In a previous article, I outlined my approach for analyzing CoT data to reveal how different types of traders are positioned in the futures markets. If you missed it, give the article a read to see the method behind my analysis.
This is the 18th in a series of weekly updates that outlines how traders are positioned, and how that positioning has recently changed. I break down the updates by asset class, so let's get started.
Hedge funds have actually been reducing their long exposure to the 30-year bond (NYSEARCA:TLT). They've captured a large amount of the uptrend as long-term rates have persistently fallen.
Institutions are very long the 5-year (NYSEARCA:IEI), betting on higher bond prices and lower short-term rates.
I'm interested by what's going on in cotton (NYSEARCA:BAL). Cotton producers have been quick to sell futures and lock in current prices for their future production.
Compare this to what happened in corn (NYSEARCA:CORN) futures a couple of weeks ago. Same setup: price rallied, producers were quick to short. Corn fell over the next few weeks. Maybe this will happen in cotton, maybe it won't. It is something worth watching.
Money managers have aggressively bought up copper futures (NYSEARCA:JJC).
Money managers have been progressively more bearish on WTI crude oil (NYSEARCA:USO). They added to their shorts last week.
Hedge funds have kept their record long exposure to the Japanese yen (NYSEARCA:FXY). This was a tad surprising to me, I would have expected a bit more risk reduction after the recent 5% correction vs. the USD.
Hedge funds have aggressively shorted the British pound (NYSEARCA:FXB).
Positioning within stock index futures remained a mixed bag. Below, check out how bullish both hedge funds and institutions are on the Dow (NYSEARCA:DIA).
In contrast, check out how these same money managers are positioned in the Nasdaq (NASDAQ:QQQ).
Finally, institutional investors have record long exposure to VIX futures (NYSEARCA:VXX).
So what's the big picture? Money managers are very bullish on the 30-year bond, 5-year note, copper, Japanese yen, and the Dow. Remember, this is not an indication to go short. Trends can persist longer than you'd think. The purpose of CoT analysis is to make you aware of how the herd is trading. If you're long any of the above asset classes, be aware that you're not a contrarian. In addition, commodity producers have been quick to lock in current cotton prices. This means that, on average, they think that price is high and have decided to hedge some of their future production.
If you've got any questions about CoT data, don't hesitate to ask me in the comments below!
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.