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 48th 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.
It's been interesting to watch money managers get significantly more bullish on silver (NYSEARCA:SLV) futures vs. gold. The chart below covers positioning in silver.
Here's gold (NYSEARCA:GLD). As you can see, money managers have been much slower to increase their long exposure after last winter's correction.
Natural gas (NYSEARCA:UNG) producers nailed the top in December. At that point in time, they were more net short than they had ever been in the past five years. They were correct to hedge a lot of future production then, natural gas has fallen more than 20% since.
Agricultural commodities are some of the least crowded trades on the long side. Corn (NYSEARCA:CORN) is up 3% YTD and money managers have gotten a bit more bullish, but sentiment is nowhere near an extreme level.
Money managers are extremely bullish on WTI crude oil (NYSEARCA:USO) futures. At 5-year net position percentile of 100%, they haven't had this big of a net long position in five years. Positioning extremes were good indicators of short-term tops in WTI last year, but so far oil has held up with the huge current amount of long positioning.
Both hedge funds and institutions have stayed persistently short the British pound (NYSE:FXB) against the USD for months. They've been on the right side of the trade thus far, as the pound has gradually fallen in value.
Institutions and funds are not positioned the same way in EUR/USD (NYSEARCA:FXE) futures. Hedge funds are much less optimistic on the European currency relative to institutions.
Positioning in JPY/USD (NYSE:FXY) futures provides a good example for how to effectively use CoT data. Last September, hedge funds were more net long the currency than they had ever been over the past five years. CoT revealed that the long side was very crowded. The Japanese currency went on to fall more than 10% against the U.S. dollar in late 2016.
Hedge funds and institutional investors have markedly increased their long exposure in S&P (NYSEARCA:SPY) futures over the past few weeks. I will say this, their positioning is less extreme than I initially expected relative to other sentiment indicators and the S&P being at all-time highs.
There was a huge move in positioning in VIX (NYSEARCA:VXX) futures last week. Institutions flipped from being net short 25,000 contracts to net long 28,000 contracts.
Of all the equity indices I monitor, traders are by far the least bullish on Nikkei (NYSEARCA:EWJ) futures.
So what are the main takeaways from this week's CoT data? Three things:
- Most traders are betting on the U.S. dollar to keep rising in value relative to the pound, yen, and euro.
- Long positioning is very crowded in a number of different commodity contracts.
- Two weeks ago, institutions were more net short VIX futures than they had ever been in five years. They reversed their stance last week and bought a huge amount of contracts.
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.