12 Aug

Speculator Extremes: Cocoa & Palladium lead COT Bullish & Bearish Positions

August 12, 2023

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 August 8th.

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:

Cocoa Futures


The Cocoa Futures speculator position comes in as the most bullish extreme standing this week. The Cocoa Futures 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 8.9 this week. The overall net speculator position was a total of 79,502 net contracts this week with a change of 1,288 contract in the weekly speculator bets.

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Mexican Peso


The Mexican Peso speculator position comes next in the extreme standings this week. The Mexican Peso speculator level is now at a 90.2 percent score of its 3-year range.

The six-week trend for the percent strength score was -7.8 this week. The speculator position registered 83,651 net contracts this week with a weekly change of -4,897 contracts in speculator bets.

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.

British Pound


The British Pound speculator position comes in third this week in the extreme standings. The British Pound speculator level resides at a 88.4 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at -3.5 this week. The overall speculator position was 47,020 net contracts this week with a change of -2,542 contracts in the weekly speculator bets.

VIX


The VIX speculator position comes up number four in the extreme standings this week. The VIX speculator level is at a 87.1 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 14.9 this week. The overall speculator position was -44,404 net contracts this week with a change of -2,238 contracts in the speculator bets.

DowJones Mini


The DowJones Mini speculator position rounds out the top five in this week’s bullish extreme standings. The DowJones Mini speculator level sits at a 85.3 percent score of its 3-year range. The six-week trend for the speculator strength score was 65.0 this week.

The speculator position was 4,031 net contracts this week with a change of 2,451 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Palladium


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

The six-week trend for the speculator strength score was -20.6 this week. The overall speculator position was -10,192 net contracts this week with a change of -895 contracts in the speculator bets.

5-Year Bond


The 5-Year Bond speculator position comes in next for the most bearish extreme standing on the week. The 5-Year Bond speculator level is at a 2.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -17.1 this week. The speculator position was -1,230,307 net contracts this week with a change of 26,739 contracts in the weekly speculator bets.

2-Year Bond


The 2-Year Bond speculator position comes in as third most bearish extreme standing of the week. The 2-Year Bond speculator level resides at a 3.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -7.7 this week. The overall speculator position was -1,109,126 net contracts this week with a change of -13,463 contracts in the speculator bets.

Ultra U.S. Treasury Bonds


The Ultra U.S. Treasury Bonds speculator position comes in as this week’s fourth most bearish extreme standing. The Ultra U.S. Treasury Bonds speculator level is at a 4.6 percent score of its 3-year range.

The six-week trend for the speculator strength score was -8.6 this week. The speculator position was -445,088 net contracts this week with a change of 11,341 contracts in the weekly speculator bets.

Ultra 10-Year U.S. T-Note


Finally, the Ultra 10-Year U.S. T-Note speculator position comes in as the fifth most bearish extreme standing for this week. The Ultra 10-Year U.S. T-Note speculator level is at a 13.9 percent score of its 3-year range.

The six-week trend for the speculator strength score was -3.8 this week. The speculator position was -149,951 net contracts this week with a change of 35,286 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

*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.


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