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Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    



1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.


The Sugar, Cotton, and Soybeans markets experienced the most BULLISH relative positioning change in the CRB week-over-week

  • Soybeans: Despite the bullish change week-over-week, the soybeans market is still -2.0 standard deviations shorter than its Trailing 12-month average and aggregate open interest is +3.1 standard deviations above its trailing 12-month average

The Orange Juice, Heating Oil, and Cocoa markets experienced the most BEARISH relative positioning change in the CRB week-over-week


Commodities Weekly Sentiment Tracker - Chart1 CFTC Sentiment


2.       Spot – Second Month Basis Differential: Measures the market expectation for forward looking prices in the near-term.

  • The Corn, Natural Gas, and Wheat markets are positioned for HIGHER PRICES near-term
  • The Lean Hogs, Cotton, and RBOB Gasoline markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month basis


3.       Spot – 1 Year Basis Differential: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The Corn, Wheat, and Sugar markets are positioned for HIGHER PRICES in 1-year  
  • The Lean Hogs, Live Cattle, and Cocoa markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr basis


4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart4 open interest         


Ben Ryan





JCP - ceo announcement more bearish than bullish

Takeaway: JCP needed a 'rock star' CEO. Ellison is not that (at least in perception). We think this gives more ammo to the bear debate.

Today’s announcement from JCP does not make us more or less inclined to own the stock here, but as much as we walked away more positive from the analyst meeting last week, this announcement probably gives more for the bears to chew on than the bulls. Here’s why…

  1. At last week’s analyst meeting, Ullman clearly brought greater intensity towards the subject of finding a replacement CEO.  So the timing of the announcement is not a surprise. Though there was at least a fleeting chance that JCP hired a high-profile ‘rock star’ CEO like Glen Murphy (remember how close JCP was to hiring Mindy Grossman from QVC/Nike). Marvin Ellison might be good, but he’s not a rock star (at least in perception).
  2. Ellison has been serving as EVP of Stores at Home Depot where he oversaw a $78bn revenue stream over 2256 stores and 236mm square foot.  At JCP, he’ll be overseeing $12bn in sales, 1112 stores, and 111mm square feet.  Net/net coming to JCP is hardly an insurmountable task given his background. That’s a positive.
  3. We actually like the idea of not bringing a dinosaur department store executive to serve as CEO. But on the flip side, Home Improvement is about as far away from selling Clothes and Shoes as you can get. Inventory is far easier to manage at a store like Home Depot, particularly given that the merchandise does not go out of style every 90 days (to the point of obsolescence). Home Depot is the 900lb gorilla in the retailer/vendor relationship in virtually every category. While at JCP, it holds the cards with only a handful of vendor relationships, and those are with the brands that probably don’t matter. We’re not saying that Ellison can’t make this jump from one category to another, but rather that his success at HD does not guarantee his success at JCP.  
  4. The fact that he is overlapping with Ullman in his new role for nine months is a positive. Transitional blowups are not likely. He’ll be there to learn how to execute on the plan that Ullman set out at the analyst meeting next week. We like that a lot. But if there is one thing that’s clear with the 21% sell-off since the analyst meeting, it’s that the market absolutely does not believe in the plan. So, a new CEO brought in to carry on what is viewed to be an unattainable plan can hardly be viewed as a positive.


In the end, after being extremely vocal about getting Ullman out of his seat early on, we’ve actually grown to respect the fact that he repaired a devastated balance sheet, and set the company on a trajectory of earning money by 2017 – something we think is absolutely achievable (in fact, we think break-even by 2016 is achievable). Still tough to find valuation support in that regard. But Ullman has probably done a better job than most others could. If Ullman/Ellison hits that plan, the stock is likely headed higher. We’ll need to hear more about the transition plan before we have any real conviction on the name. For now, we’re on the sidelines.  

Video | McCullough: Expecting A More Dovish Fed

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Monday Mashup: DFRG, EAT and More

Monday Mashup: DFRG, EAT and More - 1


Notable Callouts

  • We removed DFRG and EAT from our Investment Ideas list as shorts in a note last week.  CLICK HERE to access the note.


Recent Notes

10/06/14 Monday Mashup: PBPB, MCD and More

10/09/14 DFRG, EAT: Covering Our Shorts Given Strong Knapp Sales

10/10/14 Estimates Are Heading Higher


Events This Week

Tuesday, October 14th

  • DFRG earnings call 8:30am EST
  • DPZ earnings call 10:00am EST

Thursday, October 16th

  • SAFM Investor Day 9:00am EST


Chart of the Day

Black Box reported the strongest monthly same-store sales and traffic data in September since 1Q12.

Monday Mashup: DFRG, EAT and More - 2


Recent News Flow

Monday, October 6th

  • BWLD downgraded to neutral from outperform at Wedbush with a $135 PT.
  • BKW upgraded to overweight at Morgan Stanley with a $38 PT.
  • MCD downgraded to equal-weight at Morgan Stanley with a $96 PT.
  • JMBA entered into a master franchise development agreement with Quan Hung Gourmet company to develop 35 stores in Taiwan over the next ten years, effectively securing its 11th international market.
  • BAGL JAB Holding Company commenced its tender offer for all outstanding shares of Einstein Noah Restaurant Group at a price of $20.25 per share.

Tuesday, October 7th

  • YUM WSJ's Ahead of the Tape column was negative on YUM, citing a same-store sales slump in China due to the recent supply issuer and subsequent publicity surrounding the event.
  • GMCR was initiated buy at Goldman Sachs with a $166 PT. 

Wednesday, October 8th

  • CMG announced a partnership with Slow Food USA to create or support ~100 school gardens in 10 metropolitan areas across the country.
  • BAGL announced the launch of two new gourmet chicken sandwiches (Bavarian Chicken Sandwich, Napa Valley Chicken Sandwich) now available at Einstein Bros Bagels and Noah's New York Bagels nationwide.

 Thursday, October 7th

  • TXRH Chairman and CEO Kent Taylor was named Operator of the Year during the MUFSO Industry Awards Gala in Dallas.
  • TAST completed its previously announced acquisition of 30 Burger King restaurants in North Carolina for ~$20 million in cash.
  • LOCO celebrated the grand opening of its newest restaurant located at 8428 Elk Grove Florin Road at Calvine Road in Elk Grove, CA.  This is the 16th El Pollo Loco in the Sacramento area.

Friday, October 8th

  • DRI Shareholders elected all 12 Starboard-nominated directors to Darden's board.
  • BOBE elected Mary Kay Haben as Non-Executive Chair, while Steven Davis will remain CEO and a director.  Mary Kay Haben joined the Bob Evans board in 2012 and most recently served as President, North America for the Wm. Wrigley Jr. Company from 2007-2011.  She currently sits on the board of The Hershey Company and Equity Residential.


Sector Performance

The XLY (-3.6%) underperformed the SPX (-3.1%) last week.  Both quick-service and casual dining stocks, in aggregate, outperformed the SPX.


Monday Mashup: DFRG, EAT and More - 3

Monday Mashup: DFRG, EAT and More - 4


XLY Quantitative Setup

From a quantitative setup, the sector remains bearish on an intermediate-term TREND duration.

Monday Mashup: DFRG, EAT and More - 5


Casual Dining Restaurants

Monday Mashup: DFRG, EAT and More - 6

Monday Mashup: DFRG, EAT and More - 7


Quick Service Restaurants

Monday Mashup: DFRG, EAT and More - 8

Monday Mashup: DFRG, EAT and More - 9


Call with questions.


Howard Penney

Managing Director


Fred Masotta


European Banking Monitor: Financials Swaps Continue Widening

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email 




European Financial CDS - Swaps were notably wider across Spanish Banks and Russia's megabank, Sberbank. We are intrigued with Russia as falling oil prices coupled with the effects of ongoing Western sanctions appear to having a significant weakening effect on Russia's economy. The average CDS profile across the EU bank complex is moving in the opposite direction of Euribor-OIS, our preferred gauge of systemic risk for the European banking system. In other words, while the systemic risk measure appears to be declining, the average individual risk measure across European banks is rising. Stay tuned.


European Banking Monitor: Financials Swaps Continue Widening - chart1 euro CDS


Sovereign CDS – Sovereign swaps were mixed with Spain widening the most at +6 bps to 79 bps. On balance, however, the average change for the week was just +1 bp. 


European Banking Monitor: Financials Swaps Continue Widening - chart2 sovereign CDS


European Banking Monitor: Financials Swaps Continue Widening - chart3 sovereign CDS


European Banking Monitor: Financials Swaps Continue Widening - chart4 sovereign CDS


Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 1 bps to 10 bps.


European Banking Monitor: Financials Swaps Continue Widening - chart5 Euribor OIS Spread



Matthew Hedrick



Ben Ryan







Keith's Macro Notebook 10/13: Vix | Oil | Gold

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