InvestMacro

Wealth of nations: Why some are rich, others are poor – and what it means for future prosperity

By Amitrajeet A. Batabyal, Rochester Institute of Technology

– Why are some nations rich and others poor? Can the governments of poor nations do something to ensure that their nations become rich? These sorts of questions have long fascinated public officials and economists, at least since Adam Smith, the prominent Scottish economist whose famous 1776 book was titled “An Inquiry into the Nature and Causes of the Wealth of Nations.”

Economic growth matters to a country because it can raise living standards and provide fiscal stability to its people. But getting the recipe consistently right has eluded both nations and economists for hundreds of years.

As an economist who studies regional, national and international economics, I believe that understanding an economic term called total factor productivity can provide insight into how nations become wealthy.

Growth theory

It is important to understand what helps a country grow its wealth. In 1956, Massachusetts Institute of Technology economist Robert Solow wrote a paper analyzing how labor – otherwise known as workers – and capital – otherwise known as physical items such as tools, machinery and equipment – can be combined to produce goods and services that ultimately determine people’s standard of living. Solow later went on to win a Nobel Prize for his work.

One way to increase a nation’s overall quantity of goods or services is to increase labor, capital or both. But that doesn’t continue growth indefinitely. At some point, adding more labor only means that the goods and services these workers produce is divided between more workers. Hence, the output per worker – which is one way of looking at a nation’s wealth – will tend to go down.

Similarly, adding more capital such as machinery or other equipment endlessly is also unhelpful, because those physical items tend to wear out or depreciate. A company would need frequent financial investment to counteract the negative effect of this wear and tear.

In a later paper in 1957, Solow used U.S. data to show that ingredients in addition to labor and capital were needed to make a nation wealthier.

He found that only 12.5% of the observed increase in American output per worker – the quantity of what each worker produced – from 1909 to 1949 could be attributed to workers becoming more productive during this time period. This implies that 87.5% of the observed increase in output per worker was explained by something else.

Total factor productivity

Solow called this something else “technical change,” and today it is best known as total factor productivity.

Total factor productivity is the portion of goods and services produced that is not explained by the capital and labor used in production. For example, it could be technological advancements that make it easier to produce goods.

Another way to understand total factor productivity.

It’s best to think of total factor productivity as a recipe that shows how to combine capital and labor to obtain output. Specifically, growing it is akin to creating a cookie recipe to ensure that the largest number of cookies – that also taste great – are produced. Sometimes this recipe gets better over time because, for example, the cookies can bake faster in a new type of oven or workers become more knowledgeable about how to mix ingredients more efficiently.

Will total factor productivity continue to grow in the future?

Given how important total factor productivity is to economic growth, asking about the future of economic growth is basically the same as asking whether total factor productivity will continue to grow – whether the recipes will always get better – over time.

Solow assumed that TFP would grow exponentially over time, a dynamic explained by the economist Paul Romer, who also won a Nobel Prize for his research in this field.

Romer argued in a prominent 1986 paper that investments in research and development that result in the creation of new knowledge can be a key driver of economic growth.

This means that each earlier bit of knowledge makes the next bit of knowledge more useful. Put differently, knowledge has a spillover effect that creates more knowledge as it spills out.

Despite Romer’s efforts to provide a basis for the assumed exponential growth of TFP, research shows that productivity growth in the world’s advanced economies has been declining since the late 1990s and is now at historically low levels. There are concerns that the COVID-19 crisis may exacerbate this negative trend and further reduce total factor productivity growth.

Recent research shows that if TFP growth falls, then this can negatively affect living standards in the U.S. and in other rich countries.

A very recent paper by the economist Thomas Philippon analyzes a large amount of data for 23 countries over 129 years, finding that TFP does not actually grow exponentially, as Solow and Romer had thought.

Instead, it grows in a linear, and slower, progression. Philippon’s analysis suggests that new ideas and new recipes do add to the existing stock of knowledge, but they don’t have the multiplier effect previous scholars had thought.

Ultimately, this finding means that economic growth used to be quite fast and is now slowing down – but it’s still occurring. The U.S. and other nations can expect to get wealthier over time but just not as quickly as economists once expected.

About the Author:

Amitrajeet A. Batabyal, Distinguished Professor and Arthur J. Gosnell Professor of Economics, Rochester Institute of Technology

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

Economics & Fundamentals Opinions

27 Jun

Crude Oil Is Consolidating

By RoboForex Analytical Department

On Monday morning, the Brent price is balancing at $113 per barrel The commodity marker remains uncertain – the supply isn’t expanding as quick as it is expected to, and the demand might drop as well.

China is cancelling lockdowns but it does not necessarily mean that the country will start increasing its oil import right away. There are doubts about the Chinese economy’s ability to quickly and steadily expand at a time when the entire world is fighting inflation and afraid of recession.

OPEC+ members are working according to their earlier approved plan to increase oil production. This factor might have calmed down financial markets but Libya remains a mess and the Iranian oil won’t come to the commodity market in a while. Taken together, all these factors create a rather controversial basis.

In the H4 chart, having completed the correctional wave at 107.30, Brent continues growing towards 113.30 and may later consolidate there. After that, the instrument may break the range to the upside and form one more ascending wave with the target at 117.60. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving near the lows outside the histogram area, which means that it may grow to reach 0 and the uptrend in the price chart may continue.

As we can see in the H1 chart, after finishing the ascending wave at 113.30 along with the correction down to 110.15, Brent has rebounded from the latter level. Possibly, the asset may break 113.30 and then continue growing towards 117.70. Later, the market may correct to return to 113.30 and then form one more ascending structure with the first target at 119.50. From the technical point of view, this idea is confirmed by the Stochastic Oscillator: after rebounding from 50, its signal line is expected to continue moving towards 80.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News

27 Jun

Japanese Candlesticks Analysis 27.06.2022 (EURUSD, USDJPY, EURGBP)

Article By RoboForex.com

EURUSD, “Euro vs US Dollar”

As we can see in the H4 chart, the asset has formed an Inverted Hammer reversal pattern close to the support area during the correction. At the moment, EURUSD may reverse in the form of a new ascending impulse. In this case, the upside target may be at 1.0595. However, an alternative scenario implies that the price may fall to reach 1.0490 and continue the downtrend without testing 1.0595.

USDJPY, “US Dollar vs Japanese Yen”

As we can see in the H4 chart, USDJPY has formed several reversal patterns not far from the support area, such as Hammer. At the moment, the asset is reversing in the form of a new rising impulse. In this case, the upside target may be at 137.50. At the same time, an opposite scenario implies that the price may correct to reach 134.15 and resume the uptrend after a pullback.

EURGBP, “Euro vs Great Britain Pound”

As we can see in the H4 chart, after forming aт Engulfing pattern near the support area, EURGBP is reversing in the form of a new rising impulse. In this case, the upside target may be the resistance level at 0.8655. Later, the market may test this level, break it, and continue moving upwards. Still, there might be an alternative scenario, according to which the asset may correct to reach 0.8570 before resuming the ascending tendency.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News

27 Jun

Trade Of The Week: Will Central Bank Heavyweights Spark EURUSD Breakout?

By ForexTime

– Watch this space because the EURUSD could turn volatile over the next few days!

Investors will be served a tantalizing combination of key economic reports and speeches from policymakers this week. However, the main course and potential market shaker could be the ECB’s three-day forum in Portugal’s Sintra which kicks off today. The forum will be focusing on “the challenges for monetary policy in a rapidly changing world” with Wednesday’s panel discussion featuring central bank heavyweights in sharp focus.

Before we sink our teeth into what to expect from the major events and EURUSD in the week ahead, it is worth keeping in mind that the euro has appreciated against most G10 currencies quarter-to-date. But against the mighty dollar, the currency is down roughly 4.7% due to the ECB lagging behind the Fed, which has moved aggressively to tame inflation.

Taking a quick look at the technical picture, the EURUSD is balancing above significant support at 1.0400 on the monthly timeframe. The last time prices secured a monthly close below this level was in December 2002.

The trend is heavily bearish on the weekly timeframe as there have been consistently lower lows and lower highs.

Now, this is where things get interesting.

On the technical charts, the EURUSD remains in a downtrend with the widening policy divergence between the ECB and Fed supporting bears in the past. However, the ECB has recently joined the hawkish camp and signalled to markets it plans to raise interest rates by 25 basis points in July. In fact, the central bank could also move ahead with a 50bps hike in September as it battles the inflation beast! Such a development is likely to favour euro bulls – limiting downside losses on the EURUSD.

The week ahead: data, policymakers, and more…

Grab your popcorn and find a comfortable seat because the show is about to begin.

On Tuesday, San Francisco Fed President Mary Daly will be under the spotlight. Last Friday she stated that another 75 basis point interest rate hike in July is her “starting point” but if the economy slows more than expected a 50 basis point could be reasonable. Investors will also be presented with the US consumer confidence data for June which is expected to deteriorate further.

Several Fed officials will be making an appearance on Wednesday.

However, the main risk event will be the ECB panel featuring ECB President Christine Lagarde, Fed Chair Jerome Powell, and BOE Governor Andrew Bailey.

Investors will be closely watching the panel discussion for fresh insights on how the central bank heads plan to fight inflation while trying to engineer a soft landing for the global economy. Given how markets remain highly sensitive to rate hike expectations, any fresh clues about future rate hikes could trigger fresh volatility in the FX space. On the data front, Eurozone economic confidence, German inflation figures for June, and third print US Q1 GDP figures will also be published.

On Thursday, it’s all about the Eurozone unemployment figures for May which are expected to remain unchanged at a record low of 6.8%. In the United States, the weekly initial jobless claims, personal income/spending, and PCE deflator for May will most likely hijack the spotlight in the afternoon.

Given how the core Personal Consumption Expenditure (PCE) Index is the Fed’s favoured measure of inflation, this will be closely scrutinised by market players.

According to a survey on Bloomberg, the PCE Core Deflator YoY is expected to have cooled to 4.8% in May compared to the 4.9% witnessed in the previous month. If expectations match reality, this could fuel speculation around inflation peaking – cooling rate hike bets and weakening the dollar.

To conclude the week, the flash Eurozone CPI figures and manufacturing PMI for June will be published. Eurozone inflation is estimated to have hit 8.5% in June, higher than the record-high of 8.1% seen in May. If the reports meet expectations, this could boost speculation over the ECB adopting an aggressive approach towards higher interest rates to fight inflation. Such a development could boost the euro. We also have the US ISM manufacturing and Global manufacturing PMI figure for June on Friday afternoon which may show how the US economy is coping amid the Fed’s aggressive rate hiking cycle.

With so much going on this week, the EURUSD has the potential to throw investors on a roller coaster ride!

EURUSD poised to breakout from range?

Over the past few weeks, the EURUSD has been trapped within a wide range with support at 1.0350 and resistance at 1.0780. Although the overall trend remains bearish, there seems to be a struggle between bulls and bears and this continues to be reflected in price action.

There are a couple of scenarios that could play out on the EURUSD in the week ahead.

A solid breakout and daily close above 1.0630 may trigger an incline towards 1.0780 and 1.0920.

Prices fail to conquer the 1.0630 resistance which results in a decline back towards 1.0480, 1.0350, and 1.0200.

Prices remain trapped within the 1.0480 support and 1.0630 resistance level with a possibility of sinking back towards 1.0350.

Article 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

27 Jun

The cryptocurrency market digest (BTC, DOGE, XRP). Overview for 27.06.2022

Article By RoboForex.com

The BTC is moderately growing at the beginning of the new week. The leading cryptocurrency is balancing at $21,409. Yesterday buyers were more optimistic, but the level of $21,900 turn out to be firm.

While stock market indices are favourable, there are serious chances for the continuation of this timid growth, as long as it remains cautious and slow. In case the BTC reaches above $21,900, a pathway to $22,800 will open. And if this level will be is also conquered, the next goal will be $24,000-$25,000. The medium-term picture looks bearish. The nearest important support remains at $19,700.

There is a correlation between the S&P 500, Nasdaq, and the BTC. A close eye should be kept on the stock market sentiment.

Mind that the fear index in the crypto market is now 12, though yesterday it was 14. These are extreme levels of stock market fear.

Top 10: DOGE is strong

On the Top 10 list of the most popular cryptocurrencies over the last 24 hours, the worst results were demonstrated by the BTC and ETH, losing about 1.5%, and the SOL (-2.3%). The BNB and ADA demonstrate a neutral position. A burst of optimism was shown by DOGE (+11.4%).

Miners have got into debts

According to Bloomberg, miners have taken $4 billion of loans for buying equipment. Simultaneously, the collateral value of equipment used as a deposit lost half of its price due to the BTC decline. Certain miners in debt had to default payments, while others are selling their businesses.

Ripple will open an office in Toronto

Ripple is planning to open an office in Toronto, Canada, making it the key development centre. For this, the company will have to employ 50 new developers, later increasing their number several times. With all the recent rumours about companies decreasing the number of employees in the crypto sector, Ripple looks like a safe haven.

Article By RoboForex.com

Cryptocurrencies Financial News

27 Jun

The Analytical Overview of the Main Currency Pairs on 2022.06.27

By JustForex

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.0518
Prev Close: 1.0551
% chg. over the last day: +0.31%

German Business Climate Index data showed a decline over the past month. The ifo Business Climate Index fell to 92.3 in June from 93.0 in May. The most significant decline was in the manufacturing sector. But the business climate -improved in the services sector. This was due to a considerable decrease in skepticism from service providers. The business climate also continues to improve in the construction sector. Many European countries will release inflation data this week, and then the overall figure for the Eurozone will be published on Friday. Analysts believe that inflation will continue to accelerate.

Trading recommendations

Support levels: 1.0408, 1.0379
Resistance levels: 1.0555, 1.0611, 1.0680, 1.0723

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price forms a wide corridor, and the MACD indicator has become inactive. Under such market conditions, sell deals can be considered from the resistance level of 1.0555 or from the upper border of the flat, but only after the additional confirmation. A price move above 1.0611 will change the priority. Buy trades are best to look for on intraday time frames from the support level of 1.0408 or from the lower border of the flat, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.0611 resistance level and fixes above, the uptrend will likely resume.

News feed for 2022.06.27:

– German Retail Sales (m/m) at 09:00 (GMT+3);
– US Durable Goods Orders (m/m) at 15:30 (GMT+3);
– US Pending Home Sales (m/m) at 17:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 20:30 (GMT+3).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2249
Prev Close: 1.2275
% chg. over the last day: +0.21%

A three-day forum with the main theme “Challenges for monetary policy in a rapidly changing world” will start on Monday in Sintra, Portugal. The forum will end with speeches by the heads of the Fed, the ECB, and the Bank of England on Wednesday, so investors should keep a close eye on this event.

Trading recommendations

Support levels: .2238, 1.2093, 1.1974
Resistance levels: 1.2422, 1.2470, 1.2523, 1.2629

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is very similar to the euro. The price forms a wide corridor, while the MACD indicator shows no activity. Under such market conditions, sell deals can be considered from the resistance level of 1.2422 or from the upper border of the flat, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.2238 or from the lower border of the flat, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.2422 resistance level and fixes above, the uptrend will likely resume.

There is no news feed for today.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 134.92
Prev Close: 135.15
% chg. over the last day: +0.17%

The Japanese yen has strengthened these days slightly, but it should be noted that this strengthening was due to a decrease in the dollar index. There is no fundamental reason for the yen to strengthen at the moment, as the Bank of Japan is still keeping its soft monetary policy, while the US Federal Reserve, as well as the central banks of England and Canada, are tightening policy. Such divergence has- caused the Japanese yen to make new price lows against major currencies.

Trading recommendations

Support levels: 134.10, 133.35, 131.67, 131.00, 130.12, 129.48, 128.76
Resistance levels: 135.23, 135.77, 136.66

The medium-term trend on the USD/JPY currency pair is bullish. The price is trading near the moving average lines and forming a wide price balance. The MACD indicator has become inactive. Under such market conditions, buy trades can be considered from the support level of 134.10 or 133.35, but with confirmation. A resistance level of 135.23 is good for sell deals, but only with additional confirmation and short targets.

Alternative scenario: If the price fixes below 133.35, the downtrend will likely resume.

There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2995
Prev Close: 1.2892
% chg. over the last day: -0.80%

The Canadian dollar is a commodity currency, so it depends on the US Dollar Index and oil prices. The dollar index declined on Friday, while oil prices jumped during the last two trading sessions. As a result, the Canadian dollar has strengthened. It should be noted that the Bank of Canada is on its way to raising interest rates and the latest inflation data from Canada showed that inflation has not stopped rising. Therefore, on expectations of an aggressive rate hike at the next meeting, the Canadian dollar may continue its upward momentum in the near term.

Trading recommendations

Support levels: 1.2815, 1.2709, 1.2618, 1.2578, 1.2510
Resistance levels: 1.2893, 1.2956, 1.3068

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. But the MACD indicator became negative, and the price is trading below the moving averages. Buyers are losing the initiative. A price move below 1.2815 will change the priority. Under such market conditions, it is better to look for buy deals in the lower time frames from the support level of 1.2815. For sell deals, it is better to consider the resistance level of 1.2956, but it is also better with confirmation and short targets.

Alternative scenario: if the price breaks through and consolidates below the 1.2815 support level, the downtrend will likely resume.

There is no news feed for today.

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Financial News Forex and Currency News

27 Jun

Falling commodity prices last week eased inflation fears

By JustForex

At the close of the stock market on Friday, the Dow Jones index (US30) increased by 2.68% (+5.31% per week), while the S&P 500 index (US500) added 3.06% (+6.71% per week). Technology index NASDAQ (US100) gained 3.34% on Friday (+8.51% per week). All three indices closed in the plus as the week ended.

On Friday, Fed member Daly, the usual political dovish spokeswoman, indicated she supports a 75 basis point rate hike at the upcoming Fed meeting in July. At the same time, the indices have rallied substantially, suggesting that the 0.75% rate hike scenario at the next Fed meeting is probably already priced in. And since there is no new negativity, no new factors contribute to the decline. But analysts believe that inflation will not slow anytime soon, which means the Fed will raise rates more and move faster, putting downward pressure on the economy.

A significant factor last week was the drop in oil and commodity prices, which eased inflation fears and allowed stock markets to rebound. Falling commodity prices could help lower overall inflation, especially during the autumn months, which would reduce the need for aggressive monetary tightening.

The three-day forum will begin on Monday with the main topic “Challenges for monetary policy in a rapidly changing world.” The forum will conclude with speeches by the heads of the Fed, the ECB, and the Bank of England on Wednesday, so investors should keep a close eye on this event.

The second quarter is coming to a close. These six months have already been characterized by the fastest rate hike cycle in decades, market turmoil, and a war that has caused rising inflation. As investor expectations fluctuate between continued high inflation and an economic slowdown caused by hawkish central bank policies in major countries, few believe market volatility will subside anytime soon.

Stock markets in Europe traded higher on Friday. German DAX (DE30) gained 1.59% on Friday (-0.68% per week), French CAC 40 (FR 40) jumped by 3.23% (+2.91% per week), Spanish IBEX 35 (ES35) added 1.70% (+0.79% per week), British FTSE 100 (UK100) gained 2.68% on Friday (+2.74% per week).

On Sunday, G7 leaders promised to raise $600 billion in private and government funds over five years to finance needed infrastructure in developing countries. Biden said the United States would raise $200 billion over five years in grants, federal funds, and private investment to support projects in low- and middle-income countries. It will help fight climate change as well as improve global health, gender equality, and digital infrastructure. Europe is mobilizing 300 billion euros for the initiative over the same period.

US President Joe Biden and other G7 leaders have agreed to announce a ban on new gold imports from Russia. It will be part of a new sanctions package to be announced Tuesday.

Asian markets traded higher last week. Japan’s Nikkei 225 (JP225) gained 1.28% over the week, Hong Kong’s Hang Seng (HK50) jumped by 3.68%, and Australia’s S&P/ASX 200 (AU200) was up +1.60%.

The People’s Bank of China, with the Bank for International Settlements and five other regulators, will create a yuan-denominated reserve pool to provide liquidity to member countries during periods of market volatility. China, along with Chile, Indonesia, Malaysia, Hong Kong, and Singapore, will contribute at least 15 billion yuan ($2.2 billion) or the equivalent in US dollars to the so-called “RMB liquidity agreement.” Participating central banks will not only be able to use their contributions if liquidity is needed but will also have access to additional financing through a secured liquidity window. The agreement marks a move by Beijing to internationalize China’s currency, challenging the global financial system dominated by the US dollar.

Over the weekend, Russia launched new missile strikes against Ukraine’s two largest cities, Kyiv and Kharkiv. Russia has stepped up its use of cruise missiles, mainly striking at targets in northwestern Ukraine from Belarus. The Kremlin is also seriously considering military action against Lithuania. Last week, Lithuania banned the rail transit of sanctioned goods through its territory to Russia’s Kaliningrad region.

Russia is one step away from default. The issue is the payment of about $100 million on government bonds. The grace period for this payment ended on Sunday, June 26.

At the commodities market the biggest gains over the week showed the futures on lumber (+5.54%) and palladium (+3.21%). Cotton (-17.25%), corn (-13%), soybeans (-10.4%), natural gas (-9.74%), wheat (-9.4%), copper (-6.84%), orange juice (-6.34%) and platinum (-2.8%) futures showed the biggest drops.

Main market quotes:

S&P 500 (F) (US500) 3,911.74 +116.01 (+3.06%)

Dow Jones (US30) 31,500.68 +823.32 (+2.68%)

DAX (DE40) 13,118.13 +205.54 (+1.59%)

FTSE 100 (UK100) 7,208.81 +188.36 (+2.68%)

USD Index 104.12 -0.31 (-0.30%)

Important events for today:

– German Retail Sales (m/m) at 09:00 (GMT+3);
– US Durable Goods Orders (m/m) at 15:30 (GMT+3);
– US Pending Home Sales (m/m) at 17:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 20:30 (GMT+3).

By JustForex

Economics & Fundamentals Financial News

26 Jun

Window of Opportunity – Valuations Below Pre-Pandemic Highs

By Ino.com

Window of Opportunity

Six months of relentless and indiscriminate selling has roiled the markets. This selling has reduced the frothy pandemic induced run-up in stocks back to pre-pandemic levels. In many cases stocks are trading well below the pre-pandemic highs.

Stocks are now presenting a window of opportunity for long-term investors at this juncture. With the collective P/E ratios reverting to its historical mean, oversold conditions at extremes and the inflation picture at a potential inflection point may combine to be a back half of the year reprieve.

This window of opportunity may not last too much longer based on historical bear market metrics so pounce and pounce harder if the markets slide further.

Mid-June Flushing?

Many commentators in the investing circles stated that a final washout in the market was likely needed prior to moving higher in any meaningful way.

Mid-June saw its worst weekly performance since March of 2020, dropping 5.8% for the S&P 500 while taking its overall decline to ~24%. After this brutal week, there hasn’t been any stock or sector that has been immune to the breadth of participation in this sell-off. As such, the market has now registered abnormal extremes in selling and oversold conditions.

Is this the washout that was needed to arrest the selling pressures in this market, and will this be an inflection point? A battery of indicators suggest that the markets are close to making a meaningful move higher very soon.

Inflection Point?

The percentage of S&P 500 stocks trading above their 50-day average hit a level that can’t go any lower as seen over the past 20 years. This level indicates extremely oversold conditions (Figure 1).

Figure 1 – Assessing overbought and oversold conditions via the percent of stocks relative to its 50 day moving average (adopted from CNBC).

It’s noteworthy to highlight that fewer than 25% of stocks are still within 20% of their 52-week high. The only times this was worse was the Covid crash and the 2007-2009 financial crisis. Over 42% of S&P 500 stocks hit a new 52-week low, only the tenth time since 1985 this total exceeded 40%.

The average Nasdaq stock has undergone a 50% drop from its high. The S&P 500 now trades at a level first reached more than 16 months ago in early 2021. This move negates the post-Covid advance in equity markets. The correction waves in February 2016 and December 2018 both bottomed at levels first reached nearly two years prior. Thus, these markets are reaching the point where the past two years of appreciation has been erased.

Stocks Are Looking Cheap

The current collective P/E a ~16, well off the pre-Covid high and not far above where it has bottomed in prior severe sell-offs in 2016, 2018 and 2020 closer to a P/E of ~14. The equal-weight S&P 500 finished mid-June at 13.1-times earnings. It’s noteworthy to point out that the markets bottomed in December 2018 at 12.9 and in March 2020 at 11 (Figure 2).

Figure 2 – Assessing P/E ratios over the past 10 years (adopted from CNBC).

Conclusion

The relentless and indiscriminate selling has reduced the frothy pandemic induced run-up in stocks back to pre-pandemic levels. Stocks are now presenting a window of opportunity for long-term investors at this juncture.

With the collective P/E ratios reverting to its historical mean, oversold conditions at extremes and the inflation picture at a potential inflection point may combine to be a back half of the year reprieve.

The percentage of S&P 500 stocks trading above their 50-day average hit a level that can’t go any lower as measured relative to the past 20 years. This level indicates extremely oversold conditions.

Fewer than 25% of stocks are still within 20% of their 52-week high. The only times this was worse was the Covid crash and the 2007-2009 financial crisis. Over 42% of S&P 500 stocks hit a new 52-week low, only the tenth time since 1985 this total exceeded 40%. The average Nasdaq stock has undergone a 50% drop from its high.

Bank of America’s Bull & Bear Indicator, which captures fund flows and other market-based risk-appetite measures, is well in the fearful depths that typically imply a buying opportunity. During prolonged stressed periods (i.e., 2000-’02 and 2008-’09) bear markets had this gauge persistently stuck at these low levels while prices continued to trend lower.

This window of opportunity may not last too much longer based on historical bear market metrics so pounce and pounce harder if the markets slide further.

Noah Kiedrowski
INO.com Contributor

Disclosure: Stock Options Dad LLC is a Registered Investment Adviser (RIA) firm specializing in options-based services and education. There are no business relationships with any companies mentioned in this article. This article reflects the opinions of the RIA. Any recommendation contained in this article is subject to change at any time. No recommendation is intended to constitute an entire portfolio. The author encourages all investors to conduct their own research and due diligence prior to investing or taking any actions in options trading. Please feel free to comment and provide feedback; the author values all responses. The author is the founder and Managing Member of Stock Options Dad LLC – A Registered Investment Adviser (RIA) firm www.stockoptionsdad.com defining risk, leveraging a minimal amount of capital and maximizing return on investment. For more engaging, short-duration options-based content, visit Stock Options Dad LLC’s YouTube channel. Please direct all inquires to [email protected]. The author holds shares of AAPL, ACN, ADBE, AMD, AMZN, ARKK, AXP, BA, BBY, C, CMG, CRM, DIA, DIS, FB, FDX, FXI, GOOGL, GS, HD, HON, IBB, INTC, IWM, JPM, MA, MS, MSFT, NKE, NVDA, PYPL, QCOM, QQQ, SBUX, SPY, SQ, TMO, and V.

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Source: Window of Opportunity – Valuations Below Pre-Pandemic Highs

Financial News Stock Market News

26 Jun

Currency Speculators boost Japanese Yen bets to 15-week high while Canadian dollar bets drop sharply

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 June 21st and shows a quick view of how large traders (for-profit speculators and commercial entities) 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.

Currency market speculator bets overall were mixed this week as five out of the eleven currency markets we cover (Note: Russian Ruble positions have not been updated by CFTC since March) had higher positioning this week while six markets had lower contracts for the week.

Leading the gains for currency markets was the Japanese yen (11,301 contracts) and the British pound sterling (2,349 contracts) with the Australian dollar (2,648 contracts), New Zealand dollar (1,415 contracts) and the US Dollar Index (534 contracts) also showing positive changes on the week.

Meanwhile, leading the declines in speculator bets this week were the Canadian dollar (-19,097 contracts) and the Euro (-9,587 contracts) with the Brazil real (-2,868 contracts), Mexican peso (-489 contracts), Swiss franc (-349 contracts) and Bitcoin (-15 contracts) also showing lower speculator positions through June 21st.

Currency Position Notables:

Japanese Yen large speculator bets rose for the 6th straight week this week and this improvement has brought the overall speculator standing to the least bearish level of the past 15 weeks at -58,454 contracts. Speculators have trimmed a total of 52,000 contracts off of the total bearish position in these past six weeks after the standing hit -110,454 contracts on May 10th. Yen bets have been in bearish territory since March 13th of 2021 (67 weeks running) with the highest bearish level of the cycle occurring on April 12th at a total of -111,827 contracts.

Canadian dollar bets dropped sharply by -19,097 contracts this week and fell for the first time in the last five weeks. CAD speculator bets had risen over the previous four weeks by a total of +37,698 contracts. The decline this week brings the CAD speculator position into a virtual neutral level at an overall bullish position of just +4,105 contracts as the speculator position has yet to find a sustainable trend and has been alternating between bearish and bullish net positions over the past few months.

The US Dollar Index rose for a 3rd straight week this week and hit a new 5-year high level at +45,010 contracts. This is the first time the overall position has topped +45,000 contracts since March 21st of 2017 and the continued bullish sentiment for the DXY has pushed the US Dollar Index strength score (3-year range) to the very top of its range (100 percent – extreme bullish).

Euro positions fell for the third straight week and dropped to its most bearish level of the past 29 weeks. The strength score for the Euro has dropped to just a 30.2 percent and it seems the speculator positioning is catching up to the bearishness of the EURUSD exchange rate. The speculator net position had been at a twelve-week high on May 31st at a total of +52,272 contracts before dropping over the past three weeks to settle at -15,605 contracts this week.

Strength scores (3-Year range of Speculator positions, ranging from 0 to 100 where above 80 percent is extreme bullish, below 20 percent is extreme bearish and 100 percent is the top of the range) show that the US Dollar Index (100 percent), Bitcoin (99.7 percent) and the Brazilian Real (94 percent) are all in extreme bullish positions. On the bearish side, the Mexican Peso is the only currency currently in an extreme bearish position with a score of 15.9 percent.

Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the Japanese Yen (32.0 percent) and the Swiss Franc (21.8 percent) are leading the strength trends over the past six weeks. Both of these markets have overall bearish net positions but have seen the bearish sentiment cooling off strongly. The Mexican Peso leads the downside trends for another week with a -18.6 percent score.

Data Snapshot of Forex Market Traders | Columns Legend

Jun-21-2022	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
USD Index	58,543	86	45,010	100	-46,746	2	1,736	36
EUR	671,718	70	-15,605	30	-18,182	71	33,787	30
GBP	228,266	57	-63,247	28	77,902	76	-14,655	25
JPY	218,076	67	-58,454	33	74,349	72	-15,895	21
CHF	37,669	16	-7,157	38	14,958	67	-7,801	31
CAD	140,047	23	4,105	44	-6,578	63	2,473	35
AUD	137,017	35	-40,606	47	44,608	52	-4,002	43
NZD	42,889	30	-5,423	62	8,756	44	-3,333	13
MXN	191,265	45	-26,870	16	22,977	82	3,893	60
RUB	20,930	4	7,543	31	-7,150	69	-393	24
BRL	68,858	65	44,345	94	-45,996	6	1,651	84
Bitcoin	13,537	77	1,046	100	-995	0	-51	12

US Dollar Index Futures:

The US Dollar Index large speculator standing this week recorded a net position of 45,010 contracts in the data reported through Tuesday. This was a weekly boost of 534 contracts from the previous week which had a total of 44,476 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 100.0 percent. The commercials are Bearish-Extreme with a score of 1.6 percent and the small traders (not shown in chart) are Bearish with a score of 35.5 percent.

US DOLLAR INDEX Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	88.2	2.9	7.7
– Percent of Open Interest Shorts:	11.3	82.7	4.8
– Net Position:	45,010	-46,746	1,736
– Gross Longs:	51,606	1,676	4,522
– Gross Shorts:	6,596	48,422	2,786
– Long to Short Ratio:	7.8 to 1	0.0 to 1	1.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	100.0	1.6	35.5
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	17.1	-15.2	-7.2

Euro Currency Futures:

The Euro Currency large speculator standing this week recorded a net position of -15,605 contracts in the data reported through Tuesday. This was a weekly decrease of -9,587 contracts from the previous week which had a total of -6,018 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 30.2 percent. The commercials are Bullish with a score of 70.9 percent and the small traders (not shown in chart) are Bearish with a score of 30.4 percent.

EURO Currency Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	29.1	55.6	12.7
– Percent of Open Interest Shorts:	31.4	58.3	7.7
– Net Position:	-15,605	-18,182	33,787
– Gross Longs:	195,554	373,695	85,208
– Gross Shorts:	211,159	391,877	51,421
– Long to Short Ratio:	0.9 to 1	1.0 to 1	1.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	30.2	70.9	30.4
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-9.9	7.0	12.1

British Pound Sterling Futures:

The British Pound Sterling large speculator standing this week recorded a net position of -63,247 contracts in the data reported through Tuesday. This was a weekly boost of 2,349 contracts from the previous week which had a total of -65,596 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 28.4 percent. The commercials are Bullish with a score of 75.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent.

BRITISH POUND Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	12.5	77.6	7.8
– Percent of Open Interest Shorts:	40.2	43.5	14.2
– Net Position:	-63,247	77,902	-14,655
– Gross Longs:	28,470	177,170	17,735
– Gross Shorts:	91,717	99,268	32,390
– Long to Short Ratio:	0.3 to 1	1.8 to 1	0.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	28.4	75.8	25.3
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	11.8	-10.3	2.1

Japanese Yen Futures:

The Japanese Yen large speculator standing this week recorded a net position of -58,454 contracts in the data reported through Tuesday. This was a weekly advance of 11,301 contracts from the previous week which had a total of -69,755 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 32.9 percent. The commercials are Bullish with a score of 71.9 percent and the small traders (not shown in chart) are Bearish with a score of 21.1 percent.

JAPANESE YEN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	16.4	71.6	10.6
– Percent of Open Interest Shorts:	43.3	37.6	17.9
– Net Position:	-58,454	74,349	-15,895
– Gross Longs:	35,864	156,248	23,099
– Gross Shorts:	94,318	81,899	38,994
– Long to Short Ratio:	0.4 to 1	1.9 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	32.9	71.9	21.1
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	32.0	-24.7	-2.9

Swiss Franc Futures:

The Swiss Franc large speculator standing this week recorded a net position of -7,157 contracts in the data reported through Tuesday. This was a weekly decline of -349 contracts from the previous week which had a total of -6,808 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 38.4 percent. The commercials are Bullish with a score of 67.3 percent and the small traders (not shown in chart) are Bearish with a score of 31.1 percent.

SWISS FRANC Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	8.1	66.2	25.7
– Percent of Open Interest Shorts:	27.1	26.5	46.4
– Net Position:	-7,157	14,958	-7,801
– Gross Longs:	3,068	24,927	9,673
– Gross Shorts:	10,225	9,969	17,474
– Long to Short Ratio:	0.3 to 1	2.5 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	38.4	67.3	31.1
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	21.8	-23.7	21.2

Canadian Dollar Futures:

The Canadian Dollar large speculator standing this week recorded a net position of 4,105 contracts in the data reported through Tuesday. This was a weekly reduction of -19,097 contracts from the previous week which had a total of 23,202 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 44.0 percent. The commercials are Bullish with a score of 63.2 percent and the small traders (not shown in chart) are Bearish with a score of 35.1 percent.

CANADIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	30.2	47.9	20.7
– Percent of Open Interest Shorts:	27.2	52.6	18.9
– Net Position:	4,105	-6,578	2,473
– Gross Longs:	42,260	67,084	29,011
– Gross Shorts:	38,155	73,662	26,538
– Long to Short Ratio:	1.1 to 1	0.9 to 1	1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	44.0	63.2	35.1
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	10.7	-7.9	0.0

Australian Dollar Futures:

The Australian Dollar large speculator standing this week recorded a net position of -40,606 contracts in the data reported through Tuesday. This was a weekly gain of 2,648 contracts from the previous week which had a total of -43,254 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 47.2 percent. The commercials are Bullish with a score of 52.2 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent.

AUSTRALIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	23.2	60.2	13.7
– Percent of Open Interest Shorts:	52.8	27.7	16.6
– Net Position:	-40,606	44,608	-4,002
– Gross Longs:	31,745	82,514	18,756
– Gross Shorts:	72,351	37,906	22,758
– Long to Short Ratio:	0.4 to 1	2.2 to 1	0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	47.2	52.2	42.7
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	1.0	-1.9	3.4

New Zealand Dollar Futures:

The New Zealand Dollar large speculator standing this week recorded a net position of -5,423 contracts in the data reported through Tuesday. This was a weekly lift of 1,415 contracts from the previous week which had a total of -6,838 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 62.2 percent. The commercials are Bearish with a score of 43.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.3 percent.

NEW ZEALAND DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	34.2	60.8	5.0
– Percent of Open Interest Shorts:	46.8	40.3	12.8
– Net Position:	-5,423	8,756	-3,333
– Gross Longs:	14,652	26,056	2,145
– Gross Shorts:	20,075	17,300	5,478
– Long to Short Ratio:	0.7 to 1	1.5 to 1	0.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	62.2	43.9	13.3
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	12.7	-12.5	6.3

Mexican Peso Futures:

The Mexican Peso large speculator standing this week recorded a net position of -26,870 contracts in the data reported through Tuesday. This was a weekly fall of -489 contracts from the previous week which had a total of -26,381 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 15.9 percent. The commercials are Bullish-Extreme with a score of 82.4 percent and the small traders (not shown in chart) are Bullish with a score of 59.5 percent.

MEXICAN PESO Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	50.3	45.8	3.3
– Percent of Open Interest Shorts:	64.3	33.8	1.3
– Net Position:	-26,870	22,977	3,893
– Gross Longs:	96,147	87,609	6,317
– Gross Shorts:	123,017	64,632	2,424
– Long to Short Ratio:	0.8 to 1	1.4 to 1	2.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	15.9	82.4	59.5
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-18.6	18.3	-1.1

Brazilian Real Futures:

The Brazilian Real large speculator standing this week recorded a net position of 44,345 contracts in the data reported through Tuesday. This was a weekly fall of -2,868 contracts from the previous week which had a total of 47,213 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 94.0 percent. The commercials are Bearish-Extreme with a score of 6.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 84.1 percent.

BRAZIL REAL Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	80.7	14.6	4.7
– Percent of Open Interest Shorts:	16.3	81.3	2.3
– Net Position:	44,345	-45,996	1,651
– Gross Longs:	55,599	10,020	3,238
– Gross Shorts:	11,254	56,016	1,587
– Long to Short Ratio:	4.9 to 1	0.2 to 1	2.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	94.0	6.4	84.1
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	3.5	-3.9	4.7

Bitcoin Futures:

The Bitcoin large speculator standing this week recorded a net position of 1,046 contracts in the data reported through Tuesday. This was a weekly decline of -15 contracts from the previous week which had a total of 1,061 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 99.7 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 11.8 percent.

BITCOIN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	77.5	0.6	7.7
– Percent of Open Interest Shorts:	69.8	7.9	8.1
– Net Position:	1,046	-995	-51
– Gross Longs:	10,495	78	1,048
– Gross Shorts:	9,449	1,073	1,099
– Long to Short Ratio:	1.1 to 1	0.1 to 1	1.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	99.7	0.0	11.8
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	6.3	-11.9	-3.1

Article By InvestMacro – Receive our weekly COT Reports by Email

*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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26 Jun

COT Week 25 Charts: Metals Speculator bets slightly higher as Gold & Silver bets gain

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 June 21st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

COT metals market speculator bets were mostly higher for the week as three out of the five metals markets we cover had higher positioning this week while two markets had lower contracts.

Leading the gains for the precious metals markets was Gold (8,689 contracts) and Silver (4,414 contracts) with Palladium (11 contracts) also showing a small positive week. Meanwhile, leading the declines in speculator bets this week was Copper (-7,141 contracts) while Platinum (-723 contracts) also registered lower bets on the week.

Notes:

Highlighting the data for metals this week is the Gold positioning. Gold speculative positions rebounded a bit this week after seeing a sharp decline last week of over -20,000 contracts. The Gold net position has been mostly on the defensive since March 8th when the spec level had reached a total of +274,388 contracts which was a 61-week high, dating back to January 5th of 2021. Since then, the overall bullish position has shed a total of -111,101 contracts to settle at this week’s net standing of +163,287 contracts (just 4.4 percent level of its 3-year range). The Gold futures price, however, remains in an uptrend on the daily charts and is sitting right on a significant upward trendline that started in March of 2021.

Silver positioning, much like Gold’s, has been under pressure over the past fifteen weeks. On March 8th, Silver bets reached a forty-three week high at +52,297 contracts, coinciding with the Silver futures price hitting a 2022 high of $27.49. Since then, speculator bets have cooled and have fallen in ten out of the past fifteen weeks (and by a total of -33,878 contracts) to this week’s standing of just +18,419 contracts. The Silver futures price has been on a downtrend since April, currently trading at just over $21.00 and possibly on its way towards the significant psychological level of $20.00.

Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that Copper (27 percent) remains the only precious metals futures market that is not in an extreme bearish level (below 20 percent). A rising interest rate environment with a strong US Dollar has weighed on the precious metals category as speculator futures sentiment continues to be really weak at the moment.

Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that Gold (-15.1 percent) and Palladium (-4.5 percent) lead the downward trends over the past six weeks. Copper (1.2 percent) and Platinum (0.2 percent) are the only two markets with positive trends over the time period.

Data Snapshot of Commodity Market Traders | Columns Legend

Jun-21-2022	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
WTI Crude	1,658,636	0	289,502	0	-323,915	100	34,413	64
Gold	500,276	14	163,287	4	-186,929	96	23,642	14
Silver	145,356	12	18,419	7	-27,250	93	8,831	4
Copper	187,170	17	-20,938	27	18,928	72	2,010	37
Palladium	7,641	6	-4,046	0	4,511	100	-465	17
Platinum	64,946	30	1,491	6	-6,397	96	4,906	30
Natural Gas	1,030,971	0	-130,869	39	85,977	58	44,892	86
Brent	173,098	18	-38,010	47	36,052	53	1,958	36
Heating Oil	268,818	23	9,564	56	-28,204	41	18,640	63
Soybeans	745,494	32	178,379	68	-152,968	38	-25,411	28
Corn	1,512,152	23	380,169	79	-326,474	25	-53,695	12
Coffee	192,832	0	49,371	81	-52,348	22	2,977	20
Sugar	779,773	0	163,111	70	-181,280	34	18,169	30
Wheat	320,326	6	19,067	44	-15,407	38	-3,660	91

Gold Comex Futures:

The Gold Comex Futures large speculator standing this week came in at a net position of 163,287 contracts in the data reported through Tuesday. This was a weekly rise of 8,689 contracts from the previous week which had a total of 154,598 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 4.4 percent. The commercials are Bullish-Extreme with a score of 96.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.7 percent.

Gold Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	53.6	24.0	8.9
– Percent of Open Interest Shorts:	21.0	61.4	4.1
– Net Position:	163,287	-186,929	23,642
– Gross Longs:	268,119	120,045	44,380
– Gross Shorts:	104,832	306,974	20,738
– Long to Short Ratio:	2.6 to 1	0.4 to 1	2.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	4.4	96.0	13.7
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-15.1	19.7	-38.5

Silver Comex Futures:

The Silver Comex Futures large speculator standing this week came in at a net position of 18,419 contracts in the data reported through Tuesday. This was a weekly increase of 4,414 contracts from the previous week which had a total of 14,005 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 6.9 percent. The commercials are Bullish-Extreme with a score of 93.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 4.2 percent.

Silver Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	37.5	37.7	17.2
– Percent of Open Interest Shorts:	24.8	56.5	11.1
– Net Position:	18,419	-27,250	8,831
– Gross Longs:	54,451	54,828	25,018
– Gross Shorts:	36,032	82,078	16,187
– Long to Short Ratio:	1.5 to 1	0.7 to 1	1.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	6.9	93.4	4.2
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-1.0	4.2	-13.8

Copper Grade #1 Futures:

The Copper Grade #1 Futures large speculator standing this week came in at a net position of -20,938 contracts in the data reported through Tuesday. This was a weekly decline of -7,141 contracts from the previous week which had a total of -13,797 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 27.3 percent. The commercials are Bullish with a score of 72.5 percent and the small traders (not shown in chart) are Bearish with a score of 36.9 percent.

Copper Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	26.8	55.5	9.0
– Percent of Open Interest Shorts:	38.0	45.3	8.0
– Net Position:	-20,938	18,928	2,010
– Gross Longs:	50,230	103,789	16,909
– Gross Shorts:	71,168	84,861	14,899
– Long to Short Ratio:	0.7 to 1	1.2 to 1	1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	27.3	72.5	36.9
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	1.2	-0.2	-7.9

Platinum Futures:

The Platinum Futures large speculator standing this week came in at a net position of 1,491 contracts in the data reported through Tuesday. This was a weekly fall of -723 contracts from the previous week which had a total of 2,214 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 5.5 percent. The commercials are Bullish-Extreme with a score of 96.2 percent and the small traders (not shown in chart) are Bearish with a score of 30.4 percent.

Platinum Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	39.5	43.9	13.0
– Percent of Open Interest Shorts:	37.2	53.7	5.4
– Net Position:	1,491	-6,397	4,906
– Gross Longs:	25,676	28,487	8,413
– Gross Shorts:	24,185	34,884	3,507
– Long to Short Ratio:	1.1 to 1	0.8 to 1	2.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	5.5	96.2	30.4
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	0.2	-1.4	12.5

Palladium Futures:

The Palladium Futures large speculator standing this week came in at a net position of -4,046 contracts in the data reported through Tuesday. This was a weekly lift of 11 contracts from the previous week which had a total of -4,057 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 0.1 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.0 percent.

Palladium Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	13.2	74.0	12.6
– Percent of Open Interest Shorts:	66.2	15.0	18.6
– Net Position:	-4,046	4,511	-465
– Gross Longs:	1,009	5,655	960
– Gross Shorts:	5,055	1,144	1,425
– Long to Short Ratio:	0.2 to 1	4.9 to 1	0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.1	100.0	17.0
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-4.5	6.0	-16.0

Article By InvestMacro – Receive our weekly COT Reports by Email

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