COT: The precious data ignored

Natural gas analysing this messy chart

Attached Image (click to enlarge)

The above chart looks a total mess at first look, because its a 12 years historical chart compressed.

But every chart, every datas got patterns we can analyse in order to find opportunity of investment.

Its a weekly chart, so we have plenty of time to analyse it and its to make long term cash.

I'll just give a quick tip about it. Whenever you look at it, it looks a mess, impossible to read. But lets just filter the "big" changes of positionning.
Most of the time, its glued on top, near 100%. Just wait until producers or money managers make a move, clear positions, brining down the percentages.
You can see anytime traders are positionned towards 100% then going down towards or below (better) 60% then a potential reversal is happening for natural gas
A big change of positions obviously lead to a change of trend, or a correction.

Lately ? the longs money managers are very active, opening and clearing positions at the bottom
The next few weeks will tell if a bottom is in place

Daily sentiment

JPY on the rise ?

Attached Image

This chart above represents all positions from large traders moving the market.

I have debated about it a lot of time, so it'll be shorter this time.
Just have a look at the dealers. They have increased drastically their long positions.
Did you know smart money was buying 2 weeks ago ? Dealers went from 23% to 33% last week, and to 39% longs this week. Looks like the CoronaVirus is just an excuse to risk off. But this Virus started to appear 3 weeks ago, up to you to think what you want
For the open short from the money managers, they have been increasing their shorts over the past weeks as well. More upside on the process ? (aka usdjpy short)


Dealer's spread just confirm what i said above, dealers are buying up JPY as spread is increasing, going from 8% to 23% to 30%...fast increase


Asset managers are confirming the potential JPY rise as well. Going from positive to negative -13% within 2 weeks. Going too short too quick is not a good idea.


This chart above shows a mix of the smart money positions. Charts says it all. Overall longs are weak, shorts strong. Sign it could reverse, long going strong, shorts getting dumped.


Technically ? daily has been overextented over 70 with a bearish divergence. Classic setup

VIX ready to rip shorts off?

Lets have a look at 4 charts to analyse the VIX index


This chart above shows dealers accumulate longs, before seeing a break up in prices. Whenever the spread is high, above 0, VIX is getting ready to rise. The opposite works.
Its been a while spread is above 0 and more or less high, VIX could spike way higher in the coming weeks.


Asset managers accumulate a lot once its a top, and barely do anything at bottom. It seems we are at a bottom right now. Prices are not moving a lot, asset managers don't even accumulate longs, and they are mostly wrong. They'll accumulate once we have a top. Prices are ready to go higher here


These 2 charts show the long/short from the big traders. Easy to read, whenever longs have a high number, they want to make the price go high.
For the shorts, its the opposite. Both are in sync, and in here as well prices could go higher (temporary or not, no one knows)


Technically ? We had a bullish divergence. It went below 30 as well.

Everything is showing market participants want higher prices in VIX, we could be in for a correction in equities

Natural gas bottom ?

Lets have a quick look at the natural gas for the coming week, and most likely for the coming weeks.


This chart above represents the spread of the long/shorts producers. Something easy we can notice, as price goes down, spread is getting reduced, from -2,6% to -1% right now. It means one thing, producers are NOT following this down move. Ideally, users would buy now, increasing their net longs, its the case, but very weak. It went from 12,98%/12,93%/12,7% to 13,07%. But Watch out longs because spread hasn't turned positive yet.



This chart above represents spread from the long/short money managers. They are heading for record shorts. Watch out shorts.


This chart shows the spread is being increased, showing the buying pressure existing. Shorts won't last long. They may get a kick this week.


This matrix doesn't need explanation. A part of it shows extreme positions, while the other show the lack of conviction in the move down.


Technically on the Daily chart, a clear bullish divergence


Technically on the H4 chart, a clear bullish divergence as well.

Daily sentiment


As expect, equities and vix are cooling off.

Its the turn of gold to be a bit overcrowded. Too soon to tell though

Warning signs

Attached Image (click to enlarge)

EURO bounces expect within the coming weeks ?



For the time being, shoring the rallies is the way to go. But from this chart above...its weakening.
I'll be closely monitoring that chart over the next couple of weeks. See if smart money accumulate here.

Sugar top ?



From these 2 charts above, we can see traders with open longs are very bullish, traders with open shorts are decreasing their shorts at fast pace.

Usually it signs a top, a retracement, a correction.

Cocoa rally to end soon ?



Just by looking at the short traders, we can see whenever they increase their shorts its time to long, when they clear them its time to short cocoa

They are clearing most of their shorts, i guess new highs in cocoa price will make shorts go lighter. That's when it'll be time to short it.

Daily market sentiment


source : http://trade-futures.com/

Natural gas, gold, australian dollar, canadian dollar, euro, vix are inside danger zone (below 20/above 80)

The more extreme, the worst

Gold stops ?

Attached Image

No surprises if Gold stops here for a moment

Big moves ahead ?

From a COT analysis, there are a few things to notice.

During this current week (and past weeks), market participants have been taking/closing positions bigger than usual. Big move is coming for the next week(s) ?

I'm talking about the USD, CHF, JPY, Crude oil, Gas, Gold (and Sugar on a side note).

It doesn't mean it will have to move quick and fast this week. We could have interesting times ahead though, volatility will be back ?
Its best to stay on its guard.

Natural gas follow through

Here is a follow though of my analysis from last week.


Last week i was mentionning to watch out for the producers as they are still in the negative side of the market. They are at -0,66% now.
When you look at the chart above, long producers are starting to buy. Time to accumulate longs?
Regarding the money managers, going extreme again, they are going shorts all in. But longs are going in as well. Will we get a change of trend?
We are going extreme on the natural gas. The safest way to take profit out of it is buying natural gas ETF. I'll start buying next week as it goes down.


Check out the swap dealers spread? Going stronger as we go down.
These guys are good at finding bottom, they increase all they can at the end of a move.
They have the biggest position for the past 3 years. Something to consider if you keep shorting...

What market participants can tell us ?

If we have a deep look at the details of the market participants positionning (their open longs & shorts), we can try to understand what are their views on the market

Just a tip. Have a look at the open longs or shorts from producers, swap dealers, money managers for the commodities.

Crude oil ? check the short side from the money managers
Nat gas ? check the short side from the money managers
Wheat ? check the short side from the money managers, long side from the producers, short side from the swap dealers
Soybean ? check the short side from the money managers
Coffee ? check the short side from the money managers
Cocoa ? check the short side from the money managers
Sugar ? check the short side from the swap dealers
Palladium ? check the short side from the swap dealers

And so on...

How to trade Palladium ?

Attached Image (click to enlarge)

People are asking me how to trade Palladium with its massive rise. Well its not hard, nor easy.

Here is a tip from the swap dealers open longs. Looks like the swap dealers "own" palladium, they know it well.

A picture worth a thousand words, everything you need to know is on the chart

Lately what is happening ? Swap dealers are buying again Palladium as it falls.

Lean hogs fat accumulation in the process ?

Lets have a look at the lean hogs commodities. Even though a few will trade it, it may be worth an extraordinary opportunity.
Below i'll have a look at what the producers are doing, letting aside swap dealers and money managers for now.


Lets have a look at the open longs from the producers. Very simple view, whenever they add longs, they accumulate and prices rise. As prices rise, they clear their longs. Easy.
But lately as prices went up and down, they stayed very loaded with longs. Are they loading more as we go down because they think it'll rise like crazy? Time will tell



Regarding the open shorts from producers, its the same story, they add more on the way up, decrease as we go down.
But lately shorts haven't decreased much like it did before.

Before going in with lean hogs, i'll check the amount of longs from producers (hoping it will stay the same or increase) and wait for an unload from the short producers.
Just to mention, lean hogs have been in range 50/90 dollars (+-5 dollars) for years.

Excellent
If you have time, can you cover all the popular CME and CBOE products with such comments?
Thank you.