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Follow the Smart Money / COT Analysis
- Thread starter Dunstan
- Start date
Hi Fahad s,
Orange Juice is definitely an interesting market. If you look at the chart I’ve attached, you will see that we are at a COT extreme situation: commercials are producing a 98% COT Index score, they have dramatically cut back their short positions, Small Speculators are extremely pessimistic about the market… a great combo, confirming a bullish move.
All the best,
Dunstan
Orange Juice is definitely an interesting market. If you look at the chart I’ve attached, you will see that we are at a COT extreme situation: commercials are producing a 98% COT Index score, they have dramatically cut back their short positions, Small Speculators are extremely pessimistic about the market… a great combo, confirming a bullish move.
All the best,
Dunstan
Attachments
Hi everyone,
The latest Commitments of Traders review is out (here)
Silver
It was interesting this week that all over metals, there were pretty large changes in the positions that Commercials, Large Speculators and Small Speculators are holding. These changes can be considered sell signals, but I think we should realize, that 2 month ago , there was a pretty bullish picture in the COT report for these markets, especially one in Silver (26th report - Commercials at a 563 report COT Extreme). The question here I think is to determine the difference in the strength of the two signals. In my opinion, a COT extreme picture could have a longer lasting effect, while a COT change signal has a shorter one. So following this analogy, if one took the signal in the 26th report and went long in metals, than it could be a good time to realize some profits and re-enter in a few days, when prices have dropped a little, since the COT extreme should have enough momentum left to push prices higher. Of course this decision should be in harmony with one’s trading system’s money management rules and trading strategy.
I have attached a 5-year chart on the 26th report for Silver and the most recent one as well. It is clearly visible that during this 2 month, the COT picture has moved away from those extreme levels. I guess we can start talking about a bearish picture again, once Commercials have reached 50.000 or more contracts net short and Small Speculators are holding roughly 15-20 thousand (or more) contracts net long.
Canadian Dollar
The changes in positions amongst all participants were relatively large. In my opinion the best picture would have been if these changes took the COT report to the extreme territories that the review was talking about, Commercials net short 100.000 or more contracts and Small Speculators net long 35.000 or more contracts. The extreme combined with the change signal would have been a very significant sell signal, but of course this change on its own could also be strong enough to push prices lower.
I wish all of you good luck to this week’s trading,
All the best,
Dunstan
the original COT report --> here
COT charts (free) --> here
The latest Commitments of Traders review is out (here)
Silver
It was interesting this week that all over metals, there were pretty large changes in the positions that Commercials, Large Speculators and Small Speculators are holding. These changes can be considered sell signals, but I think we should realize, that 2 month ago , there was a pretty bullish picture in the COT report for these markets, especially one in Silver (26th report - Commercials at a 563 report COT Extreme). The question here I think is to determine the difference in the strength of the two signals. In my opinion, a COT extreme picture could have a longer lasting effect, while a COT change signal has a shorter one. So following this analogy, if one took the signal in the 26th report and went long in metals, than it could be a good time to realize some profits and re-enter in a few days, when prices have dropped a little, since the COT extreme should have enough momentum left to push prices higher. Of course this decision should be in harmony with one’s trading system’s money management rules and trading strategy.
I have attached a 5-year chart on the 26th report for Silver and the most recent one as well. It is clearly visible that during this 2 month, the COT picture has moved away from those extreme levels. I guess we can start talking about a bearish picture again, once Commercials have reached 50.000 or more contracts net short and Small Speculators are holding roughly 15-20 thousand (or more) contracts net long.
Canadian Dollar
The changes in positions amongst all participants were relatively large. In my opinion the best picture would have been if these changes took the COT report to the extreme territories that the review was talking about, Commercials net short 100.000 or more contracts and Small Speculators net long 35.000 or more contracts. The extreme combined with the change signal would have been a very significant sell signal, but of course this change on its own could also be strong enough to push prices lower.
I wish all of you good luck to this week’s trading,
All the best,
Dunstan
the original COT report --> here
COT charts (free) --> here
Attachments
Hi badvestor,
Unfortunately in my experience, amongst all market categories, it is the Indexes where I find the COT analysis the least effective.
You can find some sort of correlation between extremes in the COT and the price, but not as strong as in other markets, thus the effectiveness of these signals on Indexes is definitely weaker – in my experience.
Anyways, I have attached a chart on S&P-500 for you. It is interesting to see that both Commercials and Large Speculators are net short, only Small Speculators are taking the long side of the market. In general, Small Speculators are usually on the wrong side of the market, so the fact that they are the most optimistic participants now in the market, suggests a bearish picture. Unfortunately I don’t see that when it was looking like this in the past, it had any negative effect on prices --> I couldn’t find significant amount of supporting examples to prove to me that this recent picture will push prices lower.
All the best,
Dunstan
Unfortunately in my experience, amongst all market categories, it is the Indexes where I find the COT analysis the least effective.
You can find some sort of correlation between extremes in the COT and the price, but not as strong as in other markets, thus the effectiveness of these signals on Indexes is definitely weaker – in my experience.
Anyways, I have attached a chart on S&P-500 for you. It is interesting to see that both Commercials and Large Speculators are net short, only Small Speculators are taking the long side of the market. In general, Small Speculators are usually on the wrong side of the market, so the fact that they are the most optimistic participants now in the market, suggests a bearish picture. Unfortunately I don’t see that when it was looking like this in the past, it had any negative effect on prices --> I couldn’t find significant amount of supporting examples to prove to me that this recent picture will push prices lower.
All the best,
Dunstan
Attachments
Quote from Dunstan:
Hi badvestor,
Unfortunately in my experience, amongst all market categories, it is the Indexes where I find the COT analysis the least effective.
You can find some sort of correlation between extremes in the COT and the price, but not as strong as in other markets, thus the effectiveness of these signals on Indexes is definitely weaker – in my experience.
Anyways, I have attached a chart on S&P-500 for you. It is interesting to see that both Commercials and Large Speculators are net short, only Small Speculators are taking the long side of the market. In general, Small Speculators are usually on the wrong side of the market, so the fact that they are the most optimistic participants now in the market, suggests a bearish picture. Unfortunately I don’t see that when it was looking like this in the past, it had any negative effect on prices --> I couldn’t find significant amount of supporting examples to prove to me that this recent picture will push prices lower.
All the best,
Dunstan
the small speculators are trying to catch the last rattle of the market at this point... if you ask me.. i think going by generalities isn't a great strategy.. but if i were to make a vague statement about the spx at this point it would be a great time to trap small speculators..