COT Report Analysis - a thread on market sentiment

Hey Philip.
I found this very interesting. Check it out.
The U.S. Economic Outlook and Monetary Policy - Federal Reserve Bank of New York

Hey Mike,

Very important speech, has not gone unnoticed by the banks even though on the surface it may seem different.

Dudley seems resigned to a hike, not what he feels is best, so best case scenario is to make it small and gradual.

So looks even more likely that the die is cast, Dec for a hike, recent moves maybe the set up.

BTW, should add, just my perspective, he is very much a dove, so most guys are looking to him for even the slightest shift of tone.

Hi Guys,

I believe the last 4 posts summed up everything important. I pretty much agree what Philip has written. In the thread we concluded a lot earlier that the rate hike will be delayed against most market expectations. And I also think it is dangerous, especially with very low commodity prices and that all CBs (except BOE) want to depreciate its currencies.

On the other side I have read Mike´s article and Peter´s comment and they both makes sense in hiking rates in December.

Summary: it doesn´t matter what I find logical or how I see it, the Fed decided to do something else so I just have to consider that in my trading.

Have a great weekend guys,
FE

Hi Peter,

there is an article from Forex Gump which is interesting for current EUR sentiment. It shows how mixed the different officials are on further stimulus.

Look at it:
Forex - What ECB Officials Are Saying About Additional Stimulus

In which camp do you belong to if your opinion was asked what to do?

Take care,
FE

Hi FE,

Jens Weidmann’s input carries much weight.

It often intrigues me how history can have such an impact on a person’s outlook, without perhaps them even aware of it’s influence.

Germany’s dislike of QE (money printing) can be traced right back to the Wermacht Republic, or so many historians state, during ww1 one USD was worth from 5 to 9 Marks , then the Mark devalued to 33 m per USD at the end of 1919.

For various reasons the Wermacht Government undertook money printing, strongly opposed by economists of the time. By end of 1921 it was 330m per dollar, 800m by end of 1922.

By November 1923, after some more printing the numbers are a little vague, but somewhere around 4,210,000,000,000m per USD
Finally, the government scrapped the old mark and inflation became controlled, the lesson was learned.

Reality was that money printing was only one of the causes, having to repay reparations in foreign currencies was also a cause, effectively selling the Mark to buy foreign currency, the selling driving down the Mark’s value and so on.

Mr Weidmann commands much respect in Germany and in the EZ so his influence will likely be felt, Draghi and the ECB will not wish to push him too far.

(Apologies for the history stuff, just thought I’d put my view into context.)

Wow, thanks for sharing this! I didn’t know that much about Weidmann myself but this definitely puts things in perspective.

Hi Guys,

interesting week, would be good to know Mike´s stats and where he positions himself. Forex Gump had an article today, I wrote there my opinion, we had some different viewpoints. He looks at the markets as risk off sentiment, looking at my trades and exotic pairs, for me it seems like a clear risk on sentiment where CHF and USD loses ground. I would be happy to read your thoughts on it.

FE

Hi Peter,

I have seen an interesting post from you in another thread. It is off topic here, but maybe our team finds it interesting and that is the reason why I answer here and not in the other thread. So you worte about a difference for account negative balance account protection for UK and US traders. Why is there a difference? Isn´t the same rules apply for everyone? And what about the other countries of the world? Are the protections should be carried out by the country where the broker is registered? Maybe you can post us a useful link what you always do.

Thanks and take care,

FE

Hi Philip,

I hope this post gets to you. I studied today gold and silver in the cot report. I also observed long term charts and something got my attention at gold (silver showed nothing interesting which might be strange). Gold is heading to the territory where Commercials are near to the “0” position level which is always good to watch out as gold rallies are about to come. More than that, COT index signal might come in 1-3 weeks to buy gold.

What do you think on that?

FE

Hi FE,

I have a good friend who works in compliance with hedge funds, many clients are registered in various islands. Those companies have a great many hoops to jump through costing a lot of money just to comply with regulatory bodies that are often regarded as ‘second world’.

But perhaps the most difficult set of regulations, not necessarily the better for it, but certainly the most bureaucratic is the CFTC.

They seem to take the theme of ‘protection’ to a different level, their focus on protection is to dissuade traders from taking undue risk, therefore rule CFTC 5.16 rules out, or so it seems, the possibility of a broker from forgiving a negative balances.

https://www.law.cornell.edu/cfr/text/17/5.16

I have seen emails from US brokers quoting this rule, those same brokers offering negative protection to UK clients - those emails state : “Negative Balance Policy - Traders shall at all times be liable to … for any negative balance or debit balance”.

Not the fault of the brokers, therefore I will not quote their names.

Maybe things are changing, the focus of my research, I’m up to April this year.

Negative balances are rare, or are they, aside from SNB back early this year, I have encountered some on Euro swings with QE, although they are more prevalent with share trading.

Here is a salutary lesson for anyone wishing not to risk more than they can afford to lose, a story doing the rounds over this past few days:

Edit: the link to the US Govt info - just the same only more words:

Update to above.

It seems the position is unchanged since April as far as US is concerned, Jason from FXCM has responded in the thread you mention and has quoted the above CFTC rule.

Strange type of scenario, but if you are UK then you are covered, if US then not - next question is does a non US trader pay for this ‘insurance’?

Hi Peter,

thanks for the useful explanation. It got me interested if my broker makes a difference between countries so I wrote them to see what they can say about it.

Update on my COT comment from yesterday: gold arrived to the mentined levels, silver is on the way. Now it gets interesting. Wonder when that rally starts. Will be watching the charts carefully. Peter, any wisdom on gold these days?

Have a nice weekend,

FE

One final not on gold. I checked the AUD in COT as a main gold producing country. Surprise surprise.

AUD is at the net position extremes and COT Index is just about to arrive there. I now will try to find a good site which shows all inflation developments in the world for the last months. If those are showing a positive sign/trend then I see no reason why no to try a probe bet. That would be a final green signal for me.

Hey FE…guys…
Well, I’m still in the middle of crunching them. But, this is something I have done. The months progression so far.
Top # = The total running % for the month. Bold lower # = that days result.


Oh yeah…and uh…we should mention that Rook was right about thinking the Comms just might be making a come back. (remember him showing us his charts last week? )
Good job buddy!!
I’m hoping to see it continue.

Mike

P.S. —sorry that’s not clear!
Here’s a blow up of this past week.


One more note…check out NZD. Are they on the climb? I originally thought not. Maybe we have a change coming for them. Huh?

OK guys, one more pic.
This is in regards to the Majors vs. Comms. This week.


Uh…it went to the Comms. Stronger, collectively, over the Majors.

Mike

Hi FE,

I do watch gold, mainly as an indicator of USD sentiment.

I have a terrible habit of setting arrows without notes, looking back on a daily gold chart I have a big up arrow back on Aug 14, why I put that there I just cannot remember other than that I was watching either Gbp/Usd or Eur/Usd or both, likely it was something to do with USD.

Anyways, as I’ve posted on Clint’s Gold painting itself thread, I usually use GDX for guidance on near term risk appetite on Gold - my theory is that the investors in miners are generally not retail, are always trying to second guess bullion direction so I look to price and volume on that particular ETF.

I don’t trade a long term view, only about 5 days ahead, even the S&P these days - but from a long term perspective I’d guess there seems to be bottom pickers in GDX currently.

Many thanks Mike for the hard work, see more guys are becoming interested in the idea of individual currency buying/selling instead of just looking at TA on crosses - I suspect that your work is not terribly dissimilar to some of the algos.

GDX daily from tradingview:

Hi Peter,

you bottomr picker idea lines up with my inflation findings. I checked all inflation report from early September if I could see something interesting (was looking for an increase as it would indicate also higher gold prices).

I did find interesting results. While in Sepember and early October, the main trend was still seen everywhere, which is red inflation numbers. However the second part of October and then November is another story. Not that the reports were positive, but surely they were already mixed at least. The falling oil prices might have ended their negative influence and it is time of finally better reports to come out.

FE

Now that is funny! Forex Gump also decided today to analyse a bit inflation! Here is the article:

Forex updates - Global Inflation Roundup