Chart View: Class III Milk Futures may "Need More Cowbell" by Jeff Gilfillan
As discussed in last month’s Chart View, CME Group Class III Milk futures (or “cheese milk”) has been in the midst of an upside breakout since a four-and-a-half year range was left behind in August. Commitments of Traders shows managed money taking on the largest net long relative to the size of the group. Since August 13th the managed money sector has added nearly 3,000 long contracts. Current number of long managed money participants is 17. As of Nov 5th trade date, managed money was long 4,383 contracts which accounts for 20.1% of all longs.
The Producer sector of the Commitments of Traders held 22% of the longs and 42% of the shorts in Class III futures as of 11/05 trade date. There is a small trend of the net position becoming less short since August breakout. Since last November, the number of traders reported in the Producer sector of the COT report has increased by 25%, showing that liquidity in the CLOB may be improving as more producers utilize the competitive pricing mechanisms unavailable to them with dealer-owned structured products.
As indicated last month (see below), the front month contract is trading in an area of low value and any new substantive data could result in a quick 100-point move higher or lower without much friction. My guess would be the path of least resistance is still higher given the opportunity for the charts to test 2014 high value levels about 100 points higher. Cheese milk futures may need “More Cowbell” to get there.
From “Chart View: CME Group Class III Milk Futures” (October 2019):
"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…. 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"
Be patient as a spec and liquid as a hedger.
Trade Dairy Futures with Phillip Capital.
Phillip Capital is a CME Group clearing member located in the Chicago Board of Trade building. We offer electronic access to CME Dairy Futures markets through Globex for both speculators and hedgers. Our network of agricultural introducing brokers offers value-added services for clients requiring marketing assistance and block trade capabilities.
Exhibit A.
CME Group – CME Class III Milk Futures Continuation Weekly
Chart – Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Exhibit B.
CME Group – CME Class III Milk Futures Continuation Monthly
Chart: Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Exhibit C.
Source: CME Group – Commitment of Traders powered by QuikStrike
RISK DISCLAIMER: Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.