The COT report can be extremely confusing for novice traders, as the data is presented in several different formats and in addition of course, the CFTC have recently changed the reporting categories in an attempt to provide further transparency in the futures market. Whilst this was a welcome change to the old format of the reports, it has, in my opinion, provided yet another layer of confusion for those traders who use the COT data regularly, so in order to try to explain the simple approach that I use, I’ve recorded this short video which I hope you will find useful in using the COT report as a broad gauge of market sentiment, whether you’re trading in commodities or currencies.
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- GBPJPY – Moving Lower February 1, 2012via annacoulling.com This pair still moving lower. […]
My latest analysis for gold
- What The Experts Are Saying About the Gold Price July 15, 2011With the spot gold price now having broken out into new high ground, having touched $1594 per ounce earlier this week, here is a round up of what the experts are saying. However, a couple of points: first the gold price is still some way off its equivalent high of the 1980′s. In other words, […]
My latest analysis for silver
- What The Experts Are Saying About the Gold Price July 15, 2011With the spot gold price now having broken out into new high ground, having touched $1594 per ounce earlier this week, here is a round up of what the experts are saying. However, a couple of points: first the gold price is still some way off its equivalent high of the 1980′s. In other words, […]
My latest analysis for oil
- What The Experts Are Saying About the Gold Price July 15, 2011With the spot gold price now having broken out into new high ground, having touched $1594 per ounce earlier this week, here is a round up of what the experts are saying. However, a couple of points: first the gold price is still some way off its equivalent high of the 1980′s. In other words, […]
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British Pound - Open Interest Volumes Weekly 2008 to 2010
Open interest in the British Pound increased dramatically last week moving strongly from 95,700 contracts of 2 weeks ago to 119k of 16th February, and as clearly evidenced on the weekly COT chart continues to increase from the low of mid December at 72k. With open interest volume now increasing and a consequent fall in the pound against the dollar this suggests strongly bearish sentiment in the market. In simple terms the rise in open interest indicates new trading positions being created, with the fresh money probably creating additional short positions which are adding further to the bearish pressure. The current open interest picture confirms the current technical perspective both on the daily and weekly charts in the spot market. It is also interesting to note that in mid 2008 we saw an exponential increase in open interest (in excess of 180k contracts) while prices were range bound at the USD1.95 to USD2.0 price region. This type of activity in the futures market is often an excellent signal of an imminent and significant move, and whilst the market direction cannot always be forecast with any degree of certainty, it can provide us with an excellent early warning sign that the market is about to break out.
Weekly Spot Market FX Rates GBP/USD -2008 to 2010
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No real change since last week other than commercials still selling into a rising market, although the volume of contracts has substantially reduced in the futures market since this time last year. As an example this time last year the total number of positions was 141k whereas last week the total number was close to 95k and with commercial short positions having fallen from 100k last year to 64.5k this year.
In the spot market the trend is still bullish longer term although we are currently seeing some sideways consolidation in the market at present due to the economic climate and present round of quantitative easing and financial bail outs. The perceived wisdom of the stock markets is that the rally of the past few weeks is merely a temporary bull rise which, in due course, is likely to classified as a dead cat bounce. This in turn could lead investors back to gold and silver as safe havens in uncertain times.
Everything I say may appear slightly contrarian when viewed using the COT index as an indicator but the British Pound is a good example at present which I hope will make the point with a little explanation. At present the Commercial futures holders are net long and have been for some time even whilst the pound has been falling heavily in the spot market which may seem odd at first glance. However, if we stop and think for a moment about the nature of the commercial holders, these are institutions with very deep pockets who are taking long term view of the market and are therefore building their positions by buying at what they consider to be a low price with a view to selling the contracts in the 12 to 18 months once the pound has recovered.
All of the above merely highlights the timeframes one is dealing with when viewing the COT index; it is not a timing indicator as such but much more a sentiment and direction indicator for the longer term. The extremes of the chart, whether zero or 100 are the points at which the sentiment shifts in the commercial holders and at which point we may expect to see a change in price direction in the spot market in the following period.
The futures’ positions of the commercial players remains largely unchanged since last week when we saw the oil price spike up to $55 dollars a barrel and despite today’s fall in the spot market my view remains unchanged and has been reinforced by the monthly WTI crude oil chart which shows a long legged doji followed by a hammer – two classic reversal signals which suggest that we are now at the bottom of a long waterfall of prices.
Categories : COT Index Oil, COT Report
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