Speculator Extremes: Cotton, Sugar & 5-Year lead 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 February 4th.

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:

Coffee

The Coffee speculator position comes in as the most bullish extreme standing this week. The Coffee speculator level is currently at a 95.5 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 7.5 this week. The overall net speculator position was a total of 71,878 net contracts this week with a decline of -4,642 contracts in the weekly 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.

Gold

The Gold speculator position comes next in the extreme standings this week. The Gold speculator level is now at a 95.1 percent score of its 3-year range.

The six-week trend for the percent strength score was 20.8 this week. The speculator position registered 302,508 net contracts this week with a weekly gain of 3,099 contracts in speculator bets.

Live Cattle

The Live Cattle speculator position comes in third this week in the extreme standings. The Live Cattle speculator level resides at a 93.4 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 13.0 this week. The overall speculator position was 116,439 net contracts this week with a decrease of -2,605 contracts in the weekly speculator bets.

Corn

The Corn speculator position comes up number four in the extreme standings this week. The Corn speculator level is at a 92.7 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 30.1 this week. The overall speculator position was 462,381 net contracts this week with a boost of 18,506 contracts in the speculator bets.

Steel

The Steel speculator position rounds out the top five in this week’s bullish extreme standings. The Steel speculator level sits at a 88.5 percent score of its 3-year range. The six-week trend for the speculator strength score was 11.8 this week.

The speculator position was -1,763 net contracts this week with a small increase of 22 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Cotton

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

The six-week trend for the speculator strength score was -12.4 this week. The overall speculator position was -50,767 net contracts this week with a drop of -8,339 contracts in the speculator bets.

Sugar

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

The six-week trend for the speculator strength score was -29.8 this week. The speculator position was -33,109 net contracts this week with a decline of -3,675 contracts in the weekly speculator bets.

5-Year Bond

The 5-Year Bond speculator position comes in as third most bearish extreme standing of the week. The 5-Year Bond speculator level resides at a 2.9 percent score of its 3-year range.

The six-week trend for the speculator strength score was -8.9 this week. The overall speculator position was -1,927,666 net contracts this week with a drop of -151,611 contracts in the speculator bets.

Euro

The Euro speculator position comes in as this week’s fourth most bearish extreme standing. The Euro speculator level is at a 6.5 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 -58,614 net contracts this week with a rise of 7,990 contracts in the weekly speculator bets.

New Zealand Dollar

Finally, the New Zealand Dollar speculator position comes in as the fifth most bearish extreme standing for this week. The New Zealand Dollar speculator level is at a 6.5 percent score of its 3-year range.

The six-week trend for the speculator strength score was -3.6 this week. The speculator position was -49,090 net contracts this week with a dip of -2,059 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.