29 Jan

Speculator Extremes: SOFR-3M, Gasoline & Nasdaq lead Bullish Positions

January 29, 2024

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 January 23rd.

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:

3-Month Secured Overnight Financing Rate


The 3-Month Secured Overnight Financing Rate speculator position comes in as the most bullish extreme standing this week. The 3-Month Secured Overnight Financing Rate 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 2.6 this week. The overall net speculator position was a total of 769,187 net contracts this week with a rise of 17,969 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.

1-Month Secured Overnight Financing Rate

The 1-Month Secured Overnight Financing Rate speculator position comes next in the extreme standings this week. The 1-Month Secured Overnight Financing Rate speculator level is now at a 96.1 percent score of its 3-year range.

The six-week trend for the percent strength score was 5.3 this week. The speculator position registered 113,224 net contracts this week with a weekly dip of -14,693 contracts in speculator bets.

Gasoline


The Gasoline speculator position comes in third this week in the extreme standings. The Gasoline speculator level resides at a 95.0 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 13.9 this week. The overall speculator position was 73,741 net contracts this week with an increase by 4,664 contracts in the weekly speculator bets.

Nasdaq


The Nasdaq speculator position comes up number four in the extreme standings this week. The Nasdaq speculator level is at a 90.6 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 38.8 this week. The overall speculator position was 33,042 net contracts this week with a decline of -3,529 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 90.5 percent score of its 3-year range. The six-week trend for the speculator strength score was 24.2 this week.

The speculator position was 18,248 net contracts this week with a decrease of 861 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Soybean Meal


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

The six-week trend for the speculator strength score was -53.3 this week. The overall speculator position was -20,616 net contracts this week with a drop of -9,374 contracts in the speculator bets.

Palladium


The Palladium speculator position comes in next for the most bearish extreme standing on the 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 -6.7 this week. The speculator position was -11,617 net contracts this week with an edge down by -168 contracts in the weekly speculator bets.

Soybeans


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

The six-week trend for the speculator strength score was -34.6 this week. The overall speculator position was -105,994 net contracts this week with a decline of -12,326 contracts in the speculator bets.

Corn


The Corn speculator position comes in as this week’s fourth most bearish extreme standing. The Corn speculator level is at a 0.1 percent score of its 3-year range.

The six-week trend for the speculator strength score was -15.5 this week. The speculator position was -219,200 net contracts this week with a small gain of 768 contracts in the weekly speculator bets.

Soybean Oil


Finally, the Soybean Oil speculator position comes in as the fifth most bearish extreme standing for this week. The Soybean Oil speculator level is at a 5.2 percent score of its 3-year range.

The six-week trend for the speculator strength score was -12.0 this week. The speculator position was -25,358 net contracts this week with an increase of 2,229 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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