COT Reports: If you are not familiar, the Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions. In other words, it gives a preview of what commercial interests are buying or selling. As the theory goes, we want to be on the same side of the trade as the big guys.
While not a good timing tool, currencies, commodities and the stock market (to a lesser extent) tend to move in the direction of the bets made by the commercial players. Not always, but often enough.
Latest data, as of May 12th, 2015
Currencies:
- USD: 4K Long Vs. 72K Short – Significant short position.
- Canadian Dollar: 38K Long Vs. 52K Short – Neutral.
- British Pound: 102K Long Vs. 35K Short- Significant long position.
- Japanese Yen: 66K Long Vs. 34K Short – Neutral.
- Euro: 162K Long Vs. 27K Short – Significant long position.
- Australian Dollar: 93K Long Vs. 28K Short- Significant long position.
Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while British Pound, Euro and Australian Dollar rally.
Markets/Commodities/Volatility:
- E-Mini S&P 500: 184K Long Vs. 635K Short – Heavy short position.
- VIX: 114K Long Vs. 14K Short – Heavy long position suggests market turbulence ahead.
- Gold: 37K Long Vs. 80K Short – Neutral
Conclusion: Based on the information above, commercial interests expect markets to decline while volatility surges higher.
Next Week’s Market Calendar:
- May 20 – FOMC Minutes
- May 22 – Consumer Price Index
