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CFTC Commitments Of Traders Round-Up: August 2019

Analysing the CFTC Commitment Of Traders’ data provides insights into when trends in futures contracts listed on various exchanges might be ready to turn, either to the upside or the downside, due to the activity of important market participants. 

Last month, I pointed out that Commercials traders seemed to be positioned for a turnaround in the British Pound. Indeed the GBP/USD faced some sort of final “blow-off” on Sept 3rd and immediately turned around to the upside followed by further upwards trading sessions. For traders, this price increase beared the chance for about USD $3,300 in trading profits per contract. During that move, commercial traders seem to have reduced their long holdings, which points to a potential consolidation of the exchange rate at current levels. After that consolidation, we can do a second review of the COT positions, but it seems as if the correction has some further potential.

Figure 1: GBP/USD

COT1

Legend: Yellow = seasonal trend, black = OHLC, red = commercials, blue = large speculators, grey = small speculators, light blue = relative commercials vs open interest

In recent weeks, an interesting observation in the COT reports could be seen in the Gold market. Commercials seem to have been extremely short in that market for quite a while. In addition, both small and large speculators are heavily long Gold. That, in combination with the seasonal trend for Gold. points towards a longer correction in this market, which should start after a last short-term increase.  

Figure 2: Gold

COT2

Legend: Yellow = seasonal trend, black = OHLC, red = commercials, blue = large speculators, grey = small speculators, light blue = relative commercials vs open interest

Another market I found interesting in August was Sugar. Commercial long positions reached new highs during the course of last month. In addition, speculators have new low readings for their positions. Similar to Gold in the example above, the seasonal trend for that markets points to the upside. Therefore, I’d expect a trend reversal in the coming weeks.

Figure 3: Sugar

COT3

Legend: Yellow = seasonal trend, black = OHLC, red = commercials, blue = large speculators, grey = small speculators, light blue = relative commercials vs open interest

An even more extreme positioning of Commercials vs speculators can be observed in the meat markets; specifically, Live Cattle. What’s interesting here is the relative long positions of Commercials compared to the overall markets (in light blue), which reached extremely high levels during last month. I would therefore expect the market to shift to the upside soon.

Figure 4: Live Cattle

COT4

Legend: Yellow = seasonal trend, black = OHLC, red = commercials, blue = large speculators, grey = small speculators, light blue = relative commercials vs open interest

The next figure shows the Soymeal market. Again, Commercials seem to be positioned for an upwards move in the market whereas trend following speculators await a further price decline. However, the seasonal trend of the market might find a bottom in the coming weeks, which is another reason to maybe look for long entries in the Soymeal market.

Figure 5: Soymeal

COT5

Legend: Yellow = seasonal trend, black = OHLC, red = commercials, blue = large speculators, grey = small speculators, light blue = relative commercials vs open interest

I am looking forward to revisiting some of the above mentioned markets in the coming months as well as review other interesting information that can be gleaned from the CFTC Commitments of Traders reports.

Thomas Kochanek is CEO and Principal of 1512 St. Gallen Capital Management

 

Futures trading is speculative and involves the potential loss of the complete or even more of the investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Neither Thomas Kochanek nor 1512 SG Capital Management AG, are affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that neither Thomas Kochanek nor 1512 SG Capital Management AG have verified the completeness of the information contained herein. Statements of opinion and recommendations will be introduced as such, and generally reflect the judgment and opinions of Thomas Kochanek. These opinions may change at any time without written notice, and 1512 SG Capital Management AG assumes no duty or responsibility to send updates regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by 1512 SG Capital Management AG are not a solicitation for any investment. This newsletter does not constitute an offer of sales of any securities. Thomas Kochanek and 1512 SG Capital Management AG may or may not have investments in markets herein.

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