13 Nov

Speculator Extremes: Steel, 3M SOFR, DowJones & CAD lead Bullish & Bearish Positions

November 13, 2023

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Monday (due to holiday delay) for data ending on November 7th.

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:

Steel


The Steel speculator position comes in as the most bullish extreme standing this week. The Steel speculator level is currently at a 94.4 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 19.4 this week. The overall net speculator position was a total of -1,303 net contracts this week with a gain of 1,297 contract 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.

3-Month Secured Overnight Financing Rate


The 3-Month Secured Overnight Financing Rate speculator position comes next in the extreme standings this week. The 3-Month Secured Overnight Financing Rate speculator level is now at a 93.2 percent score of its 3-year range.

The six-week trend for the percent strength score was 4.2 this week. The speculator position registered 386,629 net contracts this week with a weekly boost of 141,657 contracts in speculator bets.

VIX


The VIX speculator position comes in third this week in the extreme standings. The VIX speculator level resides at a 87.2 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 13.3 this week. The overall speculator position was -33,049 net contracts this week with a decline of -19,070 contracts in the weekly speculator bets.

Cocoa Futures


The Cocoa Futures speculator position comes up number four in the extreme standings this week. The Cocoa Futures speculator level is at a 86.5 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of -3.6 this week. The overall speculator position was 75,027 net contracts this week with a rise of 5,550 contracts in the speculator bets.

Bloomberg Commodity Index


The Bloomberg Commodity Index speculator position rounds out the top five in this week’s bullish extreme standings. The Bloomberg Commodity Index speculator level sits at a 82.4 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 -6,162 net contracts this week with a dip of -697 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

DowJones Mini


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

The six-week trend for the speculator strength score was -33.4 this week. The overall speculator position was -37,076 net contracts this week with a decline of -965 contracts in the speculator bets.

Canadian Dollar


The Canadian Dollar speculator position comes in next for the most bearish extreme standing on the week. The Canadian Dollar speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -30.1 this week. The speculator position was -67,721 net contracts this week with a drop of -18,389 contracts in the weekly speculator bets.

MSCI EAFE MINI


The MSCI EAFE MINI speculator position comes in as third most bearish extreme standing of the week. The MSCI EAFE MINI speculator level resides at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -31.7 this week. The overall speculator position was -58,202 net contracts this week with a change of -12,717 contracts in the speculator bets.

5-Year Bond


The 5-Year Bond speculator position comes in as this week’s fourth most bearish extreme standing. 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 -26.2 this week. The speculator position was -1,423,384 net contracts this week with a decline of -231,795 contracts in the weekly speculator bets.

2-Year Bond


Finally, the 2-Year Bond speculator position comes in as the fifth most bearish extreme standing for this week. The 2-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 -15.8 this week. The speculator position was -1,453,706 net contracts this week with a shortfall of -18,258 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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