Hedge Funds Had These Trades On Pre-Trump

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Includes: BAL, CORN, EWJ, FXB, FXE, GLD, IEI, JJC, SPY, TLT, USO, VXX
by: Free CoT Data

Summary

Bonds: Hedge funds nailed the short trade in 5-year Treasury futures.

Commodities: Money managers bought a massive amount of copper futures and shorted WTI crude, producers & users locked in prices for their future cotton production by selling futures.

Currencies: Hedge funds carried big short positions in both the Euro and British pound against the USD.

Stocks: Everybody's bearish on the Nikkei, hedge funds were very long the S&P 500 and very short VIX futures leading up to the election.

Note: My approach for analyzing CoT data, to reveal how different types of traders are positioned in the futures markets, is outlined here. If you missed it, give the article a read to see the method behind my analysis. All data and images in this article come from my website.

This is the 33rd 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.

Bonds

Since the summer hedge funds have reduced their long exposure to the 30-year Treasury bond (NYSEARCA:TLT). They still carried a fairly large long position into last Tuesday though, meaning they inflicted large losses as yields spiked and bond prices fell.

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Hedge funds were on the right side of the trade with their massive short position in 5-year futures (NYSEARCA:IEI).

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Commodities

By far the most interesting tidbit from this CoT report is just how quickly money managers got bullish on copper (NYSEARCA:JJC) futures. At a CoT percentile of 100%, money managers are more net long copper than they've been in five years. I can't remember when I've seen a positioning move this drastic.

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Money managers thought differently of WTI crude oil (NYSEARCA:USO), as they rapidly added to shorts.

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Cotton (NYSEARCA:BAL) producers & users are extremely short cotton futures, meaning that producers are taking advantage of high prices and locking in prices for their future production by selling futures.

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Money managers didn't really have an extreme position on in gold (NYSEARCA:GLD) futures. They had a much larger long position on earlier this year.

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Corn (NYSEARCA:CORN) producers & users have grown much less bullish on the agricultural commodity.

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Currencies

Hedge funds are extremely short the British pound (NYSEARCA:FXB) against the USD.

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Hedge funds were also correct to carry an extremely large net short position in Euro (NYSEARCA:FXE) futures into the election.

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Stocks

Hedge funds loaded up on S&P 500 (NYSEARCA:SPY) longs. Needless to say, it was a profitable move. Next week's CoT report will reveal if their bullish positioning has grown even more extreme.

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They were also very short VIX (NYSEARCA:VXX) futures.

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It should also be noted just how many people are bearish on the Nikkei (NYSEARCA:EWJ).

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Conclusion

So what are the main takeaways from this week's CoT data? Three things:

  1. Being long copper futures is an extremely crowded trade
  2. Hedge funds largely nailed the post-election moves. They were short the 5-year, long the S&P, short VIX futures, and short foreign currencies against the USD
  3. Sentiment has quickly shifted negatively in WTI crude oil futures

If you have 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.

Additional disclosure: The author does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked in this article or incorporated herein. This article is provided for guidance and information purposes only. Investments involve risk are not guaranteed. This article is not intended to provide investment, tax, or legal advice. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.