Crude Oil: Who is buying and selling, and what does it all mean?

Crude Oil: Who is buying and selling, and what does it all mean?

December 2010 crude opened last week at 82.01 and closed the week at 81.43. This contract month on a daily chart shows a high hit at 93.55 on May 3, and a low hit that same month at 73.17 on May 26. That is a $20,380 move based on one contract. Not bad if you were on the right side of that trade. So what is ahead for crude? The "big news" everyone is waiting for is exactly what Ben’s QE2 will be. If higher than expectations, the U.S. dollar drop will send crude higher. The daily chart below does show on ADX that the trend has weakened. The weekly does show a longer term uptrend is in tack. However, in strong trending markets we always see periodic profit taking. When the "huge" money traders do this, the market will respond accordingly.

Proceed to Page 2 for the latest COT data...

Looking at the weekly charts, the COT Disaggregated report (top) is the one you want to view. The old COT Legacy report is there just to show you why you need to view the newer report. As you can see, the producers (true commercials) went from 143,888 contracts net short to 160,415 contracts net short week to week. What is interesting is our friends the swap dealers (the biggest money of the bunch) went from 172,980 contracts net long in the first week of September to last week coming in at 25,457 contracts net long. So the group that is offsetting the increased shorts of the producers is managed money. They went from 150,681 contracts net long to 166,058 contracts net long week to week. If you are not long this market right now you will A). Want to see where Ben’s QE2 comes to see where the dollar is headed, and B). Watch to see when the swap dealers (if you want to know the five biggest dealers worldwide, email me) start adding to their net longs. For the week, remember to “Be Well, Trade Well and follow the Trend”. Let’s not forget about the mid-term elections. This could have an effect on all of the markets heading into 2011.

Commercial Net Tracker instructions
This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A. If the current value is at a 12-month low, the cell will display a red/burgundy background. B. If the current value is at a 12-month high, the cell will display a green background. C. If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D. If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

Proceed to Page 3 for this week's detailed fundementals charts...