Follow the Smart Money / COT Analysis

I agree, we are living in exciting times )
NZD --> nope... from the cot report's perspective, I don't see anything new here. Have you?

All the best,
Dunstan

It isn't that noticeable if you are only using Legacy Net positions but if delve into gross positions and the amount of Open Interest it becomes more peculiar.
Legacy Report Gross positions:

I should also add that there is something similar but more extreme going on in the AUD at the moment as well.

As for the Traders In Financial Futures Report, lately Asset Managers have been reaching extremes or reversing their position trends in contracts like the JPY,AUD,NZD and CHF so I've been monitoring them closely. It just so happens that Asset Managers have about 3 Standard Deviations above average number of Shorts in both the AUD and NZD. They've also been removing their extreme short position in the JPY but have maintained their Shorts in the CHF at a high level(for now). Even more interesting is the all time Low for Asset Manager net positions in the AUD recorded in the most recent release in the futures and options combined report.
NZD TFF Net Positions:

Would you please elaborate a bit on what it is you are noticing regarding NZD?

Thank you

G

Think of it like this: Across every futures contract there is a limit to the number of contracts any entity classified as Non-Commercial/Speculator can hold at any given time enforced by either the exchange or the CFTC. Knowing this and the number of traders in each market, the upper limit for the total number of speculative longs + shorts can be calculated. For the purpose of this post the actual number doesn't matter. What does matter is that there IS a limit. As such, a historically significant number of contracts can be calculated. There are plenty of ways to do this but I simply use percentile ranges and Standard Deviations to calculate what a small,normal or large number of positions would be and when I should start paying attention more closely.

Now that that is out of the way, consider what would happen if most speculative positions are considerably weighted to either the long or short side of the market and pressed right up to this aforementioned barrier/ level. You would soon see a liquidation of positions as there would be no one left to buy/sell [except for commercials but only if speculators have enough buying power left(wouldn't be much at this point) to fulfill their hedging requirements]. As these speculators liquidate their positions and lock in profits, there would be a corresponding affect on future price depending on whether shorts or longs are being liquidated and at what rate.
It's the same concept as an extreme in net positions. Many people don't seem to realize that when these net extreme positions reverse ,they likely haven't added any NEW positions to cause the reversal but have instead reduced their exposure to one side of the market and thereby drive net positions to one side or the other( Net positions= Longs -Shorts ).

Currently Non-Commercial NZD Short positions are in or will be entering a similar position. Meanwhile, I suspect that Asset Managers and to a lesser extent Dealers in the Traders in Financial Futures report have already reached such a position.

Hi everyone,

The latest Commitments of Traders review is out.

Rough Rice
COT Change (52W) / C - 28%, LS – 21%, SS - 41% /
FTG Score / D 48.2, W -34.3, M -9.2 /
This bearish change signal coming from the cot report suggests lower prices coming. Could be the case, although high daily FTG score (positive) makes me cautious.

Oats
COT Extreme / C - 76, LS – 307 report COT extreme /
FTG Score / D 21.0, W 31.5, M 42.0 /
Beautiful bearish cot extreme near the top -> let us be prepared for much cheaper oats.

Heating Oil
COT Extreme / C - 14, LS – 182 report COT extreme /
FTG Score / D -13.3, W -23.3, M -24.5 /
Significant bullish cot extreme in the market, but in my opinion it could grow larger. In anyways, it seems that there may be a good buying opportunity soon.

All the best,
Dunstan

COT Charts
FOREX Trading
Futures Trading

Thank you for all your details!

G

TY Dunstan for dis one!

Any calls for gold or metals?! Would appreciate some analysis or calls on it!

Where what am I looking for and what are the tendencies? I'm just tryna watch and play all safe havens...

Hi everyone,

The latest Commitments of Traders review is out.

Gold
COT Change (52W) / C - 32%, LS – 36%, SS - 28% /
FTG Score / D 17.8, W 43.3, M 46.1 /
Both cot signal, the change and the extreme suggest that fallback in prices could happen. FTG scores are positive showing strength, but mainly on the weekly & monthly horizon: I can imagine some decline in the near term, but eventually see prices head north again.

Oats
COT Extreme / C, LS – 308 report COT extreme /
FTG Score / D 32.6, W 52.3, M 57.1 /
It seems as if the bearish cot extreme signal I’ve been talking about the last time has taken oats down and judging by the size of this extreme I’d be expecting further declines coming.

Brazilian Real
COT Extreme / C, LS – 225 report COT extreme /
FTG Score / D -20.8, W -34.6, M -25.9 /
The cot report is indicating a bullish extreme in Traders positions, but FTG scores indicate weakness in the market it may be advisable to wait for a better opportunity.

All the best,
Dunstan

COT Charts
FOREX Trading
Futures Trading

Hi everyone,

The latest Commitments of Traders review is out.

Swiss Franc
COT Change (52W) / C - 26%, LS – 33% /
FTG Score / D 22.7, W -28.5, M 2.8 /
Huge bearish cot change signal indicating weakness ahead, weekly FTG score supporting it.

Heating Oil
COT Extreme / C - 183, LS – 184 report COT extreme /
FTG Score / D -43.4, W 1.2, M -34.3 /
Significant bullish cot extreme, but caution is advised: 1) Large weakness measured in the market by FTG (daily score of -43.4) and 2) correlating energy markets further away in extremes.

Gold
COT Extreme / C, LS – 62 report COT extreme /
FTG Score / D 27.9, W 35.2, M 46.1 /
Bearish cot extreme. Not the largest, but at a level worth mentioning. The market is at an important resistance, if it breaks through, we could see the extreme widen further. FTG scores supporting the market, especially in the long timeframes.

All the best,
Dunstan

COT Charts
FOREX Trading
Futures Trading

I've recently gone on a coding binge to increase my VBA knowledge and as a result have made some changes to the COT Excel files that I released previously. I've fixed all the bugs that I could find but if something pops up or seems odd, please send me a message.

http://bit.ly/CFTCMM

All excel macros should now be compatible with Excel 2007. There are however limitations when compared to later releases (not fully tested)

It should no longer be necessary to update the files each week.

If there is a contract you want that isn't already present in the file and you know the Contract Code, then if you are on an empty sheet you can use the New_Contract macro to populate the sheet with all historical data for that contract.

Things I'm working on:

Auto-Chart generation for new contracts

Tuesday's close price charts for each contract

Edit 2:43 AM MST

made some slight adjustments to account for certain errors in all files

Edit 11:47 AM MST

Fixed conditional formatting issues for Legacy and Disaggregated reports

A few thoughts on the current state of the Gold Market
Over the past few weeks there have been increasing signs that a top may form in the Gold Markets. Taking a look at Commercial participants reveals a historically large amount of both shorts and longs [both in the 99th percentile].

While it can be argued that since Commercial Long interest is large enough that it isn't unreasonable for us to see continued bullish momentum, Commercial Shorts on the other hand have been rather aggressive in their position accumulation and as a result have shifted NET positions into the bottom 5% of all previous.
Now couple this with the fact that for each week from May-28th to July 2, 2019 there had been a larger than normal bearish shift in net positions followed by an ever so slight movement towards being more bullish in the most recent release for the 9th [more bullish by commercials = worse conditions for bullish speculators] and the other current extremes such as the Total Open Interest, Non-Commercial Spreading and Non-Commercial gross Longs, I believe it is far more likely that Commercials will step in and put a stop to the recent bullsih trend.
--------------------------------------------------------------------------------------------------------------------------------------------
As a side note I've made some changes to fix certain issues in the files from my previous post.
___________________________________________________________________________________________________________
Edit July 14, 2019 21:41 MST
The number of errors I'm finding in the files is astounding. Should be fixed now.

Small Update to Files:

Bug fixes and performance optimizations

Auto-Chart generator now added

Note:

Auto Charts won't work for Macs nor will selecting sheets from the "HUB" tab. [If there is any demand for it, I'm willing to code a workaround ].

If you come across any errors or something seems strange, please inform me.

Same link as previous

Edit 22-Jul-19 8:59 AM : slight change to macros for efficiency when selecting sheets

Hi everyone,

The latest Commitments of Traders review is out.

Platinum
COT Change (52W) / C - 18%, LS – 20% /
FTG Score / D -7.4, W -19.4, M -16.1 /
The larger than average change in Large Specs and Commercials positions, together with the negative reading from FTG suggest we could see some weakness from platinum in the coming days…

Bitcoin (CME)
COT Extreme / LS – All Time COT extreme /
FTG Score / D 25.0, W 60.3, M 24.5 /
We do not have such a history of cot data to be certain that we have cot signal that we can act upon, nevertheless it is interesting to see Large specs continuing to increase their net short positions, seeing Commercials net short and only Small specs taking the long side of the market. The all time extreme signal in LS would be generally considered a bullish signal, small spec net long a bearish FTG scores, especially the weekly show significant support for further rally in the market.

Canadian Dollar
COT Extreme / C - 72, LS – 68 report COT extreme /
FTG Score / D 37.5, W -26.2, M -25.7 /
In the past few weeks we have witnessed traders changing their positions towards a more bearish situation. The example from May 2017 to October the same year suggests that we could see this trend continuing for some time before the market dips back down. Daily FTG scores seem to back this, although the weekly and monthly already expect changes happening to the CAD.

All the best,
Dunstan

COT Charts
FOREX Trading
Futures Trading

Have you looked at corn lately? Bearish extreme as well in my opinion.

Yeap, absolutely!

Great for seeing the big picture, but terrible for trading IMHO. Trying to predict market direction always kill.

This isn't meant to be an attack on you so I apologize if it comes off that way but, what is your "big picture" and how much time have you spent getting familiar with the data and incorporating it into your order placement?

Next Question: What is trading to you? If it is the daily placement of orders that you are referring to then I can agree with you to some albeit small extent in regards to your first point, otherwise I disagree.

I understand that your last comment is a general trading recommendation, but if we assume it is true, then why bother trading at all if we are assured to lose? Even trend following strategies as I assume you are more inclined are in essence a prediction and hope that the trend will continue and not reverse shortly after entering. If you do use a trend following strategy over longer time frames then congratulations, the Commitments of Traders report can clue you in several weeks or possibly months before a trend change occurs. That is however, fully dependent on your ability to recognize these clues and form hypotheses about future trends in conjunction with other information if necessary. Even when you have formed your hypothesis and aligned yourself with one side of the market or the other, you can still gather information to help you decide both when to enter and whether or not you should change your view or stay out of the market. For example, let's say you have a very strong conviction with help from the COT report that the USDCAD is going to rise, but in the following weeks a news event drops the price, if you are bold enough you can use this event to fill more orders or you can remain on the sidelines till you are more assured that you are correct. If price continues to fall in the subsequent weeks you can analyze the COT report to see if the data points "make sense" before making any further decisions.

Nonetheless, the methods used to arrive to your hypothesis regardless of whether or not you used the COT report are yours to decide.

Example JPYUSD December 2018 - February 2019

I'm sure you remember the large drops in several currencies at the near beginning of the year.

Chart is USDJPY



Had you used the COT report it is possible that you could have been clued in to a possible long JPYUSD as early as October. On December 4th the Commitments of traders report showed that Non-Commercials accounted for nearly 60 % of all shorts (This is the 99th percentile for them in this contract) and had close to 2 Standard Deviations above average number of JPY Shorts. Had you monitored and acted upon this information even as late as December 18th you could have ridden price down 113 all the way down to 104 in relative comfort.

Then on January 8th the COT report showed that it was Commercials that stepped in to heavily sell the JPYUSD (2STD above average drop in commercial positions) and reverse price. If you were lucky like me, then you managed to catch the up move from 104 but if you acted on this information the moment you were able to, which would be January 14th you could have gained close to 400 as price moved from 108 to 112. One odd thing I should mention however is that during this reversal period Non-Commercials for most of it were going more net long the JPYUSD as a result of them taking profit on short positions.



As a side note I would greatly suggest you look over some of the posts in this thread (Building an Equity Millipede). You don't have to follow the method exactly as it is prescribed. In my view the concept of pyramiding preferably smaller orders over time and holding onto them is what's important.

Well as long as it works for you and other traders, it's a great tool Trading objectives are really really simple, as long as it's a technique that makes money for you, it's a great technique.

Gold (and US dollar) Futures Positioning: This chart should look familiar, I included it a few weeks ago. Since then a couple of things have both changed and stayed the same... First and most obvious is the upside breakout by the gold price. Honestly, I think this has a good chance of being the start of a prolonged/substantial move. But the other thing is that red line which shows normalized speculative futures positioning for gold minus that for the US dollar index. I chose to bring in the US dollar positioning aspect as well because positioning is still crowded to the long side for the US dollar and if the US dollar rolls over this will likely see a short squeeze there and importantly, a weaker US dollar will be a tailwind for gold. So while, by itself, gold futures positioning is starting to get somewhat stretched to the long side, it may not necessarily be a barrier to higher prices.

source: thomson reuters datastream

Attached Image (click to enlarge)

By what method did you normalize the positions?

Personally, I'm not a fan of joining futures contracts like this. Especially so for markets that already have their own contract like gold does. Reasons being that these contracts are already quoted in USD (https://www.cmegroup.com/trading/why-futures/welcome-to-comex-gold-futures.html) and in my opinion it would be folly to assume that analysis of the future prospects of the USD isn't taken into account by Reportable traders. Even then, the US dollar index is composed only of the EUR, JPY, CHF, SEK, GBP and CAD with the EUR accounting for nearly 57% of its weighting and the second largest being JPY at 13% (https://www.fxstreet.com/rates-charts/dollarindexspot). We already have a GOLDUSD contract, so why use an unequally distributed and lacking index of the USD unless you can't discern anything at all from the Gold Contract?

The fully blacked out circles in the following picture represent the 99th percentile while the 3/4 is the 95th, 1/2 the 90th of all prior data since 1995.

I will admit that the Historical high for gross Non-Commercial long positions is somewhere around 400k.

Commercial positions are just more extreme since last I posted

If we look at Non-Commercial Spreading ,which is when a Non-Commercial has both a long and a short open at the same time (Hedging exposure?) , you can see that it is rather high. With that taken into account along with the other facets of gold at the moment such as total OI, Gross and net Commercial positions etc , the prospects of a long GOLDUSD being a good decision in my opinion are slim. Even more so with such condemning news for the USD last week under these conditions but with a resurgence of USD strength this week that almost completely undoes its effects. I'm not saying we are going to crash right away, but if I was a long biased Non-Commercial and I knew that the market was bloated, I would gladly offload my short positions at the highs into a bunch of fresh and willing buyers before price drops and possibly re-accumulate those longs at a better price.