COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
724

So, let’s see what the COT Report tells us this week. Very important that the percentile factors and net positions will always show the non-commercials (speculators) vs. data from the previous week:

[B]AUD:[/B] 70.68% vs. 69.26% previous. Net positions: 41 938 vs. 36 574 previous.

[B]CAD:[/B] 53.96% vs. 54.76%. Net positions: 5 663 vs. 7 281.

[B]CHF[/B]: 26.69% vs. 22.17%. Net positions: -13 039 vs. -15 492. Ok, here we have to watch out. The speculators got more bullish but price was bearish for CHF. There is a divergence.

[B]GBP:[/B] 56.11% vs. 55.06%. Net positions: 15 467 vs. 13 287.

[B]NZD:[/B] 78.23% vs. 77.90%. Net positions: 11 841 vs. 12 032.

[B]EUR:[/B] 20.87% vs. 22.49%. Net positions: -150 657 vs. -138 825.

[B]JPY:[/B] 13.74% vs. 14.58%. Net positions: -102 891 vs. -87 271.

[B]USD Index:[/B] USD is strong as we all know, even after a weaker week. It is in a quite tough resistance zone though.

As I do not have BRL in my charting I cannot look at it. It would make sense to analyze it though. Looking at the COT action there is quite a difference in the last weeks. It looks like a big sentiment change.

The OANDA website is again not in its best form. Some currencies are not updated on the charts, some of them are updated… I do believe the only surprise where we do think a divergence between price action and net position change is the CHF, Peter might give us an explanation there.

In the short history of my non-commercials report, AUD is most bullish and EUR is most bearish.

725

[B]1. Short-term trades:[/B]

Well I entered quite many USD long trades. I might jump into some other trades but mostly [I]I am already in the positions and have to manage them.[/I] The other short-term trade is tomorrow at London open to turn the market with Peter and Mike.

[B]2. Long-term trades:[/B]
Slowly I do not understand the Russian moves at all. Putin now threatens the whole world. I do not know what he wants to do when he mentions the nuclear power of Russia. Hopefully he does not want here a world war. But for sure he is not scared at all and instead of looking for peace he sends further troops to Ukraine. The situation is getting worse continuously. Here is one of the very many articles, but the one the worries me the most:

Putin: You better not come after a nuclear-armed Russia - CNN.com

This makes me think that I cannot even think about to just sit through the crisis but I even have to close the positions as they might go a lot above the historical standards. This would mean to[I] take large losses and be ready to jump in at better prices when the situation finally calms down[/I]. Now it is also interesting that I cannot consider the exotic currencies the same way. With closing trades I mean the USD trades, the EUR trades not, because EUR suffers just the same as the European exotic currencies so these trades are not doing that bad. And of course when tensions rise it affects all exotic currencies around the world but we have to differentiate between Eastern European currencies who’s borders are not that far from Russia, and between non-European exotic currencies. The non-European exotic currencies might also take a hit but not near as bad as the European counterparts. So I will take my time and analyze this situation.

[B]3. Stolen trades[/B]
One advantage sharing are mentality and trade ideas is to get good ideas from others. I do not like to be influenced from others, but I do think about all the trade setups you guys write about. I try to understand why you thought about it and how I see them. Probably you see that I answer for all your trade setups what you mention. Bottom line is I do not take trades that I do not come up myself. Sometimes I take though exceptions.

This week I do have two “stolen trades”. [I]Peter[/I] mentioned on Friday a good entry on the [B]USD/JPY long[/B] setup. Now as you know, I was watching this pair and did not want to enter it until I have a clear view. The latest development in Japan shows me a clearer view and that I should start looking to vs. JPY again. The pair bottomed at 103.55, but I do not mind losing those pips because my mind was not sure about the setup. So if I get an entry signal I jump in.

The other setup was mentioned by [I]Philip[/I], going [B]long on GBP/CHF[/B]. I just love this setup and it makes me angry that I have not found it earlier! Fundamentals from the SNB side also lines up for GBP and the technical analysis on the daily TF really confirms to make this trade. Quite many pips are already lost in this trade, but I do believe that the rally will go on.

So as you see there are not as many setups but so important made this weekend. They are the setups I want to manage, sometimes close or look for the right entry.

And now I start to read the 20+ posts you have made in the last 1.5 days when I was not at the computer (I did not want to read them before making my own analysis as they would maybe influence my own decisions). I will see if they line up with my thinking or not. However based on Mikes charts, we have to see a “Major week” coming.

PS: I clicked through very fast the posts. I see they are very long and great analysis. In the very fast time I have seen many setups, analysis and that Mike loves Peter. I think it will take some hours to work myself through so as it is Sunday I take a break now but do the work before Market open.

726

I would like to know, at least from a theoretical point of view, what does the divergence you are mentioning in CHF usually means? especially that both of us are also looking to short CHF this week against GBP.

727

Well here it goes FE and Philip…

ZURICH, Aug 31 (Reuters) - The Swiss National Bank stands ready to intervene in the foreign exchange market to defend its cap on the franc and could take further measures to ensure price stability, its chairman told a Sunday newspaper.

The franc is still highly valued. Enforcing the minimum exchange rate of 1.20 is absolutely central to ensure adequate monetary conditions in Switzerland.

“We continue to stand ready (to defend the cap) by unlimited currency purchases if necessary,” Jordan said.

When they say defend the cap they mean the EUR CHF exchange rate shouldn’t be more than 1.20, am I getting this right ?
And what would happen to rather bullish CHF if central bank is to intervene. I need you guys elaborate explanation on this.

728

Investors’ eyes pinned on ECB as Europe’s health deteriorates

We’ve got ECB rate decision and monetary policy statement and press conference on thursday.

Here’s what to expect:

Increased geopolitical risks from the intensifying conflict in Ukraine forced Europe to impose sanctions on its third biggest trade partner Russia, a move which dented the faltering economic rebound even further.

During his speech at Jackson hole symposium Draghi struck a new, for some a groundbreaking, tone trying to cajole European governments into agreeing a common approach to reforming their economies - a drive he sees as necessary to allow the stagnant euro zone to grow with verve.

He will have a hard time selling his message. Countries like the euro zone’s second and third largest economies France and Italy are not growing and lag behind significantly with reforms.

So the ECB may have to reach deeper into its policy toolbox, with some analysts even betting on an interest rate cut at the bank’s meeting on Thursday.

Yes guys you heard it right, talk of further interest rate cut could be in the cards for EUR this thursday. /FE… you were right I should have kept my EURUSD short going like you I’ve already missed the retracement I’ll see if there’s going to be any correction happening this week/

To read more: Investors’ eyes pinned on ECB as Europe’s health deteriorates | Reuters

729

Hey Rookie.

I surely don’t know much, but, looking back in history, maybe we will have this going on.
This is a weekly chart, EUR/CHF for the year 2012.

2014-08-31_0831.jpg700×315 26.4 KB

It was there for 4 months at that level. And you can see the spikes along the way, probably traders thinking it was time to go up, but nope, it was all downward pressure. Meaning strong CHF the whole time.
I don’t know, maybe it will look like that.
Hey!! Maybe Peterma can remember that time period.
Got anything for us on that Peterma?

730

I know a lot of you guys were talking about going long on USDCAD last week. Well this week I’m thinking of getting on the rally up. It looks like the correction has already been done.

But there’s going to be quite a bit of top tier data for CAD this week especially BoC statement - interest rate.

Here’s what to expect guys if you’re thinking if shorting CAD:

Bank of Canada Governor Stephen Poloz said the central bank has scope to keep interest rates near historic lows even if employment picks up.

The trend of employment growth “has been around 1% for some time,” Poloz said. “We’re confident there’s quite a bit of room to grow and, particularly since our interest rates are already at 1%, we figure we’ve got time to watch this unfold.

Economists surveyed by Bloomberg forecast policy makers to keep the benchmark rate at 1%, where it’s been for almost four years, until the third quarter of next year.

While Canada recouped job losses from the recession faster than its Group of Seven counterparts, job growth has stalled. Only 25% of jobs created over the past year have been full time.

“It’s been pretty weak,” Poloz said. “It’s been almost all part time so therefore it’s not generating the kind of income you would get from a usual 1%” employment growth.

“We know that’s significantly less than we would expect to see in a well-performing economy,” said Poloz

Looks like the interest rate will remain unchanged on this wednesday BoC conference.

731

It is very relevant that FE’s COT analysis has red flagged CHF,

This coming week traders will be watching closely EUR/CHF as it reaches the floor.

Divergence can be a marker for bank’s “setting up” their positions - one to watch closely for reversal.

This article in forelive, again after FE’s post - bet they are following too :slight_smile:

http://www.forexlive.com/651617

732

Mike,

some answers here:
Sudden Swiss franc depreciation - Perspectives Pictet

733

Hey guys.

Well I’ll tell you what I’m thinking about this week.

USD:
-I’m already in 4 of them. Running. Limit orders got kicked in last week late. AUD, NZD, CAD, JPY.
-I have take profits in place, and all were around 20-25 pips. (thought they would take by Friday) So, I’m thinking of changing that, to look for any kind of US run this week.
-Presently they are the strongest Major.
-I’m siding with the Majors this week. Will be watching for any catalysts for Majors, and Comms.

GBP:
-Besides the USD, GBP is the other Major I’m watching this week. They are climbing on some of my charts. (trend charts)
-So, given the likelihood of a Major week, I’m watching very closely GBP against the 3 Comms.
GBP/NZD weekly chart.

2014-08-31_1240.jpg700×312 25.5 KB


I’m watching that 1.9837 level. If it turns to support, or stays resistance.

GBP/AUD weekly chart.

2014-08-31_1256.jpg700×313 24.6 KB


Well, this is sitting right at major support area 1.7777. So, how about a climb?

GBP/CAD weekly chart.

2014-08-31_1259.jpg700×318 25.5 KB


I’m embarrassed about this one. I really thought before they were gonna go up to the top, from the line. But, hey, we got a better price now!

GBP/CHF weekly chart.

2014-08-31_1320.jpg700×315 23.9 KB


I’m with you guys on this one.

I will be placing trades with either USD or GBP this week. Long of course.

I can’t give you any kind of figures how I did this week. My broker just is not accurate with the balances until Sunday night when the market opens. That’s what happened last week. See, it all gets skewed until it gets open again. I think it has to do with having trades being open before the weekend. And where the currencies are located to what they say on my balance statement is 2 different things. Totally skewed, until market open.
So, I’ll give you run down then. How my week in particular went.

I’ll be back little later.

Mike

734

My first link seems to have gone to a 404, but here it is again,

Bottom line from both the old story, a few in between and the current position is that the SNB are masters of language and can use it to de-value the CHF.

Since the introduction of the peg the mere suggestion of an increase and the market reacts immediately. There have been anonymous rumours on the peg being raised to 1.25, even as recently as this year, price always reacted accordingly.

Since price is approaching the peg Adam Button is suggesting:

“I don’t sense any willingness to let the peg lapse and with the SNB holding the line, I think we’re very, very close to the time to buy this pair”.

The upside risk to CHF is obviously geo political.

See the post at 14.01
ForexLive Forex Market News, Breaking Foreign Exchange, FX Headlines

It’s the old story of which side is the greater risk, having decided that then that may become a trader’s ‘bias’- then the exercise of patience becomes important.

735

Hi guys,

now I try to catch up. Won’t be easy I see it already. I just recognized this is a “no mercy thread”. You are not there 1 day and you are out! But I am fresh and full with power. I make different posts for everyone as my answer is getting huge. I start them in the order where I stopped following the thread for a whole day.

Peter,

sorry, I forgot to ask, which pair is at the 82.70 level that you mentioned in post 701? Just have to know to push the right pair.

Based on what you wrote on business confidence, the number on tradingeconomies.com looks good, so I guess we should look for a good report, however the difference is not huge so we should expect a positive but moderate USD strength. I will be happy to check that how it works. BTW did ILovePizza get it mostly right? How was his indicator working? Any results to share? If it is the particular Business Confidence number then it is true what I wrote above, if we have to look all indicators which measure sentiment then the picture is more complex.

I have not read the link you provided yet, the article seems like it is quite long but try to do it tonight.

736

Philip,

yeah, USD/CHF might also be good. I like the other a bit more because I have way too many USD trades open. I am getting to heavy on USD. CHF is not my favorite currency anyway. I find it often way too boring. On a technical perspective it is a great setup. If you see a bounce please tell me, I might consider it. GBP/CHF is better because I have a bit of a chance to get some carry trade at least if the pair is moving way too slow. On the daily chart USD/CHF the pair moved 400 pips. I think it shows how good it might be to trade it on a long-time frame but for my blood pressure CHF is really slowly. Maybe if I get 1-2 weeks older then I will be patient enough to trade it.

On your ECB question to peterma: I know you did not ask me, but still I share my thinking :slight_smile: I do not care much about the meeting. It is a great chance if you have the possibility to make good pips on events, that is why I like them. But frankly, I do not think they can do anything at this moment to strengthen the EUR on the long-term. EUR in my opinion will get now even weaker or retrace and get weaker. The outcome is the same.

I like the chart on tradingview.com. I have never seen that. There is a mocha1 guy with AUD/USD trade setup when I click on it. Is mocha1 you or it is just an example? Please post next time “long” or “short” because mostly it is clear what the trade is but not always. With EUR/NZD I guess you think bearish, however we except Majors take the next week. I have the same bias on the other setups, but AUD/USD looks a tough ride I guess. At least for now. As I read the post further rookie already addressed the question already so your answer might be somewhere there too.

My view on CHF is in post number 721. Price action is not confirmed by specs, who usually follow the trend. Normally price rises net position specs rise; when price decreases net positions for specs decreases. This time this statement is not true.

737

Mike,

the weekly chart is awesome, like always. I though USD was worse than it actually was. Also the huge EUR weakness was a surprise. More than that I thought AUD was number 1. These feelings… At least I got the CHF – EUR correlation as these two were the worst. I think CHF only survived better because of risk off environment. So now we can take an advantage of it. I agree, Majors will win now.

You are the “man of tables”, I just realized it. Man, I knew you make your weekly table I should have not gone slowly through on all the daily numbers an hour ago :slight_smile: I guess I rely on your chart analysis with rookie too much. We give way too much credit for you doing that. With that I only meant to say if I were you, I would trick the other guys with false data for some weeks, letting them doing some false trades :slight_smile: Just kidding! Don’t do it with us! We like these stats a lot!

You raised a very interesting question with you weekly charts. I am not sure if the weekly timeframe brings us much if you want to trade short-term. I would not really look at weekly charts. It looks to me just too long-term for short-term trades. But like I said, I am not sure on this one, Peter can maybe help on this issue. I most look for the daily TF.

738

Rookie,

your analysis is great, it is however expected from you. No special “Thanks rookie!” from now on.
I want to announce that I do believe CAD will get strength in the next COT Report. It is because of last weeks’ strength in the last 3 days, maybe because of M&A. I do not care about that one. CAD has to be stronger for a longer period to change my bias on it. I do see the development in you. This week you already did not compare the stats on the negative/positive basis but on the historical extremes. I have recognized it in your NZD analysis. This deserves a “good job rookie “ clap. You might have read the book recaps :slight_smile: With your AUD analysis I agree strongly. I was even thinking to close the trades on Friday. I watch it carefully. Oh, and now I see the best sentence: “So let’s keep that in mind guys… especially before taking any long swing trades with AUD.„ Nice, coding this sentence it means: „FE, consider closing your trades soon!” I consider it! You should remember next week, that comdolls were all strong this week so we can expect a correction in comdolls increasing spec longs in the short-term I think.

Reading your conclusion, from the 8 currencies we have the same bias on 7. The one where we have different bias is the CHF. I guess it is a good statistic. It is difficult to come more close to each other. The CHF is funny, because I posted also to watch out for that one today, without reading the posts.

I would say for you CHF question that CHF is just getting too strong. SNB have to defend it and make it weaker. For me this means CHF is bearish.

Your CAD analysis was great. I do not know if you copied from somewhere or read about it and made you own thoughts on it together.

So guys, we have 13 minutes until market open. I told you I get ready on time. Hope you can all read fast!

PS: I would like to announce already that September looks quite busy for me. This means the following week from Thursday until Sunday night I will be rarely available, unfortunately I also miss the NFP live. In the second part of the month I will be also missing sometimes but always only 1-2 days in a role.

739

Hey guys!

Well, I finally have my accurate total from last week. I’m happy. + 3.9% And that is from the start from last Sunday night (market open), and just after I closed out all my winners from the week before. And the big gap!

I was looking, and see that AUD is kicking it over everyone so far now. Comms are in session (for the most part). So, I got out of the market. Closed up all the USD trades. Now gonna just wait for the London session, and be looking at [I]my[/I] GBP. I have them in mind this week. GBP/CHF also guys. ]

I’m happy. I don’t have work tomorrow. But, you better believe I’ll be up at 3am, just when London is getting going. I ALWAYS have so much work to do. It’s [I]my business[/I] that I love to be working on. And I’ll have a whole lot of time to get things done.

Ok fellas. We’ll be in touch.
Oh, hey FE! Look man…you snooze in here you lose. :18:
I hope you don’t think that you always have to respond to us. Ok, maybe to answer questions, but, I think it’s all good. Just throw in a “like” every now and then. If we got things going on, then posting it is!
When you will be away we will keep the ship afloat. No worries captain!

See ya all in the a.m.

Mike

740

You’re doing great already Mike keep it up!

There’s something to be said about managing your trades properly besides trade execution itself which I’m currently working on. If we master that stage I think we’ll do great! I have a feeling FE is already quite good at managing open trades.

I hear your broker isn’t good with calculating weekly gains , why don’t you link your account with myfxbook I have mine linked. It’s a lot easier that way. They’ve got bunch of fancy ways to show you how well or bad you’re doing.

741

I see you’re up FE…

I hope you won’t be away for too long ;). Otherwise you’ll have a lot of catching up to do when you’re back.

I always appreciate your feedback on my weekly analysis. I’m trying to absorb in everyone’s comments.

Like you I don’t have much planned for this week except for managing my two open trades NZDUSD short. Yes I’ve got two in fact I’ve just opened the third one, trying to get as much out of this trade.

I have a limit order to long USDCAD so far its about 13 pips away. Besides these two I’m not looking at much at least for now. I have to manage these 4 for now and not close trades too early.

I remember your advice. Open your trades place your TP and SL. And just walk away from your PC. But there’s cellphone! :59:. I keep finding myself checking my open trades throughout the day. And I know thats one of the biggest reason why I keep closing trades too early. Gotta work on that.

Hope you have a good trading week and I’ll see you around!

742

Hi guys!

Well, it is showing it, and I’m in. Come on GBP.

GBP against CHF, JPY, NZD.

Now I hope I can stay with these for the week. I only want to get out after some profits. I’m a little nervous with NZD though. And the only reason is because their a Comm. And I think their the weakest of them. And this week should go to the Majors.

Mike

743

Hi Mike,

I am expecting some posts from you if you have a holiday :slight_smile: At the same time I congratulate to you for your 1 year Babypips membership. You can for sure apply now for Babypips.com MasterCard or something like that :slight_smile:

I am actually also in the GBP/JPY and GBP/CHF trades. I opened both of them. NZD not so. I like the bias but the chart makes me a bit uncertain.

The AUD trades are doing great until this point.

It is more interesting than useful for all of you, because it shows the most up-to-date action in Ukraine:

Militants tortured military Commissioner to death in Snizhne

BTW rookie, I have a double suggestion for you to save money: first of all buy a cell phone for only $40-50 which does not have internet and is not a smart phone. You will save money with not spending hundreds of USD on a cell phone. And doing this you will also save money with not closing your trades too early as you will not be able to check during the day how they are doing! That is a huge marketing thing to make smart phones for a lot of money and engineer them in a way that you have to throw them away in 2 years when you “have to” buy a new one. It destroys your wallet and social life at the same time. This was only my thought off the topic.

Good trading to everyone,
FE