COT: Dollar shorts & silver longs cut in week of WSB mayhem COT: Dollar shorts & silver longs cut in week of WSB mayhem COT: Dollar shorts & silver longs cut in week of WSB mayhem

COT: Dollar shorts & silver longs cut in week of WSB mayhem

Ole Hansen

Head of Commodity Strategy

Summary:  This update highlights futures positions and changes made by hedge funds across commodities, forex, bonds and stock indices up until last Tuesday, February 2. A week that saw the dollar jump to a six-month high while bond yields and commodities ticked higher on renewed reflation focus. Also a week where traders reacted to the rwallstreetbets attack on shorted stocks and silver.


Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across commodities, forex, bonds and stock indices up until last Tuesday, February 2. A week that saw stock markets trade lower on what turned out to be short-lived deleveraging concerns, after the rwallstreetbets (WSB) group on social media inspired attack on shorted U.S. stocks triggered some major hedge funds losses. The dollar jumped to a six-month high while bond yields ticked higher on renewed reflation focus. Commodities traded mixed with losses in metals, minus silver, being more than offset by another strong week across the energy sector.

Commodities

Speculators maintained an unchanged but still record long exposure across 24 major commodity futures. Another week of strong buying across the energy sector was joined by livestock to offset reductions seen in metals, grains and softs. 

Most in demand was natural gas where an 8% price jump triggered a 46.4k lots increase in bullish bets to 327k lots. Crude oil net longs increased as prices continued their month-long rally in response to tightening market conditions supported by Saudi production cuts and strong Asian demand. The combined net long in Brent and WTI rose 18k lots to reach a one-year high at 698k lots.

Silver’s social media driven rally and subsequent dump was captured in last weeks data. Given all the focus on the so-called and non-existent bullion bank naked short, it is worth mentioning the changes seen in COMEX silver futures last week. Producers took advantage of the rally to increased their net short hedges by 5% to -55.6k lots, speculators (tracked in this report) also sold into the rally and reduced their net-long by 8% to 40.6k lots. Swap dealers or banks meanwhile cut their net short by 8% to -19.8k. As highlighted in updates last week a net short which is less than 20% of the daily silver futures turnover. In other words, a position that never could trigger the squeeze that the social media dreamt up.

Especially not during a week where the other key drivers, such as the dollar and bond yields both continued to sap interest in gold. The yellow metal dropped 1.2% during the week while speculators cut bullish bets by 9% to 106k lots, near the lowest recorded since June 2019. Copper’s China liquidity squeeze related weakness only triggered a 1% reduction with strong underlying fundamentals awarding the bulls after the metal recovered strongly ahead of the weekend.

Forex

A week of broad dollar strength saw the net short against ten IMM currency futures and the Dollar Index reduced by 11% to $31.9 billion, a seven week low. The bulk of the change occurred in EURUSD where the combination of longs being cut and fresh shorts added reduced the euro net long by 17% to 137k lots (€17.1 bn), the least bullish since mid-November. Changes in the other crosses were muted with the exception of the Swiss francs where speculators increased their net long by 45% to 14.6k lots. Despite trading a touch lower, the CAD long reached a one-year high at 16k lots.  

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming

 

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.