Be Aware Of These Crowded Trades: WTI Crude, Natural Gas, And The U.S. Dollar

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Movement Capital
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Summary

  • Commodities: Money managers are extremely long copper and WTI crude futures. Commodity producers are actively hedging future cotton and natural gas production at current prices.
  • Currencies: Everybody's long the U.S. Dollar relative to other foreign currencies.
  • Stocks: Surprisingly, hedge funds have shorted a ton of S&P futures over the past two weeks. Net positioning levels are still quite optimistic though.

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 43rd weekly update 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.

Commodities

Money managers are extremely bullish on copper (JJC).

Cotton (NYSEARCA:BAL) producers are actively hedging their future production at currently high prices.

I found it interesting that money managers didn't really add to their long exposure in gold (NYSEARCA:GLD) on the recent rally. Their degree of bullishness has substantially reduced since the summer of 2016.

The single most important change in last week's CoT report is that money managers bought a huge amount of WTI crude oil (NYSEARCA:USO) futures - $2.6 billion to be exact. The last time money managers were this bullish on WTI was in July of 2014, right before the crash. Be careful if you're long.

Natural gas (NYSEARCA:UNG) producers are taking advantage of high prices and selling futures, locking in prices for their future production. Historically, it's paid to pay attention when this group of traders gets extremely bearish.

Currencies

Both institutions and hedge funds have reduced their long exposure to the AUD/USD (NYSEARCA:FXA) over the past few months.

Being long the U.S. Dollar (NYSEARCA:UUP) is a very consensus trade. Positioning hasn't been this optimistic since 2015.

Hedge funds have made a complete 180 in JPY/USD (NYSEARCA:FXY) futures. A couple of months ago they were more net long than they had ever been in five years. Now they're quite bearish just after the yen has corrected

This article was written by

Movement Capital profile picture
5.01K Followers
Eversight Wealth is an independent flat fee investment advisor offering financial planning and investment management services. We help investors build low-cost diversified portfolios, create comprehensive financial plans, and save money with a flat annual fee. Formerly Movement Capital.

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.

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