COT: Stretched positioning raising reversal risks
Head of Commodity Strategy
Summary: Hedge funds cut bullish bets on commodities by 18% to 457k lots. While gold, silver, copper and grains were sold as the dollar rose, the oil long expanded further in response to the US decision not to extend waivers to the ban on Iranian oil.
To download your copy of the Commitment of Traders: Commodity report for the week ending April 23, click here.
Copper traders reacted to the stronger dollar by once again reversing their net positions to a short of 7k lots, the most bearish in nine weeks.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
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.