The COT Report
Highlights of last week’s report * Last week’s FX Commitment of traders report showed no major (defined as >10k in net or gross positioning) speculative position adjustment. * Most FX adjustments reflected some USD buying or USD short squaring. * A large EUR overweight remains which may find it challenging to stay if momentum stops playing ball. * Speculators have reduced but remain fairly long (+83k contracts) MXN for carry and valuation reasons. Thursday's exemption of Mexico (and Canada and now Australia and possibly Japan...) likely increased MXN long position in the latter part of the week. Europe (and those “very bad people” to paraphrase the US President in particular) now appears to be the primary target of US trade tariffs, being kept away from the exemption game...
* Oil "large" net long position continues to deflate (slowly). Purpose of the Analysis: Financial futures are a “Zero Sum game”. Somebody’s gains is somebody else’s loss.The positioning and change in positioning of speculative players in the futures market can be used to assess the bullish or bearish positioning of this category of investors which is more price sensitive than hedgers. The COT report is published by the CBOT futures exchange every Friday at 3.30PM Eastern Time, based on closing positions held as per the preceding Tuesday’s close. We analyse this report to determine if speculative (either long or short) positioning is large or small vs. the historical norm and if this positioning is taken wrong or right footed which may provide some early signaling for the immediate price action. Changes above 10k in the net (difference between gross long and gross short) positioning are deemed to be meaningful. Numbers shown are in thousands of contracts long or short with all positions measured vs. the USD. For gold, given it is a small market and given the way it trades (occasionaly one player, most often a ‘commercial’ will sell 100 tons of paper gold at market in 2 seconds to drive the price of gold down and to cut speculators long position) we do the opposite and look at what the “commercials” are doing because the paper gold market is at the mercy of hedgers more than speculators. Some history about the COT report can be found here. http://www.cftc.gov/MarketReports/CommitmentsofTraders/AbouttheCOTReports/index.htm
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