Follow the Smart Money / COT Analysis

Hi everyone,

The latest Commitments of Traders review is out (here)

Silver
The size of change was again larger than average. Market participants have started to move towards their bearish extreme levels, although we are definitely further away from these levels than for example in Platinum.

Platinum
Large Speculators have reached an all-time net long position, which is an extreme COT signal, but as said in the review, the picture is not the same as in the previous two cases. The volume and open interest total score being 16 is a bullish signal and the fact that other metal markets are not at their COT extreme levels yet, suggests that the rally could continue, but we should be at the lookout for a possible down-turn.

Cocoa
The reason why it has been mentioned is the size of change that happened in Commercials’ positions, but what is interesting here is that Small Speculators are near extreme levels (COT Index 97%). The picture is becoming bearish.

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

the original COT report --> here
COT charts --> here

Report36_Cocoa

could you cover the major currencies as well please.

Hi Dunstan,

I really like your work. The only thing I can find that I don't completely agree with is the picking of tops and bottoms.... I don't think it necessary - and it maybe a bit too risky. I think I would go with the trend, as every week one will see the speculator's commitment either rise of fall. Price/wave breakouts with trend is the way I would trade it.

Anyways, I see you have a website and you offer the tool for a very small fee... I think I may subscribe! --- great work!

I agree with you, it is only possible to see the top and bottoms after the move has been made. However using the COT can confirm whether the trend you are in has strength.

I use momentum/trend based and price breakouts as well but I look at the COT just to have that peace of mind that indeed I am in the right trend.

Hi Pipanator,

Here are the major currencies:

AUD
The change size in the positions market participants are holding was the largest in this market and it was a bullish move. You can see on the chart that a COT extreme has been achieved two reports ago and we are moving away from those levels. If prices can stay under the recent top which corresponds to the mentioned COT extreme, meaning that the downtrend continues, I would be expecting the continuation of the moving away from the recent COT extreme. On the other hand, this change signal could push prices above this top, which would result in the break of the COT extreme signal and could mean that we are headed towards an even greater COT extreme = stresses in this market continue their rise.

Summary: the recent top in prices is a crucial point. If we can rally above it, I believe that the COT extreme could widen even more --> LS would start to increase their net long positions and prices would continue their move up. Even though, I think that the risk on the long side would be greater in the medium to long term, since the stress level in the market is relatively high.

GBP
SS are closer to their upper extreme levels (COT Index – 69%), but LS and C are basically neutral both a bit net short. The picture suggests the continuation of stagnating prices, no larger moves are indicated in any direction by the COT report.

CAD
We are becoming more and more extreme in this market, getting closer to all-time extreme levels: COT Index: C - 20%, LS - 90%, SS - 56%. We still have place left for prices to continue their rally, so I would not be surprised if prices continued their upward move for another few weeks. Said this, I think being long at the time is the place to be, but one should monitor the changes in COT report closely, cause as stress levels are building up, the chances of a change in the up-trend is becoming larger and larger.

EUR
LS have continued their buying and as we are moving away from the last COT extreme it seems that prices have started to react to it. Since in the long term LS are the ones who are leading the direction of trend, it is logical that being on the long side of the market these days is a better decision. Following the report, if we start seeing LS cutting back on their buying activity and experiencing the COT extreme widening again, this could easily push prices towards (or even under) their recent lows.

JPY
None of the participants are showing clear signals, but we can conclude – looking at the COT Index (C - 29%, LS - 72%, SS - 61%) – that the picture is a little bit more bearish than bullish.

CHF
Similarly to JPY it is difficult to read clear signals here also. In such cases I recommend to look at LS, who as we know by now are the ones who we should follow in a trend. They are currently buying the market, but my remarks written in EUR can also be applied here.

MXP
Similarly to CAD and AUD, the COT extreme in this market suggests a bearish move in the medium to long term range (COT Index: C - 25%, LS - 75%, SS - 68%).

Hi Dick,

Thank you for the compliment. I believe that you may be right, I have emphasized the significance of COT signals at tops and bottoms a lot . On the other hand I have also showed the significance of knowing where LS are headed, since they are the ones, who in the long run, should be considered – to connect to the title of my thread – smart money.

I cannot agree more that basing “brave” trades against the trend based purely on the report is a risky way, but by knowing which side of the market the stresses are building up, one can start thinking of these brave trades and the implementation of these facts in their trading system.

As stated many times, the COT report should help one to feel a directional bias, but for concrete trades, these should be accompanied by more classical approaches, using traditional TA tools also.

Hi cotnet,
I like the way you look at report, I’m glad you have joined my thread!

All the best,
Dunstan

Report36_CAD & Report36_EUR

Report36_JPY & Report36_CHF

Report36_MXP

Have these COT reports ever been measured against what price actually does if its accurate by a certain percentage?

Hi Pipanator,

I don’t know about any statistics about that. If there were any, it would be advised to separate each market.

All the best,
Dunstan

Hi everyone,

The latest Commitments of Traders review is out (here)

Copper
The size of change in C and LS positions was HUGE (!): 41% & 42%, but it was in a direction away from the recent extreme levels. This pushed market participant’s positions towards a more neutral zone. The hard question here to decide is whether to act on the large COT change signal and exit longs or even go short, when LS – the ones who we like to follow – are buying the market and actually just turned net long. Well, the change was definitely significant, so it should be considered a meaningful signal --> we should be careful in further buying the market, but on the other hand, we know that metals tend to correlate with each other. Let’s have a look at all the metal markets to see – by looking at the COT report – which ones are stronger and which one are weaker compared to each other:

Gold
SS signals in gold are usually pretty accurate, so the fact that they are at COT Index 96% is an exciting situation. I have indicated on the chart previous cases, when SS were at such levels to see what happened to price back then.

Silver
Although we cannot talk about an All-time or close to all time extreme picture, you can see on the attached chart, that in case of the last two relative tops in the market, market participants where at such levels.

Platinum
LS and C are at COT All-Time extreme levels, but SS are not at such levels yet. The picture is still more bearish than bullish.

Palladium
The COT Index shows us that neither participant is in their extreme zone. The Volume&OI score is the largest here. I would consider this market to be the strongest amongst metals.

Even though, we do not have a super clear picture (I would say all-time or close to all-time extreme levels amongst all market participants and all metal markets), overall, I think that we are becoming more bearish in metals day-by-day.

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

the original COT report --> here
COT charts --> here

gold & silver

platinum and palladium

Hi everyone,

Just wanted to update you on metals, which I have analyzed for you in my last post. It looks like prices have started to decline, so it could be that my assumption on the general bearish picture in metals was correct. As the examples brought to you, showed clearly that we are not at all time extreme levels everywhere, there where relative extremes, which in the past had the strength to effect prices. It’s not an easy play, but I guess the Risk/Reward of taking the recent report’s signals was(is?) pretty good.

All the best,
Dunstan

Hi everyone,

The latest Commitments of Traders review is out (here).

USD Index
Very large Change in positions of C and LS --> 58% and 62%. This signal together with the COT extreme picture (see attached chart) suggests a bullish move in prices.

Coffee
The COT change signal that we had here points in the opposite direction as what the COT extreme picture suggests, but of course we should know by now that while a change signal has a faster effect on prices – if at all – extremes give you a better understanding on the wider picture. In this case Commercials being net long – as the review says correctly – is a bullish signal. If you look at the COT index, we can see that it confirms this --> C at 87% and L at 14%.

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

the original COT report --> here
COT charts --> here

Hi everyone,

The latest Commitments of Traders review is out (here).

Cotton
COT Change / C-27%, LS-20%, SS-25% /
COT Index / C-88%, LS-10% /
The COT report suggests that there could be an increase in cotton prices in the near term and even in medium-long term as well.

Crude Oil
The change signal suggests a bullish move, but the general picture looks bearish.

British Pound
Small Speculators are at an All Time extreme level (their most optimistic mood ever), but also Commercials are heavily selling the market--> bearish picture.

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

the original COT report --> here
COT charts --> here

GBP chart

Hi everyone,

The latest Commitments of Traders review is out (here).

Natural Gas
COT Change (52W) / C-31%, LS-32%, SS-13% /
COT Extreme / C-230, LS-255 /
COT Index (3 year lb.) / C-0%, LS-100%, SS-69% /
The near term picture looks bearish, since the more than 30% changes that we can witness in C and LS positions are stronger than average signals. In medium to longer term (let’s say up to 6-9 month), I don’t see such an extreme picture yet, that would suggest the end of this increase in prices that started in mid April.

Cotton
COT Change (52W) / C-31%, LS-30% /
COT Extreme / C-281, LS-281 /
COT Index (3 year lb.) / C-100%, LS-0% /
The COT report suggests that there could be an increase in cotton prices in the near term and even in medium-long term as well.

Platinum
COT Extreme / C-All Time, LS-All Time /

Gold
COT Extreme / SS-All Time /

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

the original COT report --> here
COT charts --> here

Cotton & Platinum charts