long near 421,579 contracts. Traders remain concerned that two large index funds could reallocate positioning in commodities and reduce this position."

For soybeans, the report showed the market in a classic bullish setup with non-commercial traders net long (and buying more) and non-reportable traders net short. This leaves the market vulnerable to increased fund buying and increased small trader short covering if resistance levels are violated.

CBOT analysts said taking out commodity index fund traders, the new supplemental data shows that traditional trend following funds were net long nearly 47,000 contracts, not the 59,579 net long posted. From the fund and commercial positions, index fund traders were net long 129,727 soybean contracts and 67,869 soyoil contracts.

For wheat, the Commitment of Traders report showed the market in a bullish setup but the selling trend of the funds is a negative short term force. Non-commercial traders are still net long near 20,000 contracts after dumping near 8,500 for the week ending January 3rd.

The new supplemental data shows that traditional trend following funds were net short 1,094 contracts, not the 19,755 net long posted. From the fund and commercial positions, index fund traders were net long 201,104 contracts. The net short position and selling trend of traditional trend following funds is a bearish factor, CBOT analysts said.

Subscribers can read the full text of the article by Clicking here