COT Report Analysis - a thread on market sentiment

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2067

Good weekends guys…

Here’s an analysis on AUD

I apologize as I’ll be leaving you guys with graphs mostly this time around. But I’ll get better at it. I see that FE has already doing analysis on historical charts like BB on top of weekly analysis, I’ll catch up with you guys soon :wink:


While specs have reduced their net shorts a bit commercials have bought more AUD. Specs and commercials current net positions are far away from extremes. Specs still remain net sellers and commercials net buyers of AUD.

Screen Shot 2014-11-15 at 8.06.16 PM.jpg700×257 32.1 KB

Open interest has increased slightly. Commercials increased their longs from 89,948 to 93,580 while shorts remained flat.


Commercials COT index = 80, Non commercials COT index = 22 both are away from extremes

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Commercials long positions are at around 76% of total OI. This appears to be an extreme reading. But since we haven’t seen any COT extremes I’ll conclude this a false signal. I’ll examine more into this in the coming weeks as part of my weekly historical chart analysis. So stay tuned guys! or this could be inaccurate. I’ll check BBs database.


I don’t know what its supposed to signal anyone ??? So it turns out this one is inaccurate. I’ll update the chart once I get an updated database from BB.

In conclusion AUD appears bearish still, commercials stacking up their AUD longs while reducing their shorts. So far there’s no indication of bottom. Therefore, I would say go with the flow, follow the specs.

Except for the bottom 2 charts everything else is accurate I’ve checked!

2068

Hi Rookie,

just the first impression: it does not look like someone is very rookie :slight_smile: Haha I am in a funny mood. I am happy you are doing it. But please work on the Comm. Movement Index. That does not look promising yet :-))) Or at leats the results look strange for the last chart.

I will look today everything in detail but knowing you it has to be a high quality work!

Good job,
FE

2069

lol I just realized I sent you a the database that was under construction as I added to 6 months COT Index which messed up the Movement Index, CP/OI and Willco. I’ll finish the update tomorrow and will send you again to your e-mail.

2070

Peter is right and the phenomenon is very still alive even today. I’ll post some updates on ProGo because I noticed that it gives reliable signals on Equities.

2071

Hi everyone,

it is time for the COT report. I already have an exotic currency (RUB), a petroleum commodity (US Crude Oil) and a major currency (JPY) in my report. I will add the first agricultural product, Soybean to the analyzed markets. I show graphs only if they are needed. For the new product I will show the charts so you can see where we start.

I will start my short view on Silver and Gold, but it belongs to BB so I am waiting what he has to say. IMO Silver turned and the upside movement is under way. What makes it a bit difficult that Gold is flat and did not start the Net Position movement. It is still good to keep in mind the nice gold rally in the last day is not included in the report. Did we just spot there a major reversal?

FINALLY A COT REPORT TO TALK ABOUT! Don’t miss out this report guys.

JPY
There is really nothing that gets my attention.

RUB
PRICE CHART ALERT! Better check the charts guys. It seems like there is a wall where USD is just not able to break through. I already made my Crude analysis (it is only behind in the order here) so please check my findings there for further information. I know it might be strange why I make the same conclusions for Crude and RUB but it has to do something with weaker USD. As Peter always stresses out the importance in intermarket analysis, we might see a great example right there.

Crude Oil
I updated the charts and was already expecting that nothing interesting happens. Hmmm however it is more than interesting! It seems like my report will be long this week and will contain more posts as with Crude Oil I will already use the maximum allowed 5 pictures/post. We had discussion about Crude with Philip this week. He argued to look the market and while it was definitely good not to enter, there are some signs to watch. Of course it can be just a pause or a retracement. No matter what but net positions changed the direction two weeks ago which is not normal in the whole rally. Willco also changed direction. The COT Index and COT Movement Index both show a change in direction in the last two weeks. Do not get those long orders ready yet as Crude Oil lost $2 since Tuesday night. Important to note, if you have good eyes, OI increased but not the OI of commercials, Peter might tell us what this exactly means. Still, look at those charts!

Crude Oil 20141114 Comm Movement Index.jpg700×233 21.4 KB

Crude Oil 20141114 cpoi and open interest.jpg700×497 44.2 KB

Crude Oil 20141114 Willco.jpg700×324 20.1 KB

Crude Oil 20141114net positions.jpg700×279 28.9 KB

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2072

First of all: BB, your fast data update tutorial was great, it really made the process faster. Thanks.

Soybean
Well we can spot that some time ago there was a major reversal. That was of course the main reason to enter the market! I did not know of course that some days later there will be a small reversal, but this might be good for anyone who wants to enter the trade on a better price. As we are talking about an agricultural product, I think this commodity functions a bit different than all others in my analysis. The price fluctuations might do more with seasonals and as it is a product that we need independent on economic conditions, we might also look at it in different perspectives. These were only my assumptions.

Net Positions

Soybean Net Positions 20141114.jpg700×379 32.7 KB


The net positions show the reversal about 1.5 months ago.

CP/OI and OI

Soybean OI and CPOI 20141114.jpg700×500 45.1 KB


It follows very nicely the reversal. Now the sudden drop in OI is interesting. I am a bit uncertain here. Peteeeeeeeeeer!

Willco

Soybean Willco 20141114.jpg700×336 19 KB


The continuous buy signal is not there anymore but it is also far away from being a sell signal.

COT Index

Soybean COT Index 20141114.jpg700×298 31.2 KB


It shows that the extreme reading came again way too early. For us it is more interesting that continuous advance can be seen to the rising side.

COT Movement Index

Soybean Comm Movement Index 20141114.jpg700×240 21.9 KB


It does not show anything special.

Conclusion: well, I am already in the trade and I am comfortable to stay in the market.

Ok guys, if I am right or wrong I do not know. But I did my best to get your attention for the interesting market conditions. Most likely it has a lot to do with the lately struggling USD (besides JPY and GBP).

BB did a tutorial this week, Rookie made his first analysis, Peter just never gets board from us and teaches something every week, Mike got his good mood back, Philip showed signs of life again, Dunstan found his way back (because of Rookie) and I am done with my analysis. These are the sings of progress which makes me happy and give myself a day off then. All I do for the rest of the weekend is to lay back into my chair and read BB’s analysis about his 10+ markets.

Good job everyone!

FE

2073

I was wondering what was up with the last 2 charts. Even after I updated the formula I couldn’t see any highlight on my sheet. I then concluded if thats how it was supposed to be as other instruments had the same thing going on for them. Call me genius. Thank you BB again!

2074

<---- :35: well said BB

I have been going to this particular post of BB where he explained the difference between COT index and Willco many times now. And everytime I read , I pick up new things. I just wanted to highlight this post once again in case if some of you had missed.

I actually have been really enjoying this way of analysing currencies. Our analysis is not confined to specs net positions anymore. We’ve got vast amount of data on both players and now are able to monitor their activity precisely with all of these indicators.

And on AUD, [B]Mike[/B] if you’ve seen my analysis there wasn’t any signal no sign of reversal. So most likely we’ll see a trend continuation for AUDUSD. But hows that affect the major/comm split ? Say we take AUDUSD as a benchmark indicator. Something to think about. No ? I see a potential here for your major/comm split. I just don’t know yet how we can incorporate. But that was an idea. You’ll know what I mean when you start analysing currencies this way :13: BB has made data updating a lot easier. Once you got his database all you have to do is copy and paste the historical compressed data to your excel sheet and the rest will be done for you automatically. I didn’t even have to set up the formulas to calculate COT, Wilco and all of the remaining indicators. They all automatically calculated themselves once I pasted the corresponding data.

We no longer need to dread over every single news releases and try to make a sense out of. I think their activity holds more value than any news or even their central banks ; take RBA for example.

And [B]FE[/B] great analysis. The charts do indeed tell a lot when you actually start doing it yourself. Been liking it. For one I didn’t know that Willco 100 meant buy. What I got from your crude oil analysis is that the downtrend is likely to resume. Correct me if I’m wrong BB. See I’m still very new to this. But its very apparent to me, that specs turned from somewhat extreme bullish to bearish and commercials on the hand turned more bullish - them buying more means price is likely to drop further. And COT index still looks far away from extreme readings but we’ve got to be beware, like you said they can’t be used for timing. Moreover I don’t see any extreme changes in commercials CP/OI longs and shorts do look somewhat stable. If they were getting ready for a sell off , a reversal I would expect their shorts to pick up while longs decrease at a similar rate. I would also look out major levels on weekly and daily S&R lines and combine that with those readings. Yes BB I’ve picked that one from you! :slight_smile:

From what I know, from one of your book recaps, sudden drop in OI usually indicates a reversal , for now I don’t see much change in OI neither. So that concludes me to believe that we can hop on the downtrend preferably on a retracement ? :33:

Very interesting analysis on soybean FE! Up until I reached open interest and Willco charts i was thinking to myself FE has gotten himself on a nice uptrend ? But i see your concern specially with sudden drop in OI and Willco both signaling rather bearish outlook whilts an uptrend. What I would look out for in this case is to look out for major S&R levels and the readings from USDA for more hint.

However one thing for sure is that specs are bullish and commercials are bearish holding more shorts than longs and I see that commercials have been increasing their shorts.

2075

[B]Here’s a proposal guys.[/B]

We’ve been working for 4-5 months now roughly. And like I’ve been saying its beyond my wildest imagination how far we’ve come in such a short span of time and how dedicated we’ve all been.

5 months ago I would have never thought that I’d be analysing other markets, commodity futures for instance. Thanks to [B]Peter [/B]for enlightening us on intermarket analysis. Its been a journey!

While we’ve got many more to learn, I feel certain that we’ve accumulated a pretty good understanding and knowledge on large area of market. Now all thats left to do is to go in depth, and study the delicate relations in within each market and instrument , and thanks [B]BB[/B] for making all of that possible!

My proposal however is not just studying relations, but to formulate a dynamic system. I feel that way we’ll all be motivated and the studies that we’re about to embark upon will be effective and materialized in a proper way. We’re all aware that in the past we’ve had plenty of initiations Philip created an entry signal, Peter has been working on a system and last but not least BB has been trying out a lot things and has shared his findings. I myself haven’t paid much attention to it all. I’m at fault as well in that respect.

But whats troubling me is that all that work is not being materialized. We’ve had some great ideas. And I feel the only way to materialize those great ideas and intiations is an unison, therefore I would like everyone to actively participate on developing a dynamic system not just one of us. The more people the better.

We do have the necessary talents and sources, so why waste our time ? lets be focused and work in unison towards achieving a same goal thats for now is to develop a dynamic system. A system thats revolved around COT data and throw intermarket correlation for timing as we all know we can’t be using COT for timing, there we’ve got our entry signals figured out. And for exits and delicate details such as risk & money management [B]Dunstan [/B] & [B]Philip[/B] ?

And last but not least I have this vague idea, a framework which I want to use for this dynamic system that we’re going to develop. Remember MGs thread ? Mike , FE and I are aware but I’m not sure if the rest of the guys are. If you aren’t here’s a quick recap. The forefront idea is to build a portfolio, and ride up and down trends. Since its a trend based system he usually holds trades long term. So thats the very basic idea, I want to know what you all think about this ?

If you want to read more on Mastergunners thread: 301 Moved Permanently

So in summary I want to take MGs idea use it as a framework add bits of this and that on top and create more sophisticated version with the resources that we have. When I say dynamic system thats designed for trending markets , I mean we build a framework and apply it for every instrument with some tweaks of course. After all trend is your best your friend so its only reasonable to start off with trend following system. Once we have the basic framework with additional tweaks of course , we can develop a system for picking up tops, bottoms or range as well.

What do you say guys ? For now I’ll leave it there. I’ll be waiting on your responses!

2076

Here’s how you can get rid of that chart down at the bottom FE. I remember BB had the same problem.

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Hope that helps.

2077

This is very true. That is why we use COT.

Yes a retracement is possible of course. There were several things though which got my attention: in the last weeks we are not continueing the tendency with positions cot index etc. anymore, the net positions changed over time. If you look at the historical analysis I made, we have observed that both net long and short extremes shift to the downside. We should not forget that. With Philip we also observed that the COT Index gave better signals in the past to sell Crude than to buy; also very important. Last but not least as we follow the trend your story seems more valid but I do not sell. I do not feel comfortable to jump in at these prices. In the case I scaled in 15x already from the top and it is to open my 16th position, that would not be a problem. But it had a run from 110 to about 75 and now opening my first position down… No, I am not that comfortable. The downplay is missed by me, I will only trade to the upside when the time comes.

On Soybean: the last couple of days were not good but altogether I think the trade is still valid. I bought on good levels and little retracements occur. I cannot expect it to go always in my direction. That is why it is good to have a portfolio management with diversification. As I said I am in many different markets and the wheat trade gives me now plenty of space to observe soybeans. If soybean was the only market I would be in I would close it already from fear. But the others compensate it and I think it looks still promising. There are small signs for a retracement I think but nothing serious.

Thanks for the IT help. I deleted the chart and attached again, it works good. Sometimes the site acts funny…

And about your proposal. I think it is utopistic. I like the idea but I do not think we can do it. All people have completely different expectations and different personality. I try to bring us together and I cannot even organise to get the COT report analysed in the same way (ok, at this point we are getting there). You are offering a whole system. It is difficult to bring all these people together and work out a system, especially if everyone has different mentality. Do not say though that I only promote my own idea as I find it great, it could be really good, I just find it very hard to do it. I am in it of course so it will not fail on me for sure. However we need to define task precisily and that it suits to everyone. (We think quite the similar way but it is more the exception). For example if I find a COT signal, I can give it to Peter who can confirm it. If he confirm he can give it to Philip who can look for an entry point. Some kind of a chain might work but this is more like a company work and we are not sitting there the whole day at the same time. So, altogether I like it, but think about how you can interpret it. Maybe you can ask everyone in pm so we do not spam with 20-30 posts the thread with 1 sentence answers and worries.

Have a nice Sunday everyone,
FE

2078

Hey guys! Sorry for the late posting, I’ve been working yesterday, so I just finished updating the database now.

Before we begin, I’d like to announce that I made some changes to my database to make the whole updating process faster. I also wanted to incorporate some new ideas I learned from Mr Williams’ course, Sure Thing Commodity Trading.

First off, I mixed the chart of Open Interest with Net Positions, so I can see which party drives Open Interest. (Is it in weak or strong hands?)

I also included the COT Index of the last 6 months. The reason behind this move is that I would be able to sell (buy) rallies (declines) in a downtrend (uptrend) more effectively. (Being in harmony with the trend.)

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Metals

Nothing changed since last week. I’m bullish on Gold, Silver and Copper as well as the Commercials. Good news is that price seems to be responding to the heavy Hedger buying. Check out Friday’s rally!

No signals on Platinum and Palladium.

Silver: A possible long entry would be the break of the falling resistance line. See the divergence between Ultimate Oscillator and price?

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A word of caution


Do you guys see the sudden Commercial change in the COT Index in Treasury Bonds? Would you consider that as a signal? Well, the matter is subjective but I’d like to give you my explanation. That extreme bearishness is not the doing of increased longs or decreased shorts (or both). We have just passed our 3 years look-back period’s last extreme reading in time. (In other words, the last extreme was more than 3 years ago)

It is evident when you look at the Net Positions.

No more signals for the week, although I have my eyes on Corn as the Funds are approaching extreme readings.

Edit: I’m still in my Gasoline long with price evading my SL level by a few ticks on Thursday! Talking about dodging a bullet :slight_smile:

2079

Great job on the analysis this week. Apologies for not being more involved recently, I am taking a bit easy in trading ahead of my vacation.
Unfortunately I have no signal to report on and I have checked all currencies, oil, gold and silver. I’m only holding two positions as well, SP500 and USDJPY long.

2080

Hi BB,

thanks for the analysis and interesting what you wrote about OI and net positions in once charts.

The other part of the analysis was a bit fast, although you said there are no signals. It would be good to confirm from your side that you checked all markets. You have many markets, you gave a list of 14 commodities. That is why it is important to know that all 14 markets were checked.

I do not understand why is it new to add the 6 months COT Index? Actually we do it from the beginning. In your tutorial and first analysis you already had it included. Or do I miss a point? And the COT index is always in the direction of the trend, that is the point in the 1 minute commodity trader system what we discussed.

Did you enter any other trade based on COT besides Gasoline? As I see you have quite many COT projects going on at the same time :slight_smile:

Have a nice evening,
FE

2081

Check XOI since that post, it is 5 bars later, you can see that on Monday price went up to resistance, then fell back. Friday’s inside bar has saved the day for bb’s trade, that bar is the result of Friday’s action on comodities incl Gold

A good entry for any oil product would obviously be above the resistance (lol there goes that hindsight thing again) Anyways, the upturn in oil commercials’ share value has started back 4 weeks ago.

Sometimes it can be helpful to figure who the actual commercials in an asset class are, then having done that, combined with cot keep an eye on their share value.

Investors, like the commercials, are often privy to information or analysis that retail may not be, also it happens that an investor in a commercial can be one and the same.

I have an interest in oil, our postman says he is selling :slight_smile:

2082

Back on oil, since last week not a lot has changed, but then look a little closer, is there a gentle breeze of change in the air.

Again this chart represents the investors’ actions, look at the volumes in the past, and the current volumes - this sets the context, the level of interest, the OI of investors.

2083

Hey guys!

There have been few articles that got my attention and thought I’d share.

The thing is they beautifully line up what we’ve talking our theory. Mike…

Australia-China Trade Deal to Drive Exports Beyond Mining - Bloomberg
"Neighbor New Zealand signed a free-trade agreement with China in 2008 and in the 12 months through June 2013 its exports to China surged 26 percent, government data show. “This is at least as good for our agriculture, as New Zealand got,”

Japan Unexpectedly Enters Recession as Abe Weighs Tax Delay - Bloomberg
"Gross domestic product shrank an annualized 1.6 percent in the three months through September, a second straight drop – matching the textbook definition of a recession. Unadjusted for price changes, the economy contracted an annualized 3 percent, the Cabinet Office said. Japanese stocks slumped"

I guess its about time that we go short on yen across the board!

2084

I always cover all the markets before I post my analysis here.

I did not include the 6 months COT Index until now in my database. I’m planning to use that index strictly for taking trades in the direction of the trend. With the index of the last 3 years, I’m more likely to play reversals.

My Gasoline trade is based mostly on it’s seasonal tendency to rally in the last quarter of the year.

2085

Hey Doc!

I hear what your saying, about the JPY. I’ve been watching them this morning…you should be careful with them. Someone is buying the Yen, across the board. And also I have a flash back of that sentiment with the NZD. Remember we all jumped all over them and just got killed. And as I keep thinking lately, we need to be real careful what we read. I think we have mentioned this that we just should not be taking a lot of stock in what the media is printing. The market thinks otherwise. (Peter has been making that point lately)
Well, I really do have this is mind to just not have them persuade my thinking into any trades. Let’s face it, the market does the opposite!
I could be wrong, maybe later on today the Yen will fall again, but in any case, I just do not trade what I see in the media. Getting burned before with the NZD had a major affect on me.

Be careful buddy!!

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Mike

2086

Hi Guys,

As promised, I am posting my cot analysis now. What can you expect from me for now? I have discussed this with Rookie in PM that in the beginning I will be doing these from two angles: 1) sharing my own cot analysis, findings of interesting opportunities and 2) commenting on other’s analysis, especially if I have a different view of that given market. This should I believe add value to the thread, especially that it will be exclusively in align with the topic of the thread: cot analysis. I wish not to give any entry/exit strategies, just purely bringing people’s attentions to situations that exist.

We will see how this attitude will be appreciated, but I do hope that at least the “team” will understand. I know – from my thread also, if you look at mrchilled’s reactions for example – that some people will be dissatisfied with me not giving exact trading advices. Why am I doing this? Rookie already knows from our conversations in PMs… in short: I have a professional side in trading and thus strict rules governing me. I wish not to unfold my positions, telling anyone what market I’m in, what market I’m not in (ok, as stated earlier, currently I am out of trading for personal reasons, but this is just temporary) AND also I wish not to reveal the exact techniques and strategies I use. I will of course, from time to time, give in some thought about the direction from which I would be investigating a trade setup.

Ok, let’s get down to business… I will try to be a bit more detailed here with my analysis, putting in some more work for the sake of “quality standards” of this thread (I intended this to be an “elegant “ compliment:)).

First off, let’s use the capabilities of the service I use and let me show you the top 5 buy and sell signals they show and then I’ll pick out markets, which I believe are worth mentioning.

Top Buy Signals.jpg700×557 62 KB

Top Sell Signals.jpg700×558 63.3 KB

Let me start with one of my favorite market, Orange Juice:

COT Change (52W) / C – 10%, LS – 13% /
COT Extreme / C – 584, LS – 579 report COT extreme /

I have already analyzed orange jucie last week and it seems that prices have reacted to the signals. It is of course still a good trade in the long run. The changes in Traders positions (Commercials and Large Speculators) were definitely larger than average - bullish signal - but it is really the cot extreme situation we have that makes the trading opportunity very exciting. As you may see on the chart, it has reacted pretty well to these cot extreme signals in the past, and since we have got a very significant extreme, this too has a high chance to become an effective signal.

(I will continue with the next market in the next post)

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