Speculator Extremes: Live Cattle, SOFR, Japanese Yen lead weekly Bullish & Bearish Positions

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on June 6th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

Bloomberg Commodity Index

The Bloomberg Commodity Index speculator position comes in as the most bullish extreme standing this week. The Bloomberg Commodity Index speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 2.1 this week. The overall net speculator position was a total of -1,487 net contracts this week with a change of 181 contract in the weekly speculator bets.

Mexican Peso

The Mexican Peso speculator position comes next in the extreme standings this week. The Mexican Peso speculator level is now at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score was 18.9 this week. The speculator position registered 81,670 net contracts this week with a weekly change of 3,665 contracts in speculator bets.

Cocoa Futures

The Cocoa Futures speculator position comes in third this week in the extreme standings. The Cocoa Futures speculator level resides at a 100.0 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 11.8 this week. The overall speculator position was 72,234 net contracts this week with a change of 6,661 contracts in the weekly speculator bets.

3-Month Secured Overnight Financing Rate

The 3-Month Secured Overnight Financing Rate speculator position comes up number four in the extreme standings this week. The 3-Month Secured Overnight Financing Rate speculator level is at a 97.8 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 61.3 this week. The overall speculator position was 40,305 net contracts this week with a change of -2,917 contracts in the speculator bets.

Live Cattle

The Live Cattle speculator position rounds out the top five in this week’s bullish extreme standings. The Live Cattle speculator level sits at a 96.5 percent score of its 3-year range. The six-week trend for the speculator strength score was 4.0 this week.

The speculator position was 105,621 net contracts this week with a change of 4,243 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

5-Year Bond

The 5-Year Bond speculator position comes in as the most bearish extreme standing this week. The 5-Year Bond speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -14.1 this week. The overall speculator position was -1,027,059 net contracts this week with a change of -43,222 contracts in the speculator bets.

2-Year Bond

The 2-Year Bond speculator position comes in next for the most bearish extreme standing on the week. The 2-Year Bond speculator level is at a 0.9 percent score of its 3-year range.

The six-week trend for the speculator strength score was -39.1 this week. The speculator position was -959,901 net contracts this week with a change of 9,962 contracts in the weekly speculator bets.

Lean Hogs

The Lean Hogs speculator position comes in as third most bearish extreme standing of the week. The Lean Hogs speculator level resides at a 2.1 percent score of its 3-year range.

The six-week trend for the speculator strength score was -5.3 this week. The overall speculator position was -33,503 net contracts this week with a change of 2,611 contracts in the speculator bets.

Wheat

The Wheat speculator position comes in as this week’s fourth most bearish extreme standing. The Wheat speculator level is at a 2.4 percent score of its 3-year range.

The six-week trend for the speculator strength score was -5.3 this week. The speculator position was -90,684 net contracts this week with a change of 3,312 contracts in the weekly speculator bets.

Japanese Yen

Finally, the Japanese Yen speculator position comes in as the fifth most bearish extreme standing for this week. The Japanese Yen speculator level is at a 4.3 percent score of its 3-year range.

The six-week trend for the speculator strength score was -22.2 this week. The speculator position was -104,817 net contracts this week with a change of -8,624 contracts in the weekly speculator bets.

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Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.