CHART VIEW: CME Group Class III Milk Futures by Jeff Gilfillan
CME Class III Milk front month futures broke out of a four-and-a-half-year range in August based on a monthly close (17.62) over previous high (17.44) from a failed breakout in January 2017. This was the 55th month of the recent trend, which is a data point in a Fibonacci Sequence (it’s easier to find these sequences than to explain their usefulness).
Both the weekly and monthly continuation charts have formed a somewhat normal distribution historically with the bulk of the value between 13.40 and 17.40 on a monthly and 15.15 and 16.90 on a weekly (market is trading 18.59 as of this writing). The market has deviated from the monthly range only seven times on a sustained basis since 1999 (as far as my charts go). The contract was launched in 1993. Each deviation lasted only about a year based on my eyeball analysis.
The weekly charts are trading at the 50% price point going back ten years and just under the 38.2% level on a monthly going back 15+ years. There still is some value up till about 19.20-19.30 before a potential squeeze or transitional zones test both sides. The areas of low value are between 19.20 and 20.75 on a weekly and 19.40 and 21.40 on a monthly.
Open interest has overall gone down through 2019 as prices have rallied. The only sector in the COT report that has shown a trend in net position growth is managed money going from net short to net long and adding. The open interest has shown a slight uptick since bottoming in August mostly due to trend following managed money. Considering “managed money” is only about 10% of OI, the market would likely need a strong pullback for the “reportables” and “other reportables” to consider building sizeable new positions and reversing the trend of declining OI.
Look for potential pullbacks finding support at 16.60-16.90 and upside moves getting squeezed around 20.00-20.50 or transitional moves targeting 21.75 to 22.25
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CME Group – CME Class III Milk Futures Continuation Weekly
Chart – Track N’Trade
CME Group – CME Class III Milk Futures Continuation Monthly
Chart: Track N’Trade
Source: CME Group – Commitment of Traders powered by QuikStrike