Follow the Smart Money / COT Analysis

Dunstan · September 23, 2013

Hi everyone,

The latest Commitments of Traders review is out.

S&P-500

COT Change (52W) / C – 44%, LS - 36%, SS - 26% /

The large change in Trader’s positions may shake prices a bit (we could see declining prices), but in the medium/long term, I don’t see, why prices could not rally further. Since the last major cot extreme, prices are again going higher/stress levels are decreasing. I may be wrong, but I would expect a larger, close to All-Time cot extreme to signal the top.

British Pound

COT Change (52W) / C – 24%, LS - 28%, SS - 11% /

The cot change and the relative extreme in the market may put an end to the rally. The fact that only Small Speculators are optimistic about the rally is also a bearish signal. Of course one may argue: stress levels in British Pound are not at their peak levels yet, thus prices can rally further… well, as always, I urge everyone to look not only at the cot data, but use it together with other TA tools. Simply looking at a longer chart, it is clearly visible, that prices are not far from important resistance levels.

Corn

COT Extreme / C-448 report, LS – 449 report COT extreme /

If we look at a longer chart, we can see that all obvious bottoms in prices correlated with major cot extremes, when commercials were net long. This is the situation right now.

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · October 1, 2013

Hi everyone,

The latest Commitments of Traders review is out.

Dow Jones-30

COT Change (52W) / C – 42%, LS - 29%, SS - 54% /

COT Extreme / C-553 report, LS – All Time COT extreme /

The huge change in Trader’s positions and the All Time cot extreme both are very strong bearish signals… the rally be over for some time now.

USD Index

COT Change (52W) / C – 28%, LS - 26%, SS - 18% /

If we analyze the past one year of the USD Index, we can find that it reacted pretty well to cot change signals. In the latest report we can find a larger that average change, which can be considered a bullish signal.

Cocoa

COT Extreme / C, LS – All Time COT extreme /

Stress levels are high, we are expecting prices to reach a top soon.

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · October 7, 2013

Hi everyone,

It seems that the U.S. Shutdown has an effect on us, people who follow the cot reports. The CFTC has stopped issuing the reports for now. Let’s hope that this situation will not last very long!

All the best,

Dunstan

Dunstan · November 12, 2013

Hi everyone,

CFTC has resumed publishing the cot reports, they are up-to-date again! 

The latest Commitments of Traders review is out.

Soybean Meal

COT Change (52W) / C – 31%, LS - 36%, SS - 18% /

If we look at the last one year, we can find that similar large changes in Trader’s positions preceded the rallies. Although we don’t have a large extreme in the cot report, the recurring patterns seem to be convincing.

Nasdaq-100

COT Extreme / LS – All Time COT extreme /

There is an unquestionable bull market here… even if we’ve got an All Time cot extreme that is indicating a top, we should be very careful entering against the obvious trend. Of course the Risk/Reward on such a trade could be pretty tempting

Cocoa

COT Extreme / C, LS – All Time COT extreme /

The large cot extreme in Cocoa has been present for many weeks now, but without any real price reaction. Still, I think there is great opportunity here, so we shouldn’t forget about this market!

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · November 27, 2013

Hi everyone,

(Sorry for my late update… I took a little holiday , just came back yesterday)

The latest Commitments of Traders review is out.

Copper

COT Change (52W) / C – 25%, LS - 30% /

COT Extreme / LS – All Time COT extreme /

The very large change in Trader’s positions and the unquestionable extreme in the market both suggest prices should go higher. This, together with close support levels adds up to an exciting trading opportunity that should be investigated more closely.

Japanese Yen

COT Change (52W) / C – 25%, LS - 38% /

COT Extreme / C – 334 report, LS – 331 report COT extreme /

The even greater change last week could not affect prices positively, so I’m not expecting the recent changes to do any better… the extreme has been present for almost a year now, but the down trend is obviously intact. Trading this market to the upside looks pretty risky, even though we’ve got large stresses built up in it.

Cotton

COT Extreme / C – 52 report, LS – 50 report COT extreme /

Commercials have again become net long, only small speculators are holding short contracts… If we investigate the historical charts, we can see that usually prices bottomed out, when we had a similar case. The volume and open interest scores also support the bullish bias that we have.

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · December 3, 2013

Hi everyone,

The latest Commitments of Traders review is out.

5-Year Note

COT Change (52W) / C – 22%, LS - 22%, SS – 19% /

Looking at a longer chart, we can see how the recent cot extreme managed to push prices higher. The bearish signal coming from the latest report (large changes in Traders positions) suggests that we could see a bit of a decline in prices, but let’s not forget the strength of a cot extreme signal --> until we reach an opposite cot extreme (Large Specs above 300.000 contracts for example), I believe the last extreme is still in place.

Japanese Yen

COT Extreme / C – 335 report, LS – 332 report COT extreme /

I hope everyone took my advice last week and stepped away from this market As we can see, even though we’ve got this close to all time cot extreme in the market, prices don’t seem to bother… I believe (but it’s really just my feeling) that we will stress levels in Japanese yen rise even further.

Wheat

COT Extreme / C – 20 report, LS – 79 report COT extreme /

Analyzing the historical chart, we can see how well wheat reacts to cot signals. This time, we’ve got a bullish type cot extreme in the market that’s telling us: prices should start climbing soon.

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · December 9, 2013

Hi everyone,

The latest Commitments of Traders review is out.

Dow Jones-30

COT Change (52W) / C – 27%, LS - 24%, SS – 22% /

Without the large cot extreme, this change in Trade’s positions is not enough for me to really seriously consider a larger short trade… I’m not convinced.

Japanese Yen

COT Extreme / C – 336 report, LS – 335 report COT extreme /

The picture still seems to me more bearish than bullish, even if we’ve got this enormous (but still not All Time!!) cot extreme. I do believe that we can see further increase of the stress level present in this market, maybe even to all time levels, before prices reach a bottom.

Rough Rice

COT Extreme / C – 22 report, LS – 108 report COT extreme /

Interesting to see, how different the picture is on a longer chart that on a shorter one… If we look from high above, we see more of a bullish type cot extreme, but as we narrow down our perspective, we can see the relative extremes that were pushing prices back down.

I wish all of you good luck to this week’s trading,

All the best,

Dunstan

Dunstan · December 16, 2013

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

tradingwizzard · December 16, 2013

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

hi Dunstan,

How do we stay on eurusd and usdjpy?

thanks

TW

Dunstan · December 16, 2013

hi Dunstan,

How do we stay on eurusd and usdjpy?

thanks

TW

Hi Tradingwizzard,

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

tradingwizzard · December 16, 2013

Hi Tradingwizzard,

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

thank you ........

TW

Dunstan · December 23, 2013

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

Dunstan · December 31, 2013

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

tradingwizzard · December 31, 2013

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

Interesting situation on the jpy.......both eurjpy and usdjpy are starting to give exhaustion signs in my opininion though

TW

Dunstan · January 7, 2014

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

Dunstan · January 13, 2014

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

Dunstan · January 20, 2014

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

Dunstan · January 27, 2014

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

Dunstan · February 4, 2014

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

Dunstan · February 10, 2014

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