Best Thread Follow the Smart Money / COT Analysis

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Copper
COT Change (52W) / C – 22%, LS - 28% /
We’ve got our two major cot analysis tools pointing the opposite way this week: the change in Trader’s positions was large, suggesting prices should decline, but the last great cot extreme in the market that started the recent rally is still in place. Of course “worry we should not” (Yoda), cause their timing is different… even if we experience a bit of a decline now (which judging by the effectiveness of cot change signals in copper, I expect), the wider picture seems to support the continuation of the rally.

Sugar
COT Change (52W) / C – 22%, LS - 28% /
COT Index (3yr lookback) / C – 63%, LS - 43%, SS – 29% /
It’s wonderful to see, how the recent bearish cot extreme ended signaled the recent top and how Traders have moved away from their extremes as prices decline. The change suggests prices could have a “bit of a break” in the decline, but since we are not that close to a bullish cot extreme (would be the case if C reached >20.000 contracts net long / LS reached <10.000 contracts net short), I expected prices to continue the decline.

Cocoa
COT Extreme / LS – All Time COT extreme /
The very large stress that has built up in Cocoa market indicates that the fuel in this recent rally is running out…

I wish all of you good luck to this week’s trading,
All the best,
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

On a different forum, I’ve received a request to give my view on the EUR and JPY markets. Not to leave you out from it, I’ll post it here as well! (hope you don’t mind )

EUR/USD
On the attached chart I’ve indicated with bold circles on Commercials graph those points in time, when we had an All Time/close to All Time COT extreme. The horizontal green and red lines indicate the recent All Time cot extremes (again for Commercials, but obviously Large Speculators are there too).

I think, but the COT Index supports my belief (C – 33%, LS – 73%), that we are getting closer to a bearish cot extreme. We are not there yet, the last major cot extreme (bullish) that we had back in mid-2012 is still in place.

If Commercials could go below the last major bearish cot extreme (indicated with a red horizontal line) / build up >120.000 contracts net short or even more, we would be at a level of extreme that could finish the rally.

Since the last major cot extreme, I’ve marked also some relative extremes that show how they affected prices. The last one as you can see is a bullish on, that could stay in affect for a few more weeks, before another bearish once happens. These relative cot extremes are much harder to find, thus I don’t even recommend to use them with such assurance as a All Time or close to All Time cot extreme.

JPY/USD
I think it is more difficult to make up our mind here, because of the commercial capitulation that we had roughly a year ago… As you can see, prices did not react to the bullish cot extreme, instead they heavily fell. Currently we have a greater extreme, but still not an All Time. If you look at the 15 year long chart I’ve attached, you can see that the much wider picture easily allows further decline for prices… On the other hand, it wouldn’t be completely foolish to go long either, since the cot index shows a great extreme (C – 98%!, LS – 2%!, SS – 18%) and we could find great support levels not far, that would give our trade a great Risk/Reward ratio.

All the best,
Dunstan

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Coffee
COT Change (52W) / C – 27%, LS - 23% /
The large cot extreme that we had in early November signaled well the bottom in coffee… now we have this large change in Trader’s positions, which I believe will push prices down a bit.

Copper
COT Change (52W) / C – 23%, LS - 31% /
Again another large change after last week… if this dynamic selling of commercials continues in the next few weeks, we will reach a bearish cot extreme pretty fast. Of course ‘IF’ as I said…

Cocoa
COT Extreme / LS – All Time COT extreme /
When will the bubble burst? That’s the big question here… let’s keep our eyes on this market, there’s a great potential on the bearish side now.

I wish all of you MERRY CHRISTMAS!!!
All the best,
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Palladium
COT Change (52W) / C – 28%, LS - 30% /
The last major cot extreme (a couple of reports ago) is in effect in my opinion. The change we’ve got suggests that prices may rally a bit.

Cocoa
COT Extreme / C & LS – All Time COT extreme /
The extreme is still present as slowly growing even larger. Prices are unable to further rally, thus it may easily be that we’ve reached a top.

Japanese Yen
COT Extreme / C – 339 report, LS – 338 report COT extreme /
The extreme is Huge, but as you can see, not All Time yet… I think there’s still space left for the decline.

HAPPY NEW YEAR TO ALL OF YOU!!!
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Heating Oil
COT Change (52W) / C – 13%, LS – 12%, SS – 12% /
It’s a difficult situation, because the last major cot extreme is still in place (bullish cot signal that has been able to push prices higher), the change is a bearish signal that may be late a bit (prices have been falling heavily the last couple of days)… Small Speculators may be helpful this time: if you look at them, they are relatively extreme now = very bullish. The last time they were at such levels, prices reached a top.

Live Cattle
COT Extreme / C – 170 report, LS – 159 report COT extreme /
We’ve got a more clearer picture here: COT extreme is very large, but if you look at a longer (let’s say 15 year) chart, you will find even greater extremes… this means that the rally can go on, but we should be ready for a change in this trend.

British Pound
COT Index / C – 12%, LS – 77%, SS – 94% (!) /
We have reached a bearish cot extreme level in GBP, especially Small Speculators. If you look at the chart, you’ll find how well GBP reacts to cot signals.

All the best,
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Palladium
COT Change (52W) / C – 21%, LS – 21% /
The 21% change in large Trader’s positions is a bearish cot signal that says prices will decline and looking at the chart we might have a sense that it is quite possible. Without a clear cot extreme signal, I would say that it’s the most that we can say now…

Live Cattle
COT Extreme / C – All Time, LS – 167 report COT extreme /
Commercials have reached their all time extreme level and Large Speculators aren’t that far from it either… keep watching this interesting market that I believe holds great shorting opportunities.

Copper
COT Extreme / C – 45 report, LS – 46 report COT extreme /
The extreme in copper is becoming pretty large, we may carefully start looking for shorting opportunities…

All the best,
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Natural Gas
COT Change (52W) / C – 32%, LS – 37% /
COT Index / C – 4%, LS – 93%, SS – 93% /
Both of our main cot signals are pointing in the same direction. The huge change in Large Speculators and Commercials positions (possibly the largest in the last year) is suggesting prices will fall in the near term, but also the extreme we have now paints a pretty bearish picture.

Soybean Oil
COT Change (52W) / C – 20%, LS – 28% /
COT Index / C – 97%, LS – 1%, SS – 18% /
Similarly to Natural Gas, we’ve got the cot change and cot extreme signals pointing in the same direction (up). The last two extremes, when Traders were holding roughly the same amount of contracts, you can see that the rallies that followed were short living… question is, would we see this happen again or is the trend going to finally change.

Live Cattle
COT Extreme / C – All Time, LS – 171 report COT extreme /
We’ve reached an All Time cot extreme in Commercials, and Large Specs are almost there… Stress level is huge in this market today. To be honest, I don’t see that these extremes were always helpful signals here. If we look at the extreme in 2010, you can see that it did not have a trend changing, longer term effect. The extreme is large – no question to that – but all time extremes can be present in a market for many weeks before we see a reaction from prices.

All the best,
Dunstan

the original COT report

COT charts

Commitments of Traders basics

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

S&P-500
COT Change (52W) / C – 33%, LS – 36% /
COT Index / C – 26%, LS – 65%, SS – 83% /
Although we’ve got a large change in Trader’s positions that is a bullish signal, I believe that the large cot extreme that has been present in indexes for some time now is the stronger signal we should be aware of. The big question of course: have we really reached maximum stress level? If we look at the past one year, you can see that the down legs were always short living…

Natural Gas
COT Extreme / C – 342 report, LS – 341 report COT extreme /
Analyzing the market on a shorter time frame, we may come to conclusion that we’ve reached a bearish cot extreme. I believe it is always very important to scale out even more and see the much wider picture. I think in the past 4-5 years, we were closer to a bullish cot extreme and the rally we are experiencing now may continue even more. An unquestionable bearish cot extreme would be the case if LS were above 50-70.000 contracts net long.

Canadian Dollar
COT Extreme / C, SS – All Time COT extreme /
The situation in CAD looks pretty easy now, since all major participants of the market are at extreme levels. Looking at the charts, I hope it is clear by now for all of you that it is a bullish picture. It is important to keep in mind though, that cot all time extremes may be present in a market for a few weeks, before prices actually react -> I’m not saying that we’re at the bottom now, just warning you that because of the huge stress in the market, we should see a change in the trend eventually.

All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Japanese Yen
COT Change (52W) / C – 35%, LS – 33%, SS – 16% /
Changes in Trader’s positions above 30% in currencies are definitely huge changes that shouldn’t be neglected. This may affect prices in the near term, pushing them lower. Let’s always look at the longer term picture, because it may show us a different view of the market. You may see that not long ago, we have reached close to all time extreme levels that seem to match with the latest bottom. If this trend in traders positions continue (Commercials decrease their net long contracts / LS the opposite), then we may be in for a rally.

Natural Gas
COT Extreme / C – 345 report, LS – 342 report COT extreme /
The situation in Natural Gas has not changed from last week, the extreme widened a bit more. We still need to decide how to view the extreme. On a shorter time frame, we are at a bearish extreme, but if we look longer, we can see that we’ve still got room left for all Trader’s, they’ve not reached their all time extreme levels.

Mexican Peso
COT Extreme / C – 112, LS – 197 report COT extreme /
We’ve reached an extreme that in the past successfully affected prices, the one we have of course is a bullish cot extreme: Commercials have roughly 45.000 contracts net long, Large Speculators have about the same amount net short, while Small Speculators are close to 0. If we analyze the historical charts, you can find how well these levels were supports for price.

All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Coffee
COT Change (52W) / C – 37%, LS – 39%, SS – 23% /
The dynamic rally we had in the last two weeks generated heavy selling from Commercials, while Large Speculators are once again long. This large change in my opinion shouldn’t be too emphasized, since not long ago we have had a great extreme in the market. The picture to me looks, as if the trend has finally changed and I believe we will be witnessing much higher prices in the next few months.

Cocoa
COT Extreme / LS – All Time COT extreme /
As prices go higher and higher, we can see how bigger the cot extreme becomes. Of course it’s hard to tell when will we reach the top, but it definitely seems to be a market with great potential to the downside.

Live Cattle
COT Extreme / C , LS – All Time COT extreme /
I could simply repeat myself here --> The extreme is so large, that eventually we will find ourselves in a bear market.

COT Analysis – Timing issue
People might say, reading my comments about Cocoa and Live Cattle that it wasn’t too helpful, because the biggest question is still missing an answer --> when??? When will we reach the top? I would like to make it clear… following the cot report week by week, you will not be able to pin point exact turns in the market (I don’t think there are any other tools out there that can do this either). BUT (!) similarly to volcano eruptions, scientists are able to determine that stresses deep in the mountain are rising. In my opinion, this is the way to look at cot analysis, cot extremes too. We should get ready that change will come.

Knowing this information, you may start exiting your long positions in these markets (taking profits) if you have any, you may re-adjust your stops (lowering risks) OR you may gradually start building up short position (obviously keeping in mind, what I have just said and knowing that the extreme may widen even more!).

Options – if available – are great tools in these circumstances (OTM options with low volatility and min. 2-3 month time value), because you have a fix and limited risk, with huge reward potential if and when price do react to these cot signals.

All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

S&P-500
COT Change (52W) / C – 44%, LS – 31%, SS – 21% /
The situation is pretty confusing… Prices were unable to decline further, while the extreme was so large. Now we see Traders moving away from their extremes while the market is back to the rally. I’m unable to draw any conclusions from the cot report right now, the only interesting fact is that Small Speculators are the only ones Long now, both Commercials and Large speculators are Short.

Crude Oil
COT Extreme / C, LS – All Time COT extreme /
Large Speculators have built up such large net long positions (while Commercials net short) that we haven’t seen in Crude Oil before… It is an unquestionable bearish cot extreme signal that may take prices down soon.

Coffee
COT Change (52W) / C – 24%, LS – 20%, SS – 22% /
COT Extreme / C – 124 report, LS – 124 report COT extreme /
The very large changes that we have may be able to slow down the rally a bit, but in the medium/longer term the bullish cot extreme that we had not long ago is influencing the market: the trend has changed, we are in a bull market again.

All the best,
Dunstan

the original COT report

COT charts

 

[neil]

Hi everyone,

The latest Commitments of Traders review is out.

S&P-500
COT Change (52W) / C – 44%, LS – 31%, SS – 21% /
The situation is pretty confusing… Prices were unable to decline further, while the extreme was so large. Now we see Traders moving away from their extremes while the market is back to the rally. I’m unable to draw any conclusions from the cot report right now, the only interesting fact is that Small Speculators are the only ones Long now, both Commercials and Large speculators are Short.

Crude Oil
COT Extreme / C, LS – All Time COT extreme /
Large Speculators have built up such large net long positions (while Commercials net short) that we haven’t seen in Crude Oil before… It is an unquestionable bearish cot extreme signal that may take prices down soon.

Coffee
COT Change (52W) / C – 24%, LS – 20%, SS – 22% /
COT Extreme / C – 124 report, LS – 124 report COT extreme /
The very large changes that we have may be able to slow down the rally a bit, but in the medium/longer term the bullish cot extreme that we had not long ago is influencing the market: the trend has changed, we are in a bull market again.

All the best,
Dunstan

the original COT report

COT charts

Is that a Brent Crude chart above ?

 

[Dunstan]

Is that a Brent Crude chart above ?

It is light sweet crude oil (WTI) that is traded on CME.

All the best,
Dunstan

 

[neil]

It is light sweet crude oil (WTI) that is traded on CME.

All the best,
Dunstan

Thanks, much appreciated

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Soybean Oil
COT Change (52W) / C – 36%, LS – 40% /
Technically, we are close to an important resistance level, so the large cot change may capable of stopping the rally, BUT (!) let’s not forget that in the medium, longer term cot extreme signals are the real “price movers”. You may see that about a month ago (basically when we’ve reach the bottom), we were close to an all-time cot extreme. If prices are able to continue their rise (judging by the dynamics of price in the last few weeks, I think they’re able to) and we see Large Speculators becoming net long once again, then I think we can be pretty sure that the trend is once again pointing upwards.

Crude Oil
COT Extreme / C, LS – All Time COT extreme /
I can only repeat myself: the extreme is “All Time” large, so we are expecting prices to decline. Important remark: cot all time extreme can exist for many weeks, before price reaction.

Coffee
COT Change (52W) / C – 16%, LS – 17% /
COT Extreme / C – 145 report, LS – 144 report COT extreme /
Enjoy the ride --> for all of you, who reacted on the bullish cot extreme signal that we had in the end of last year. You may ask: Ok, great, but how long could this ride last? If we look at the historical charts, tops developed when Commercials were holding more than 40.000 contracts net short (LS, roughly the opposite / this is true since about 2004). Because of the dynamics both in price and in the cot report, I think that we may reach even >60.000 contracts before the rally is exhausted.

All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Nasdaq-100
COT Change (52W) / C – 32%, LS – 32% /
COT Index (3 yr) / C – 1%, LS – 90%, SS – 70% /
The large change in Traders positions is a bearish cot signal that could affect prices in the near term. Not only do we have this larger change, but also a cot extreme that indicates an end for the rally. Of course we should see that for the past 1-1,5 years we have reached these extreme levels multiple times without any major price reaction. I wouldn’t be surprised at all if this extreme could become even much greater when we eventually reach a top.

Coffee
COT Extreme / C – 146 report, LS – 146 report COT extreme /
Nothing special here, the extreme is becoming larger and larger as prices are rising. As I’ve said last week, we should expect a change in the trend once Commercials and Large Speculators reach their bearish all time cot extremes.

Wheat (Minn.)
COT Extreme / C – 111 report, LS – 96 report COT extreme /
Although we’ve reached a cot extreme worth mentioning, on the 5 year chart we can see that there is still space left for the extreme to widen. This relative cot extreme examined in context with traditional TA tools (clearly visible downwards channel) may paint a more bearish picture: so I’m not saying that we need to wait for a much greater cot extreme to see prices decline, the extreme is already large enough that we can think about a short trade.


All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Palladium
COT Change (52W) / C – 33%, LS – 36% /
Looking closer at the chart, we can see that the cot change signals in Palladium were pretty effective. Interestingly, there were more bullish change signals then bearish ones… The change we have now says that prices will fall. If we look at a longer chart, we can see that we have moved away from the bearish cot extreme that was present in the market in 2013. We can of course get there again, but for now, it seems that the extreme is not that large yet to really
end to the rally in Palladium.

Russel-2000
COT Change (52W) / C – 31%, LS – 28%, SS – 30% /
Similarly to Palladium, we can state that cot change signals in Russel-2000 are usable signals. Luckily we’ve got a bit more example for the bearish ones. The cot change signal we’ve got now is a stronger one suggesting a decline in prices. The cot extreme could be larger and if so, it would be a much easier task to decide what to do… If we choose to give it a chance, I’d strongly recommend it with a smaller position size or tighter stops.

Crude Oil
COT Extreme / C, LS – All Time COT extreme /
Last week we have seen some signals that indicate: we may have reached a top… The all time extreme became even greater than before --> stress levels are HUGE in CL.


All the best,
Dunstan

the original COT report

COT charts

 

[DuCaan]

Very nice analysis, kudos!
Similar approach here http://marketchartpattern.com/forex/dollar-index-cot-positioning-technical-analysis-10-march-2014/

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Soybean Oil
COT Change (52W) / C – 29%, LS – 27%, SS - 37% /
COT Index (3 yr.) / C – 25%, LS – 73%, SS - 72% /
The change was very large and we also have a relatively large cot extreme – both of these bearish signals. An unquestionable bearish cot extreme signal would be the case if commercials were below 100.000 contracts net short / large specs above 80.000 contracts net long, but I believe that this extreme may already be strong enough to influence prices.

Wheat
COT Change (52W) / C – 22%, LS – 19%, SS – 19% /
COT Index (3 yr.) / SS - 100% /
Similarly to Soybean Oil, the cot change and cot extreme signals are bearish. What we can see here is that small speculators are relatively the most optimistic (cot index on a 3 years lookback period). On the other hand, if we look at the rally in 2010 and the one in 2012 (both of them starting after a bullish cot extreme – similar to the one that started the recent rally), and how traders moved their positions, I believe that there could be fuel left in the rally.

Coffee
COT Extreme / C – 159, LS – 159 report COT extreme /
There’s not much I could say here, since the picture is pretty clear: after the bullish cot extreme of last year, prices have finally lifted off and are in a strong rally. The bearish cot extreme is becoming larger very fast which warns us to be careful about further buying… I’m not saying that the rally is over, there’s still much space left for the extreme to become larger, but we should look carefully at the developments in coffee and know when to get off the roller-coaster.

All the best,
Dunstan

the original COT report

COT charts

 

[Dunstan]

Hi everyone,

The latest Commitments of Traders review is out.

Japanese Yen
COT Change (52W) / C – 46%, LS – 44%, SS - 38% /
The large change (largest change size in the last 52 weeks) may easily push prices a bit lower, but in the medium to longer term, if the bullish cot extreme from last year holds, prices should further rally.

Lumber
COT Extreme / C – 268, LS – 274 report COT extreme /
The cot extreme we have now in Lumber supports the continuation of the rally that is present.

Coffee
COT Extreme / C – 187, LS – 187 report COT extreme /
“The bearish cot extreme is becoming larger very fast which warns us to be careful about further buying… “ After last week’s price actions, it seems that my warning a week ago was meaningful. Although we have space left for the extreme to become larger, the speed of the rally and the widening of the extreme parallel to it makes you cautious. I can’t tell what is go’na happen to Coffer now, because both sides have their reasons… I mean if Bears win, and prices continue last week’s decline, we may start thinking that the rally is over, but if Bulls turn out to be stronger, prices shift back into rally mode, we know that the extreme can get larger, thus we can look at last week’s decline as only a bit of reaction in the market.

All the best,
Dunstan

the original COT report

COT charts