Archive for Opinions – Page 51

30 May

Avocados are a ‘green gold’ export for Mexico, but growing them is harming forests and waters

BY Viridiana Hernández Fernández, University of Iowa 

Consumers’ love for avocados in the United States seems to know no bounds. From 2001 through 2020, consumption of this fruit laden with healthy fats tripled nationwide, rising to over 8 pounds per person yearly.

On average, 90% of those avocados are grown in the southwest Mexican state of Michoacán. As with other foods that have become trendy, such as acai berries, or widely used, such as palm oil, intensive avocado production is causing significant environmental damage.

My research on 20th-century Latin American environmental history examines how the transnational movement of people, foods and agricultural technologies has changed rural landscapes in Latin America. Currently, I’m writing a book on the development of a global avocado industry centered in Michoacán, the world’s largest avocado-growing region.

Map of Mexico with the state of Michoacán highlighted
Michoacán has a large Indigenous population and an economy based on agriculture, fishing and ranching.
CrazyPhunk/Wikimedia, CC BY-SA

My research shows that raising avocados is economically beneficial in the short term for farmers, which in Latin America typically means medium-sized operators and agribusinesses. It also helps growers – people in rural areas who grow subsistence crops. Over time, though, every serving of avocado toast takes a toll on Michoacán’s land, forests and water supply. Rural growers, who lack the resources of large-scale farmers, feel those impacts most keenly.

The environmental effects of monoculture

Michoacán is the only place on earth that grows avocados year-round, thanks to its temperate climate, abundant rainfall and deep, porous volcanic soils that are rich in potassium, a vital plant nutrient. Even under favorable conditions, however, monocultures are never environmentally sustainable.

Introducing homogeneous, high-yielding plant varieties leads growers to abandon native crops. This makes the local ecosystem more vulnerable to threats such as pest infestations and reduces food options. It also erodes fertile soils and increases use of agrochemicals.

Monoculture also can drive deforestation. Mexican officials estimate that avocado production spurred the clearance of 2,900 to 24,700 acres of forests per year from 2010 through 2020. And it’s resource intensive: Avocado trees consume four to five times more water than Michoacán’s native pines, jeopardizing water resources for human consumption.

Avocados generate billions of dollars in export revenue for Mexico, but growing them imposes heavy costs at home.

Bred in California

Avocados have been a part of the Mexican diet since ancient Mesoamerica, but the Hass – the most popular variety worldwide today – was bred in modern California.

In the late 19th century, scientists from the U.S. Department of Agriculture embarked on a mission to collect and send home samples of food plants from around the world. The goal was to adapt and grow these plants in the United States, reducing the need for food imports.

Collecting plant genetic material from Latin America and imposing quarantines on avocados from Mexico starting in 1914 provided vital support for the development of a U.S. avocado industry. Farmers in California and Florida bred multiple strains from the material that USDA explorers collected. But U.S. consumers in the early 1900s weren’t familiar with this new food and hesitated to buy avocados of various textures, sizes and colors.

In response, farmers began selecting plants that grew avocados with small seeds, abundant flesh, hard skin, a creamy texture – and, most importantly, high yields. According to industry lore, Rudolph Hass, a postman and amateur horticulturalist in Southern California, stumbled on a new variety in the late 1920s while trying to propagate a variety called Rideout.

Within several decades, the Hass became the dominant avocado grown in California. By the 1950s, Mexican farmers who had connections with U.S. brokers had introduced the Hass south of the border.

How the Hass changed Michoacán

In the early 1960s, Michoacano cantaloupe farmers acquired lands to expand their production by growing avocados. Soon they focused on exclusively producing the Hass.

Many local Indigenous Purhépecha people, along with non-Indigenous campesinos, or country farmers, rented or sold land to the emerging avocado farmer class. In the 1980s, campesinos began to grow the fruit too. This was an expensive, long-term undertaking: It took four years for the trees to produce marketable avocados, but growers had to buy the trees, clear land for them and provide water, fertilizer and pesticides to help them grow.

Cantaloupe farmers could afford to invest capital for four years with no cash return. Campesinos had to rely on loans or remittances from family members abroad to develop avocado orchards.

As production expanded, agrochemical distributors, tree nurseries and packing houses sprouted on Purhépecha lands, clearing native pine trees and eroding the fertile soils. Mexico passed a law in 2003 that prohibited clearing forests for commercial agriculture, but by this time campesinos in Michoacán were already growing Hass avocados on a large scale.

The guacamole wars: NAFTA and avocados

After the adoption of the North American Free Trade Agreement in 1994, California avocado farmers lobbied to maintain a quarantine that the USDA had imposed on Mexican avocado trees in 1914 because of an alleged plague. After three years of drought in California and testing of Michoacán orchards for pests, Mexico began shipping Hass avocados to the U.S. in 1997.

However, the only region the USDA certified to send avocados to the United States was Michoacán. Mexico had to allow the USDA to station agents in Michoacán to verify that certified orchards fulfilled agreed conditions to minimize the risks of plant diseases.

Companies such as Calavo, a California-based produce distributor, began to buy, pack and ship avocados grown in Michoacán to U.S. customers. In the process, they became major competitors for California avocado farmers.

Beyond monoculture

Today, avocados are one of the most-regulated exports from Mexico. However, these rules do little to address the industry’s environmental impacts.

Farmers in Michoacán continue to clear woodlands, spray agrochemicals, exhaust aquifers and buy Purhépecha communal property, converting it to smaller, privately owned lots. Rising profits have spurred violence and corruption as some local authorities collude with organized crime groups to expand the market.

In 2022, the U.S. briefly suspended Mexican avocado imports after a U.S. plant safety inspector in Michoacán received a threatening phone call.

Visiting Michoacán on Feb. 26, 2024, U.S. Ambassador to Mexico Ken Salazar pledged that the U.S. would modify its protocol to block imports of avocados grown in illegal orchards. However, this won’t restore local ecosystems.

As I see it, expecting small-scale growers to protect the environment, after the ecology and economy of Michoacán has been radically altered in the name of free markets and development, puts responsibility in the wrong place. And boycotting Mexican avocados likely would simply lead growers to look for other markets.

Diversifying agriculture in the region and reforesting Michoacán could help to restore the Sierra Purhepecha’s ecology and protect the rural economy. One Indigenous community there is successfully growing peaches and lemons for the domestic market and avocados for the international market, while also planting native pines on their communal lands. This is a potential model for other farmers, although it would be hard to replicate without state support.

In my view, importing avocados from different areas of Mexico and the world to reduce the Hass market share may be the most effective environmental protection strategy. In 2022, the USDA approved imports of avocados grown in the Mexican state of Jalisco. This is a start, but Jalisco will follow Michoacán’s trajectory unless the U.S. finds more sources and promotes more avocado types.

As U.S. eaters’ tastes become more adventurous, sampling avocados of different sizes, shapes, textures, tastes and origins could become a decision that’s both epicurean and environmentally conscious.The Conversation

About the Author:

Viridiana Hernández Fernández, Assistant Professor of Latin American Environmental History, University of Iowa

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Soft Commodities
28 May

FXTM’s Cotton: Set for a major rebound?

By ForexTime 

  • Cotton ↑ 7% month-to-date
  • Headed for first ↑ month since Feb
  • Over 20% away from 2024 high
  • H4 prices bullish but RSI overbought
  • Technical levels – 83.90, 81.50, 79.50

FXTM’s new Cotton commodity could be set for a major rebound after ending last week on a firmly positive note.

Prices have recently hit a fresh multi-week high at 81.50 cents as bulls and bears wait for a fresh directional spark.

Note: Cotton is priced per pound.

Before we take a deep dive into the fundamentals, did you know that…

  • Cotton is an ancient non-food crop
  • China is the biggest producer & consumer
  • Has been grown on the moon
  • Most banknotes are made using cotton
  • Hit an all-time high in 2011 at $2.27

 

What is Cotton?

Cotton is a soft and fluffy natural fiber made up from the seeds of a cotton plant.

It can be made into clothing, used for industrial products, and even fuel.

What does FXTM’s Cotton track

FXTM’s Cotton tracks the ICE Group’s Cotton No.2 futures, the benchmark for the global cotton trading community.

The lowdown

After trading within a narrow range for 16 months, cotton prices rallied in February 2024.

The commodity ended the month over 17% higher amid supply concerns in the United States.

However, prices later slipped in March with the selloff gaining momentum in April as slow demand and increased stocks dampened the market outlook.

The bigger picture

Due to conflicting fundamental forces, 2024 has been a rollercoaster year for cotton prices.

Still, prices seem to be stabilizing near one-month highs due to supply-related concerns and signs of strong demand from China.

Weather-related issues in Texas and flooding in Brazil are expected to affect the planting of cotton among other crops.

What does this mean?

Cotton prices may push higher if supply-related issues persist and global demand continues to improve.

According to the United States Department of Agriculture (USDA), U.S. cotton demand is projected to increase in 2024/2025 but global production is also projected to rise 5% above the 2023/2024 estimate.

Technical outlook…

Prices are bullish on the D1/H4 timeframe with the upside gaining momentum above 79.50.

However, the Relative Strength Index (RSI) has touched 70 – indicating that prices are overbought on the H4 timeframe.

  • A solid breakout above 81.50 could encourage a move towards 83.90.
  • Should prices slip back under 79.50, this may open a path towards 77.50 and the 50 SMA.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Opinions Soft Commodities
24 May

Week Ahead: USDJPY waits for fundamental spark

By ForexTime 

  • Tokyo CPI & US PCE in focus
  • USDJPY 2% away from multi-decade top
  • Prices bullish but RSI near overbought
  • Bloomberg FX model – 77% USDJPY – (155.21 – 158.45)

Despite the holiday-shortened week ahead for the UK and US, markets could remain volatile due to top-tier data across the globe:

Monday, 27th May

  • UK and US markets closed
  • CN50: China industrial production
  • GER40: Germany IFO business climate
  • EU50: ECB chief economist Philip Lane speech

Tuesday, 28th May

  • AU200: Australia retail sales
  • US30: US Conference Board consumer confidence, Fed speech

Wednesday, 29th May

  • GER40: Germany CPI
  • ZAR: South African election
  • US500: Fed Beige Book, New York Fed President John Williams speech

Thursday, 30th May

  • EU50: Eurozone economic confidence, unemployment
  • ZAR: South Africa rate decision
  • SEK: Sweden GDP
  • CHF: Switzerland GDP
  • TWN: Taiwan GDP
  • US500: US initial jobless claims, GDP (Second Est), Fed speech

Friday, 31st May

  • CAD: Canada quarterly GDP
  • CN50: China official PMI’s
  • EUR: Eurozone CPI
  • JPY: Japan unemployment, Tokyo CPI, industrial production, retail sales
  • USDInd: US May PCE report, Atlanta Fed President Raphael Bostic speech

A few weeks ago, the yen was a hot talking point after staging a dramatic reversal against the dollar. This development fueled speculation about possible intervention by Japanese authorities after the currency weakened to a 34-year low.

Fast forward to today, the yen has given back most of its gains and is currently trading 2% away from its multi-decade top. Could another intervention be on the horizon if prices retest the 160.22 level?

The USDJPY could end May with a bang, and here are 3 reasons why:

    1) Japan data dump

Incoming data from Japan could inject the yen with fresh volatility.

Much focus will be directed towards the latest CPI figures from Tokyo, unemployment, industrial production, and retail sales for insight into the health of Japan’s economy. This data dump may also influence expectations around when the Bank of Japan will proceed with another rate hike.

Traders are currently pricing in only a 27% probability of a 10-basis point hike by June with this jumping to 88% by July.

  • Should overall data support expectations around the BoJ hiking rates further, this could boost the yen.
  • A disappointing set of data that tempers bets around higher rates in Japan could weaken the yen.

 

    2) US April PCE report

The Fed’s preferred inflation gauge – the Core Personal Consumption Expenditure is likely to influence rate cut expectations.

Recent data from the United States have eroded bets around the Fed cutting rates anytime soon.

Traders are pricing in a 60% probability of a 25-basis point cut by September with this jumping to 87% by November.

The PCE core deflator is forecast to remain unchanged at 0.3% month-over-month, with the same expected for its year-on-year print at 2.8%.

  • More signs of cooling price pressures may rekindle Fed cut bets, dragging the USDJPY lower as a result.
  • If the PCE report prints above market forecasts, this could support the “higher for longer” narrative – pushing the USDJPY higher as a result.

Note: Looking beyond the US PCE report, it will be wise to keep an eye on speeches by numerous Fed officials and other key US data points that may influence the dollar.

 

    3) Technical forces 

The USDJPY is trending higher on the daily timeframe as there have been consistently higher highs and higher lows. However, the Relative Strength Index is slowly approaching 70 – indicating that prices may be nearing overbought conditions.

– A solid breakout and daily close above 157.00 may open a path back towards 158.45. 

– Should 157.00 prove to be reliable resistance, this may encourage a decline back towards 155.00.

Bloomberg’s FX model points to a 77% chance that USDJPY will trade within the 155.21 – 158.45 range over the next one-week period.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions
24 May

Weather risk can move markets months in advance: Stock traders pay attention to these 2 long-range climate forecasts

By Derek Lemoine, University of Arizona 

To understand how important weather and climate risks are to the economy, watch investors. New research shows that two long-range seasonal weather forecasts in particular can move the stock market in interesting ways.

We often think about forecasts as telling us what the weather will bring in coming days, but the National Oceanic and Atmospheric Administration also predicts weather conditions several months out. These seasonal climate outlooks tell us whether the hurricane season is likely to be active, whether the winter is likely to be snowy or cold, and whether an El Niño or La Niña climate pattern is likely to emerge with the potential to influence weather across the U.S.

I study the impacts of weather on economic activity as an economist. In a new paper, an atmospheric scientist at NOAA and I analyzed the influence of long-range forecasts by looking at the changing prices of stock options over 10 years and thousands of companies.

We found that investors are paying millions of dollars to hedge the risks of what NOAA’s seasonal outlooks might say. Their bets suggest that seasonal climate matters for the success of companies throughout the economy, even in sectors that might not seem especially exposed to weather.

Betting on seasonal forecasts in options markets

When you buy a stock, you buy a share of ownership in a company. The value of that stock is tied to the company’s expected future profits.

When you buy a stock option, you pay for the right to buy a particular stock at a particular price on some particular future date. Importantly, the option is just that: an option to buy, not a requirement to buy. You’ll pay a premium for this flexibility.

If the stock’s value falls, then you can just let the option expire and all you’ve lost is the premium. But if the stock price rises enough, you can exercise the option and buy the stock at the lower price built into the option. Another type of option, called a “put,” lets you sell stock you already own in a similar way.

The prices of these options tell us how uncertain investors are about the future economy.

Imagine that you know NOAA will be releasing its winter seasonal outlook in 10 days. You are considering whether to invest in a ski resort whose profits are directly tied to having a snowy, skiable winter. You expect the forecast to affect the price of the ski resort’s stock, but you don’t know which way it will go.

The more uncertain investors are about a stock’s future price, the greater their expected gains from holding the option: They get all the potential gain from big increases in the stock’s price and none of the downside risk of falling stock prices. And the greater their expected gains, the more they are willing to pay for the option and the higher the option’s price in the market. So, knowing the winter seasonal outlook is coming can make one willing to pay more for an option on the ski resort’s stock and raise the option’s price in the market.

While there are now many forecasts and available data to provide clues about the coming seasons, two forecasts tend to move the market.

Winter, El Niño outlooks affect many companies

We found that, from 2010 through 2019, the prices of options on companies throughout U.S. markets tended to fall once NOAA released its Winter Outlook, in October, and the most important of its El Niño outlooks, released in June.

In other words, before the reports came out, traders were willing to pay a higher price for options that hedge, or protect against, whatever news was going to be released. So, traders must believe that seasonal climate matters for companies’ profits and that forecasters might say something important about the coming season’s climate.

We did not detect similar effects on option prices when either NOAA or Colorado State University released their Hurricane Outlooks in May and April, or when the Farmers’ Almanac released its Winter Outlook in August. Traders seem to distinguish among outlooks based on their perceived quality and on the importance of what these reports are able to predict, rather than on media attention.

The seasonal climate also matters for more than just outdoor industries. We found the June El Niño Outlook affects options on construction, transportation and utilities – all industries that can be directly affected by weather. It also affects options on other sectors, such as manufacturing and education, possibly reflecting spillovers from elsewhere in the economy. NOAA’s Winter Outlook has similarly broad effects.

The only sector that the June El Niño Outlook does not clearly affect is agriculture, which may just reflect that El Niño’s and La Niña’s strongest effects are on winter weather, when most agriculture is less vulnerable.

Traders pay money to wait for El Niño Outlook

Traders’ interest in the June El Niño Outlook is especially interesting because NOAA releases an El Niño outlook every month. Most months, the outlook changes little from the previous month’s forecast. But in June, once spring is past, the ability to accurately forecast future El Niño events suddenly jumps.

We found that traders value that jump in quality.

The June Outlook corresponds with a US$12 million premium each year on average, showing traders are willing to put real money on the line just to know what NOAA will say in its June forecast before they commit to a stock. That’s about four times higher than we found with the average May outlook.

The traders’ hedging shows that having high-quality seasonal climate forecasts matters to investors, just as it does to communities, companies and emergency responders who rely on these analyses to prepare for severe weather seasons.

It also supports the argument that there is value in investing in the technology to improve these forecasts. And it shows the importance of keeping these outlooks confidential until their official release, similar to how the U.S. government closely guards important economic statistics prior to making them public.The Conversation

About the Author:

Derek Lemoine, Professor of Economics, University of Arizona

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Stock Market News
22 May

Is a Scorching PM Sector Rally Ahead?

Technical Analyst Clive Maund explains why he believes a rally in precious metals, specifically gold and silver, may be imminent. 

Source: Clive Maund (5/20/24) 

The PM sector did exactly as predicted in the article WHEN THE RUBBER HITS THE ROAD – THE SCORCHING PM SECTOR RALLY AHEAD posted on the site about a week ago, with breakouts by metals and stocks last week from Flag / Pennant consolidation patterns into powerful uplegs. The purpose of this update is to inform you of the fact that THE REALLY BIG ACTION HASN’T EVEN STARTED YET, but it will soon, and we will proceed to see exactly why in this update.

Let’s start by reviewing what happened. Our first chart is the 6-month chart for gold and it’s interesting to see that while silver and PM stocks raced ahead last week, gold’s new upleg has barely gotten started and it has yet to break above the resistance at its early April highs — it will though and when it does it is expected to soar towards the upper rail of the uptrend channel shown and that implies further strong gains by silver and PM stocks in the days and weeks ahead.

Silver, however, showed no such hesitancy and broke out of its bull Flag and raced ahead, clearing the important psychological $30 barrier almost as if wasn’t there and as we can see on its 6-month chart it looks set for further gains as it has a ways to go before it reaches the upper rail of its uptrend channel.

We correctly anticipated this development and bought a raft of 6 SILVER STOCKS POISED TO ADVANCE about a week ago, all of which are up.

This break above $30 by silver was an important technical milestone for as we can see on the 20-year chart it means that it has cleared the important resistance established at this level back in 2020 and 2021 which means it now has its sights set on its 2011 highs at about $50 as its next major objective.

PM stocks meanwhile continued to forge ahead, especially on Friday, building on the breakout from the bull Pennant of May 9, as we can see on the 6-month chart for sector proxy GDX, which shows that they have plenty more upside before they arrive at the upper rail of their uptrend channel.

The 5-year chart makes clear the reason for the claim at the start of this article that THE REALLY BIG ACTION HASN’T EVEN STARTED YET, which is that, despite the gains so far, GDX is still some way from breaking out of the giant Head-and-Shoulders continuation pattern shown on this chart. The real action will start once GDX breaks above not just the neckline of the H&S pattern (the red line) but above the band of resistance that marks the upper boundary of the entire pattern and dates back to the 2020 highs.

Sentiment indicators continue to show that there is still little interest in the sector and a lot of skepticism, which is of course very bullish. This will change and change fast once GDX breaks above the key resistance, with a lot of investors coming down off the fence and piling in, driving a robust rally.

The 20-year chart for GDX is most interesting as it shows very clearly why the PM sector has such a huge upside from here. One is that GDX is still way below its 2011 highs, and this is despite gold having made clear new highs.

Gold is shown at the top of this chart and we see that it is romping ahead with a now very big positive divergence relative to PM stocks. This isn’t the way it is supposed to be — traditionally, during sector bull markets, stocks way outperform bullion for the obvious reason that with their high fixed costs, mines become vastly more profitable as gold continues to appreciate. What this means is that PM stocks have a lot of catching up to do — and the more gold (and silver) ascend, the more catching up there will be to do.

This is why PM stocks are expected to rip higher once GDX overcomes the resistance shown on this chart and the 5-year earlier.

Lastly, we will take a quick look at the dollar because of the increasing likelihood of a dollar collapse, which would be a big driver for strong gains not just by gold and silver but across the commodity complex generally.

So, let’s now take a quick look at a 20-year chart for the dollar index. On it, we can see that, so far, it hasn’t collapsed and has actually held up very well in the circumstances. In looking at this chart, we should keep in mind that as it is an index, it is a measure of the value of the dollar relative to other currencies and since all currencies are losing purchasing power, it doesn’t mean that because the dollar index has been more or less moving sideways since early 2023 it hasn’t lost purchasing power — it has a lot.

Going forward, if we see widespread dumping of Treasuries coupled with a buyer’s strike and the Fed aggressively monetizing new issues, as looks likely, it means that the dollar and the dollar index will drop and drop hard. This is why the sideways range of the past year or so is suspected to be some sort of bear Flag that will lead to renewed severe decline, as shown, and if it does, gold and silver and commodities will generally soar.

Streetwise has some sponsored companies that may be impacted by a rise in gold and silver. Click here to see the gold and here for the silver.

 

Important Disclosures:

  1. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  2. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

Clivemaund.com Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks cannot be  only be construed as a recommendation or solicitation to buy and sell securities.

Metals Opinions
22 May

Dow tops 40,000 as stock indexes continue to cross milestones − making many investors feel wealthier

By Alexander Kurov, West Virginia University 

The Dow Jones Industrial Average topped 40,000 for the first time on May 16, 2024. It spent the next few hours hovering around that mark, occasionally dipping under. But the breakthrough, even if fleeting, nonetheless marks another symbolic milestone in a monthslong bull market, coming three months after the S&P 500 index surpassed 5,000 for the first time.

The Conversation asked Alexander Kurov, a financial markets scholar, to explain what stock indexes are and to say whether these kinds of milestones are a big deal or not.

What are stock indexes?

Stock indexes measure the performance of a group of stocks. When prices rise or fall overall for the shares of those companies, so do stock indexes. The number of stocks in those baskets varies, as does the system for how this mix of shares gets updated.

The Dow Jones Industrial Average, also known as the Dow, includes shares in the 30 U.S. companies with the largest market capitalization – meaning the total value of all the stock belonging to shareholders. That list currently spans companies from Apple to Walt Disney Co.

The S&P 500 tracks shares in 500 of the largest U.S. publicly traded companies.

The Nasdaq composite tracks performance of more than 2,500 stocks listed on the Nasdaq stock exchange.

The DJIA, launched on May 26, 1896, is the oldest of these three popular indexes, and it was one of the first established.

Two enterprising journalists, Charles H. Dow and Edward Jones, had created a different index tied to the railroad industry a dozen years earlier. Most of the 12 stocks the DJIA originally included wouldn’t ring many bells today, such as Chicago Gas and National Lead. But one company that only got booted in 2018 had stayed on the list for 120 years: General Electric.

The S&P 500 index was introduced in 1957 because many investors wanted an option that was more representative of the overall U.S. stock market. The Nasdaq composite was launched in 1971.

You can buy shares in an index fund that mirrors a particular index. This approach can diversify your investments and make them less prone to big losses.

Index funds, which have existed only since Vanguard Group founder John Bogle launched the first one in 1976, now hold trillions of dollars.

Why are there so many?

There are hundreds of stock indexes in the world, but only about 50 major ones.

Most of them, including the Nasdaq composite and the S&P 500, are value-weighted. That means stocks with larger market values account for a larger share of the index’s performance.

In addition to these broad-based indexes, there are many less prominent ones. Many of those emphasize a niche by tracking stocks of companies in specific industries like energy or finance.

Do these milestones matter?

Stock prices move constantly in response to corporate, economic and political news, as well as changes in investor psychology. Because company profits will typically grow gradually over time, the market usually fluctuates in the short term while increasing in value over the long term.

The DJIA first reached 1,000 in November 1972, and it crossed the 10,000 mark on March 29, 1999. On Jan. 22, 2024, it surpassed 38,000 for the first time. Breaking through 40,000 on May 16 prompted a flurry of congratulatory news reports.

Because there’s a lot of randomness in financial markets, the significance of round-number milestones is mostly psychological. There is no evidence they portend any further gains.

For example, the Nasdaq composite first hit 5,000 on March 10, 2000, at the end of the dot-com bubble.

The index then plunged by almost 80% by October 2002. It took 15 years – until March 3, 2015 – for it to return to 5,000.

As 2024 has progressed, the Nasdaq composite has regularly closed at record highs.

Index milestones matter to the extent they pique investors’ attention and boost market sentiment.

Investors afflicted with a fear of missing out may then invest more in stocks, pushing stock prices to new highs. Chasing after stock trends may destabilize markets by moving prices away from their underlying values.

When a stock index passes a new milestone, investors become more aware of their growing portfolios. Feeling richer can lead them to spend more.

This is called the wealth effect. Many economists believe that the consumption boost that arises in response to a buoyant stock market can make the economy stronger.

Is there a best stock index to follow?

Not really. They all measure somewhat different things and have their own quirks.

For example, the S&P 500 tracks many different industries. However, because it is value-weighted, it’s heavily influenced by only seven stocks with very large market values.

Known as the “Magnificent Seven,” shares in Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla now account for over one-fourth of the S&P 500’s value. Nearly all are in the tech sector, and they played a big role in pushing the S&P across the 5,000 mark.

This makes the index more concentrated on a single sector than it appears.

But if you check out several stock indexes rather than just one, you’ll get a good sense of how the market is doing. If they’re all rising quickly or breaking records, that’s a clear sign that the market as a whole is gaining.

Sometimes the smartest thing is to not pay too much attention to any of them.

For example, after hitting record highs on Feb. 19, 2020, the S&P 500 plunged by 34% in just 23 trading days because of concerns about what COVID-19 would do to the economy. But the market rebounded, with stock indexes hitting new milestones and notching new highs by the end of that year.

Panicking in response to short-term market swings would have made investors more likely to sell off their investments in too big a hurry – a move they might have later regretted. This is why I believe advice from the immensely successful investor and fan of stock index funds Warren Buffett is worth heeding.

Buffett, whose stock-selecting prowess has made him one of the world’s 10 richest people, likes to say, “Don’t watch the market closely.”

If you’re reading this because stock prices are falling and you’re wondering if you should be worried about that, consider something else Buffett has said: “The light can at any time go from green to red without pausing at yellow.”

And the opposite is true as well.

This article is an updated version of a story that was first published on Feb. 15, 2024.The Conversation

About the Author:

Alexander Kurov, Professor of Finance and Fred T. Tattersall Excellence in Finance Research Chair, West Virginia University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Opinions Stock Market News
22 May

What is wind shear? An atmospheric scientist explains how it can tear down hurricanes

By Zachary Handlos, Georgia Institute of Technology 

Weather forecasters talk about wind shear a lot during hurricane season, but what exactly is it?

I teach meteorology at Georgia Tech, in a part of the country that pays close attention to the Atlantic hurricane season. Here’s a quick look at one of the key forces that can determine whether a storm will become a destructive hurricane.

What is wind shear?

Wind shear is defined as the change in wind speed, wind direction, or both, over some distance.

You may have heard airplane pilots talk about turbulence and warn passengers that they’re in for a bumpy ride. They’re typically seeing signs of sudden changes in wind speed or wind direction directly ahead, and wind shear can sometimes cause this.

With hurricanes, the focus is usually on vertical wind shear, or how wind changes in speed and direction with height.

Two illustrations show different types of wind shear. On the left, change in height rolls a cloud under. On the right, change in direction affects a plane in flight.
The effects of wind shear when wind speed increases with height (left) or changes direction (right).
National Weather Service

Vertical wind shear is present nearly everywhere on Earth, since winds typically move faster at higher altitudes than at the surface. It can be stronger or weaker than normal, and that’s especially important during hurricane season.

Tropical storms typically start as a tropical wave, or low-pressure system associated with a cluster of thunderstorms over warm water in the tropics. Warm air over the ocean surface rises rapidly, drawing in fuel for the storm. The winds begin to rotate and can intensify into a tropical storm and then a hurricane.

Hurricanes thrive in environments where their vertical structure is as symmetrical as possible. The more symmetrical the hurricane is, the faster the storm can rotate, like a skater pulling in her arms to spin.

Too much vertical wind shear, however, can offset the top of the storm. This weakens the wind circulation, as well as the transport of heat and moisture needed to fuel the storm. The result can tear a hurricane apart.

El Niño’s and La Niña’s influence

Wind shear becomes a hot topic during El Niño years, when wind shear tends to be stronger over the Atlantic during hurricane season.

An El Niño event occurs when sea surface waters in the eastern Pacific Ocean basin become significantly warmer than average, while western Pacific Ocean basin waters become cooler than average. This happens every two to seven years or so, and it affects weather around the world.

During El Niño events, upper-level winds over the Atlantic tend to be stronger than usual, and thus stronger wind shear results. The faster air flow in the upper troposphere leads to faster wind speed with increasing height, making the upper atmosphere less favorable for tropical storm development. The eastern North Pacific, in contrast, tends to have less wind shear during El Niño.

How El Niño affects the entire planet.

No two El Niño events are the same, of course. In 2023, record warm sea surface temperatures threatened to power up hurricanes so much that El Niño’s increase in wind shear couldn’t tear them down. For example, Hurricane Idalia fought through the wind shear in August and hit Florida as a powerful Category 3 storm.

El Niño’s opposite is La Niña – the two climate patterns shift every two to seven years or so. La Niña allows for more active hurricane seasons, as the Atlantic saw during the record-breaking 2020 season. La Niña conditions were expected to develop by fall 2024, and the Atlantic hurricane forecasts reflect that with expectations for another busy season.

The 2023 Atlantic hurricane season was a good reminder that there are always multiple factors at play affecting how destructive hurricanes become. Nevertheless, vertical wind shear will always be present and something meteorologists will keep an eye on.The Conversation

About the Author:

Zachary Handlos, Atmospheric Science Educator, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
22 May

Ethereum: ETF D-Day looms

By ForexTime 

  • Ethereum ↑ over 20% this week
  • Crypto could rally another 35,000 points
  • Prices bullish on D1 but RSI overbought
  • Key level of interest at $3806.49 & $40000

Ethereum is back in the spotlight after soaring over 20% this week.

The world’s second-largest cryptocurrency by market cap has been boosted by growing expectations around US regulators finally approving spot ETFs.

Investors remain hopeful after the US Securities and Exchange Commission (SEC) showed an interest in giving the green light after months of uncertainty.

This could be a pivotal moment for Ethereum which may ride the crest of this ETF wave to a fresh year-to-date high beyond $4094.

However, this will depend on what the SEC does tomorrow (Thursday, May 23rd) – the final deadline to decide on VanEck’s spot Ethereum application.

Just like we saw with Bitcoin ETFs, the approval of an Ethereum ETF would increase the exposure of the cryptocurrency. This may lead to potential inflows of new investors due to the easier and greater access.

Regarding the technicals, Ethereum bulls (those looking to see Ethereum prices rally), could set their sights on these near-term resistance levels.

  • $3806.49: – The 261.8 Fibonacci level where price is testing today after being rejected yesterday.

  • $40000: – A psychologically important level.

The crypto bears (those looking to see prices of Ethereum decline), on the other hand may take advantage of a possible “buy the rumour sell the fact scenario”, and have their sights set on the near term support at:

  • $3445.05 which is the golden 161.8 Fibonacci ratio.

The Fibonacci retracement tool is drawn from May 6th, high at $3221.68 to May 14th, low at 2860.24.

Looking at the Relative Strength Index (RSI), an indicator that highlights zones in the market that are saturated with buyers (overbought) and sellers (oversold), Ethereum is technically overbought.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Cryptocurrencies Opinions
19 May

Currency Speculators raise Euro & US Dollar bets into positive levels

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday May 14th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes led by Euro & Japanese Yen

The COT currency market speculator bets were higher this week as seven out of the eleven currency markets we cover had higher positioning while the other four markets had lower speculator contracts.

Leading the gains for the currency markets was the EuroFX (12,565 contracts) with the Japanese Yen (8,740 contracts), the British Pound (1,738 contracts), the Swiss Franc (680 contracts), the Mexican Peso (649 contracts), Bitcoin (606 contracts) and the US Dollar Index (582 contracts) also having positive weeks.

The currencies seeing declines in speculator bets on the week were the Australian Dollar (-12,655 contracts), the Canadian Dollar (-11,082 contracts), the Brazilian Real (-616 contracts) and the New Zealand Dollar (-9 contracts) also registering lower bets on the week.

Currency Speculators raise Euro & US Dollar bets into positive levels

This week’s COT currency’s data saw a continued improvement in many currencies (EUR, USDIndex, GBP, JPY) that had seen their positions weakening significantly over the past few months. Overall, most of the currency positions remain in weak levels versus the US dollar as only the Mexican peso, the Euro and the USD Index currently have positive bullish speculator positions.

Here is this week’s COT currency roundup:

The Euro positions continue to rebound after a deeply negative stretch in March and April that took -84,396 contracts off the speculator position and dropped the Euro contracts into a bearish position for the first time since September of 2022. This week the Euro bets rose by +12,565 contracts following last week’s +11,367 contract gain and has brought the speculator standing to a current level of +17,155 contracts. The Euro exchange rate has been on a 5-week winning streak as well and closed this week at the 1.0889 level against the US dollar.

The US dollar index positions rose modestly again this week and have now been higher for six consecutive weeks. This recent bullishness has taken the speculator standing back into bullish territory after the position dipped into negative or bearish levels in March for the first time since 2021.

Japanese yen speculator bets continued to improve for a third straight week after falling to a multi-year low of -179,919 contracts on April 23rd. The three-week improvement has totaled +53,737 contracts and coincided with a reported intervention in the currency markets by the Japanese government to stop a sharp slide in the yen. Despite the intervention, the yen’s exchange rate versus the dollar continues to be historically weak with the USDJPY currency pair closing the week right around the 155.60 level.

The Canadian dollar speculative position dropped for a second straight week this week and the current -80,303 contract level is the most bearish standing in a month for the CAD bets. The renewed bearishness for speculators has brought the CAD into extreme bearishness versus its range over the past three years with a 1.9 percent strength score. The Canadian dollar exchange rate remains in a down-trending channel versus the US dollar with our weekly trend model also considering the CAD to be in a downtrend at the moment. However, the CADUSD currency pair has recently bounced off a base of support around the 0.7250 level for the fourth time since 2022.

The Mexican Peso saw a small weekly gain by just 649 contracts but this broke a four-week losing streak that saw a total of -27,379 contracts subtracted from the overall bullish position. Despite the recent weakness in positions, the MXN speculative position has remained the most bullish currency versus the US dollar and has maintained a speculator position above the +100,000 contract level for eleven consecutive weeks. This is the best +100,000 contract streak since late-2019 into early-2020. The MXN exchange rate versus the USD has been trending strongly higher over the past three weeks with a gain of approximately 4 percent in these three weeks and has now brought the exchange rate into positive territory year-to-date.

Currencies Net Speculators Leaderboard

Legend: Weekly Speculators Change | Speculators Current Net Position | Speculators Strength Score compared to last 3-Years (0-100 range)

Strength Scores led by the Mexican Peso

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Mexican Peso (87 percent) leads the currency markets this week. Bitcoin (64 percent) comes in as the next highest in the weekly strength scores.

On the downside, the Brazilian Real (0 percent), the Canadian Dollar (2 percent), the Swiss Franc (3 percent) and the US Dollar Index (10 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
US Dollar Index (10.0 percent) vs US Dollar Index previous week (8.8 percent)
EuroFX (27.6 percent) vs EuroFX previous week (22.3 percent)
British Pound Sterling (40.0 percent) vs British Pound Sterling previous week (38.8 percent)
Japanese Yen (33.6 percent) vs Japanese Yen previous week (28.1 percent)
Swiss Franc (2.6 percent) vs Swiss Franc previous week (1.4 percent)
Canadian Dollar (1.9 percent) vs Canadian Dollar previous week (10.3 percent)
Australian Dollar (28.5 percent) vs Australian Dollar previous week (40.3 percent)
New Zealand Dollar (28.6 percent) vs New Zealand Dollar previous week (28.6 percent)
Mexican Peso (86.9 percent) vs Mexican Peso previous week (86.6 percent)
Brazilian Real (0.0 percent) vs Brazilian Real previous week (0.7 percent)
Bitcoin (63.7 percent) vs Bitcoin previous week (54.6 percent)

Australian Dollar & Japanese Yen top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Australian Dollar (24 percent) and the Japanese Yen (11 percent) lead the past six weeks trends for the currencies. The US Dollar Index (9 percent) is the next highest positive mover in the latest trends data.

The British Pound (-42 percent) leads the downside trend scores currently with the Brazilian Real (-39 percent), Swiss Franc (-33 percent) and the Canadian Dollar (-22 percent) following next with lower trend scores.

Strength Trend Statistics:
US Dollar Index (9.2 percent) vs US Dollar Index previous week (5.2 percent)
EuroFX (0.2 percent) vs EuroFX previous week (-11.3 percent)
British Pound Sterling (-42.1 percent) vs British Pound Sterling previous week (-37.8 percent)
Japanese Yen (10.7 percent) vs Japanese Yen previous week (-3.6 percent)
Swiss Franc (-33.4 percent) vs Swiss Franc previous week (-35.3 percent)
Canadian Dollar (-22.1 percent) vs Canadian Dollar previous week (-14.4 percent)
Australian Dollar (23.9 percent) vs Australian Dollar previous week (38.4 percent)
New Zealand Dollar (-10.4 percent) vs New Zealand Dollar previous week (-14.7 percent)
Mexican Peso (-10.2 percent) vs Mexican Peso previous week (-9.7 percent)
Brazilian Real (-39.4 percent) vs Brazilian Real previous week (-52.2 percent)
Bitcoin (-5.1 percent) vs Bitcoin previous week (4.4 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week was a net position of 2,435 contracts in the data reported through Tuesday. This was a weekly boost of 582 contracts from the previous week which had a total of 1,853 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.0 percent. The commercials are Bullish-Extreme with a score of 92.7 percent and the small traders (not shown in chart) are Bearish with a score of 26.9 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

US DOLLAR INDEX StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:69.319.88.3
– Percent of Open Interest Shorts:63.628.65.1
– Net Position:2,435-3,7901,355
– Gross Longs:29,6828,4723,535
– Gross Shorts:27,24712,2622,180
– Long to Short Ratio:1.1 to 10.7 to 11.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):10.092.726.9
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:9.2-7.3-9.8

 

Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week was a net position of 17,155 contracts in the data reported through Tuesday. This was a weekly boost of 12,565 contracts from the previous week which had a total of 4,590 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.6 percent. The commercials are Bullish with a score of 74.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.7 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

EURO Currency StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:27.259.011.6
– Percent of Open Interest Shorts:24.564.98.4
– Net Position:17,155-38,28221,127
– Gross Longs:178,398387,81276,472
– Gross Shorts:161,243426,09455,345
– Long to Short Ratio:1.1 to 10.9 to 11.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):27.674.912.7
– Strength Index Reading (3 Year Range):BearishBullishBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:0.2-1.87.2

 

British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week was a net position of -20,075 contracts in the data reported through Tuesday. This was a weekly lift of 1,738 contracts from the previous week which had a total of -21,813 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.0 percent. The commercials are Bullish with a score of 60.7 percent and the small traders (not shown in chart) are Bearish with a score of 46.5 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BRITISH POUND StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:21.861.811.6
– Percent of Open Interest Shorts:30.849.814.6
– Net Position:-20,07526,795-6,720
– Gross Longs:48,674137,91725,869
– Gross Shorts:68,749111,12232,589
– Long to Short Ratio:0.7 to 11.2 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):40.060.746.5
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-42.137.1-5.5

 

Japanese Yen Futures:

Japanese Yen Forex Futures COT ChartThe Japanese Yen large speculator standing this week was a net position of -126,182 contracts in the data reported through Tuesday. This was a weekly rise of 8,740 contracts from the previous week which had a total of -134,922 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.6 percent. The commercials are Bullish with a score of 71.7 percent and the small traders (not shown in chart) are Bullish with a score of 60.3 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

JAPANESE YEN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:11.972.713.3
– Percent of Open Interest Shorts:54.327.915.6
– Net Position:-126,182133,294-7,112
– Gross Longs:35,303216,44239,446
– Gross Shorts:161,48583,14846,558
– Long to Short Ratio:0.2 to 12.6 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):33.671.760.3
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:10.7-3.8-34.1

 

Swiss Franc Futures:

Swiss Franc Forex Futures COT ChartThe Swiss Franc large speculator standing this week was a net position of -41,107 contracts in the data reported through Tuesday. This was a small weekly advance of 680 contracts from the previous week which had a total of -41,787 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.6 percent. The commercials are Bullish-Extreme with a score of 90.2 percent and the small traders (not shown in chart) are Bearish with a score of 28.8 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

SWISS FRANC StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:7.379.112.3
– Percent of Open Interest Shorts:52.622.024.0
– Net Position:-41,10751,769-10,662
– Gross Longs:6,64671,74511,121
– Gross Shorts:47,75319,97621,783
– Long to Short Ratio:0.1 to 13.6 to 10.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):2.690.228.8
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-33.419.625.7

 

Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week was a net position of -80,303 contracts in the data reported through Tuesday. This was a weekly decrease of -11,082 contracts from the previous week which had a total of -69,221 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 1.9 percent. The commercials are Bullish-Extreme with a score of 92.3 percent and the small traders (not shown in chart) are Bearish with a score of 28.1 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

CANADIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:15.566.814.7
– Percent of Open Interest Shorts:51.931.413.8
– Net Position:-80,30378,2202,083
– Gross Longs:34,286147,62632,492
– Gross Shorts:114,58969,40630,409
– Long to Short Ratio:0.3 to 12.1 to 11.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):1.992.328.1
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-22.114.87.6

 

Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week was a net position of -77,171 contracts in the data reported through Tuesday. This was a weekly drop of -12,655 contracts from the previous week which had a total of -64,516 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.5 percent. The commercials are Bullish with a score of 69.0 percent and the small traders (not shown in chart) are Bullish with a score of 58.7 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

AUSTRALIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:19.965.212.8
– Percent of Open Interest Shorts:58.127.012.8
– Net Position:-77,17177,14229
– Gross Longs:40,059131,59625,881
– Gross Shorts:117,23054,45425,852
– Long to Short Ratio:0.3 to 12.4 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):28.569.058.7
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:23.9-28.331.2

 

New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week was a net position of -11,200 contracts in the data reported through Tuesday. This was a weekly dip of just -9 contracts from the previous week which had a total of -11,191 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.6 percent. The commercials are Bullish with a score of 70.3 percent and the small traders (not shown in chart) are Bearish with a score of 41.8 percent.

Price Trend-Following Model: Weak Downtrend

Our weekly trend-following model classifies the current market price position as: Weak Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

NEW ZEALAND DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:34.758.36.6
– Percent of Open Interest Shorts:54.836.58.3
– Net Position:-11,20012,162-962
– Gross Longs:19,28432,4513,683
– Gross Shorts:30,48420,2894,645
– Long to Short Ratio:0.6 to 11.6 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):28.670.341.8
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-10.43.628.4

 

Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week was a net position of 112,961 contracts in the data reported through Tuesday. This was a weekly advance of 649 contracts from the previous week which had a total of 112,312 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.9 percent. The commercials are Bearish-Extreme with a score of 13.3 percent and the small traders (not shown in chart) are Bearish with a score of 34.4 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

MEXICAN PESO StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:55.941.02.7
– Percent of Open Interest Shorts:12.186.21.3
– Net Position:112,961-116,6013,640
– Gross Longs:144,307105,8406,997
– Gross Shorts:31,346222,4413,357
– Long to Short Ratio:4.6 to 10.5 to 12.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):86.913.334.4
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-10.210.9-13.2

 

Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week was a net position of -38,259 contracts in the data reported through Tuesday. This was a weekly reduction of -616 contracts from the previous week which had a total of -37,643 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish with a score of 34.5 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

BRAZIL REAL StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:18.378.23.4
– Percent of Open Interest Shorts:80.715.93.4
– Net Position:-38,25938,24910
– Gross Longs:11,25747,9832,105
– Gross Shorts:49,5169,7342,095
– Long to Short Ratio:0.2 to 14.9 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.0100.034.5
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-39.440.6-17.6

 

Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week was a net position of -177 contracts in the data reported through Tuesday. This was a weekly rise of 606 contracts from the previous week which had a total of -783 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 63.7 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 26.5 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BITCOIN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:77.84.15.6
– Percent of Open Interest Shorts:78.55.63.4
– Net Position:-177-421598
– Gross Longs:21,0781,0991,519
– Gross Shorts:21,2551,520921
– Long to Short Ratio:1.0 to 10.7 to 11.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):63.754.026.5
– Strength Index Reading (3 Year Range):BullishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-5.114.9-5.7

 

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.

COT Updates Forex and Currency News Opinions
18 May

Speculator Extremes: Silver, Copper, Brazilian Real & Sugar lead weekly 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 May 14th.

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:

Silver


The Silver speculator position comes in as the most bullish extreme standing this week. The Silver 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 8.7 this week. The overall net speculator position was a total of 59,461 net contracts this week with a gain of 5,809 contract 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.

Copper


The Copper speculator position comes next in the extreme standings this week. The Copper speculator level is now at a 99.1 percent score of its 3-year range.

The six-week trend for the percent strength score was 42.2 this week. The speculator position registered 61,780 net contracts this week with a weekly dip of -868 contracts in speculator bets.

Fed Funds


The Fed Funds speculator position comes in third this week in the extreme standings. The Fed Funds speculator level resides at a 89.1 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 36.1 this week. The overall speculator position was 95,924 net contracts this week with a drop of -41,041 contracts in the weekly speculator bets.

Bloomberg Commodity Index


The Bloomberg Commodity Index speculator position comes up number four in the extreme standings this week. The Bloomberg Commodity Index speculator level is at a 88.5 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of -1.9 this week. The overall speculator position was -4,030 net contracts this week with a small dip of -40 contracts in the speculator bets.

Mexican Peso


The Mexican Peso speculator position rounds out the top five in this week’s bullish extreme standings. The Mexican Peso speculator level sits at a 86.9 percent score of its 3-year range. The six-week trend for the speculator strength score was -10.2 this week.

The speculator position was 112,961 net contracts this week with a slight edge higher by 649 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Brazil Real


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

The six-week trend for the speculator strength score was -39.4 this week. The overall speculator position was -38,259 net contracts this week with a decline of -616 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 -33.1 this week. The speculator position was 25,891 net contracts this week with a decrease by -2,670 contracts in the weekly speculator bets.

Ultra 10-Year U.S. T-Note


The Ultra 10-Year U.S. T-Note speculator position comes in as third most bearish extreme standing of the week. The Ultra 10-Year U.S. T-Note speculator level resides at a 0.3 percent score of its 3-year range.

The six-week trend for the speculator strength score was -27.1 this week. The overall speculator position was -276,454 net contracts this week with a drop of -62,155 contracts in the speculator bets.

Canadian Dollar


The Canadian Dollar speculator position comes in as this week’s fourth most bearish extreme standing. The Canadian Dollar speculator level is at a 1.9 percent score of its 3-year range.

The six-week trend for the speculator strength score was -22.1 this week. The speculator position was -80,303 net contracts this week with a decline of -11,082 contracts in the weekly speculator bets.

Swiss Franc


Finally, the Swiss Franc speculator position comes in as the fifth most bearish extreme standing for this week. The Swiss Franc speculator level is at a 2.6 percent score of its 3-year range.

The six-week trend for the speculator strength score was -33.4 this week. The speculator position was -41,107 net contracts this week with a small boost of 680 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.

COT Updates Opinions
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