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 us 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 26th, 2015
Currencies:
- USD: 5K Long Vs. 72K Short – Significant short interest remains.
- Canadian Dollar: 38K Long Vs. 56K Short – Neutral -No change from last week.
- British Pound: 76K Long Vs. 41K Short – Commercials decreased their long position – more neutral now.
- Japanese Yen: 111K Long Vs. 13K Short – Big increase in net long exposure.
- Euro: 143K Long Vs. 22K Short – Significant long position.
- Australian Dollar: 97K Long Vs. 32K Short- Significant long position.
Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while British Pound, Euro, Yen and Australian Dollar rally.
Markets/Commodities/Volatility:
- E-Mini S&P 500: 200K Long Vs. 597K Short – Slight decrease in short interest. However, a heavy short position remains.
- VIX: 111K Long Vs. 15K Short – Heavy long position suggests market turbulence ahead.
- Gold: 60K Long Vs. 102K Short – Slight decrease in short interest. More neutral now.
Conclusion: Based on the information above, commercial interests expect the stock market to decline as volatility surges higher.
Next Week’s Market Calendar:
- June 1 – ISM Manufacturing PMI
