Speculator Extremes: MSCI EAFE & FedFunds lead 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 August 19th.

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:

MSCI EAFE MINI

The MSCI EAFE MINI speculator position comes in at the top of the extreme standings this week. The MSCI EAFE-Mini speculator level is now at a 96 percent score of its 3-year range.

The six-week trend for the percent strength score was a change of 3 percentage points this week. The speculator position registered 5,439 net contracts this week with a weekly dip of -2,355 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.

 

Nasdaq

The Nasdaq speculator position comes in second this week in the extreme standings as the Nasdaq-Mini speculator level resides at a 87 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at a gain of 4 percentage points this week. The overall speculator position was 33,845 net contracts this week with a decline of -8,467 contracts in the weekly speculator bets.

Live Cattle

The Live Cattle speculator position comes up number three in the extreme standings this week as the Live Cattle speculator level is at 83 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a gain of 5 percentage points this week. The overall speculator position was 106,141 net contracts this week with no change in the speculator bets.

Lean Hogs

The Lean Hogs speculator position comes next in this week’s bullish extreme standings as the Lean Hogs speculator level sits at a 80 percent score of its 3-year range. The six-week trend for the speculator strength score was a drop by -16 percentage points this week.

The speculator position was 69,709 net contracts this week with a decrease by -4,218 contracts in the weekly speculator bets.

Ultra U.S. Treasury Bonds

The Ultra U.S. Treasury Bonds speculator position rounds out the top five in this week’s bullish extreme standings. The Ultra Long T-Bond speculator level is at a 80 percent score of its 3-year range. The six-week trend for the speculator strength score was a change of -7 percentage points this week.

The speculator position was -242,162 net contracts this week with a drop by -33,030 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Fed Funds

The Fed Funds speculator position comes in as the most bearish extreme standing this week. The FedFunds speculator level is at a 0 percent score of its 3-year range.

The six-week trend for the speculator strength score was a large drop by -62 percentage points this week. The overall speculator position was -317,054 net contracts this week with a reduction by -83,387 contracts in the speculator bets.

WTI Crude Oil

The WTI Crude Oil speculator position comes in next for the most bearish extreme standing on the week. The WTI Crude speculator level is at a 1 percent score of its 3-year range.

The six-week trend for the speculator strength score was -38 percentage points this week. The speculator position was 120,209 net contracts this week with a rise of 3,467 contracts in the weekly speculator bets.

US Dollar Index

The US Dollar Index speculator position comes in as third most bearish extreme standing of the week. The USD Index speculator level resides at a 2 percent score of its 3-year range.

The six-week trend for the speculator strength score was -5 percentage points this week. The overall speculator position was -5,988 net contracts this week with an increase of 259 contracts in the speculator bets.

Sugar

The Sugar speculator position comes in as this week’s fourth most bearish extreme standing. The Sugar speculator level is at a 2 percent score of its 3-year range.

The six-week trend for the speculator strength score was -3 percentage points this week. The speculator position was -70,293 net contracts this week with a slide of -1,781 contracts in the weekly speculator bets.

5-Year Bond

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

The six-week trend for the speculator strength score was 0 percentage points this week. The speculator position was -2,508,383 net contracts this week with a change of 57,986 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.