The COT Report
Highlights of last week’s report -Another grind down in net EURUSD long by 5.6k (to +109.7k) leaves speculators too short the dollar, in our view, especially when coupled to a fast deteriorating European political situation (Italian populist government is now compounded by a no confidence vote in Spain and the risks of a trade war against German exporting champions) and a weakening in European PMI's. -Still no interest on JPY... -Liquidation in the MXN net long was significant (-21.2k to a remaining net long of +31.5k) this past week with EM liquidation continuing unabated (on Nafta risks, Venezuela, Turkey) -The oil price break down (to 67.5 from 72.8 on WTI) from Thursday and Friday must have taken the very large net long speculative long position by surprise...exposing the risk of a further liquidation. -US 10y fixed income net shorts held at 10 year highs and were likely also taken aback.
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 Important Disclaimer © Copyright by BentinPartner llc. This blog is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security or underlying asset referenced herein or investment advice. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon and particular needs. This blog does not include information tailored to any particular investor. It has been prepared without any regard to the specific investment objectives, financial situation or particular needs of any person who receives this report. Accordingly, the opinions discussed in this blog may not be suitable for all investors. You should not consider any of the content in this report as legal, tax or financial advice. The data and analysis contained herein are provided "as is" and without warranty of any kind. BentinPartner llc, its employees, or any third party shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by BentinPartner llc. The content and views expressed in this report represents the opinions of Marc Bentin and should not be construed as guarantee of performance with respect to any referenced sector. We remind you that past performance is not necessarily indicative of future results. Although BentinPartner llc believes the information and content included in this report have been obtained from sources considered reliable, no representation or warranty, express or implied, is provided in relation to the accuracy, completeness or reliability of such information. This blog is also not intended to be a complete statement or summary of the industries, markets or developments referred to in the blog. Tags for COT: COT, FX trading