Commitment of Traders – The Basics
The Commitments of Traders (CoT) is a weekly report released by the Commodity Futures Trading Commission (CFTC). The CoT report outlines how different traders are positioned in the futures markets. There are two main types of traders in a CoT report: commercials and money managers.
Commercials are the producers and users of a commodity that use the futures markets to hedge. A commercial producer in the corn market could be a farmer who sells corn futures to lock in his selling price. Commercial traders are considered the “smart money” since they are in tune with the physical commodity business and likely have superior supply/demand information. The other main CoT trader type, money managers, comprises hedge funds, mutual funds, and commodity trading advisors. These speculative traders have no interest in the underlying physical commodity business.
CoT data is most meaningful at extremes when either commercial traders or speculators are super net long or net short. The charts below are mostly self-explanatory by looking at the color-coded type of traders. For a more detailed explanation, please see the bottom of this note.
DeMark Indicators basics at the bottom of this note
Highlights and themes
The big news wasn’t the Dollar and several crosses that were getting DeMark exhaustion signals as we have been anticipating but the re-emergence of crypto on the upside. There were signals that last week I thought it was possible that after the DeMark Setup 9 triggered, a new Sequential could continue the recent trend.
Over a week ago, the US Dollar did get the DeMark Sequential 13, and I said it would take a little more for the Combo 13s to qualify, which occurred on Friday. I have been watching other important crosses closely, notably Euro, and Yen also got the exhaustion signals this week too.
After getting these signals, we should expect a price reversal within the next ten days. I believe with the BoJ this week; there is a strong chance.
Currency Sentiment Overview
Currency sentiment highlights show the reemergence of Bitcoin after being left for dead since last May. The US Dollar at 19% is at a new one-year low, and a counter-trend bounce is probable with many DeMark exhaustion signals developing on the US Dollar Index and other crosses.
US Dollar Indexes
DXY US Dollar Index daily has the Combo buy Countdown 13 in play. Now we need a price flip-up. A “price flip” is defined as a contra-trend move identified by a close higher than the close four price bars earlier.
DXY US Dollar Index weekly has a new Sequential starting however, with this oversold weekly a counter-trend bounce is possible.
US Dollar bullish sentiment at 19% is oversold and at the lowest level in over a year.
US Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
crypto
Bitcoin Daily has a new Sequential Countdown in progress. This had the potential for this continuation higher with the completed Setup 9. RSI is very overbought.
Bitcoin futures sentiment was under pressure until this week. We will be watching the 50% level for a break higher.
Ethereum daily also with a Sequential Countdown in progress and an extreme RSI
Major USD Crosses
EURUSD Euro / US Dollar has two versions of the Combo 13s in play. Again we will be watching for a price flip lower.
Euro bullish sentiment moved over 80% last week into the extreme zone.
Euro Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
GBPUSD British Pound Sterling / US Dollar sideways with a higher low potential
British Pound Sterling bullish sentiment had started to roll over in early December.
British Pound Sterling Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
AUDUSD Australian Dollar / US Dollar continues the drift with sell Setup on day 7 of 9
Australian Dollar bullish sentiment is near the one year high in sentiment
Australian Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
USDCAD US Dollar / Canadian Dollar
Canadian Dollar bullish sentiment remains under pressure
Canadian Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
USDCHF US Dollar / Swiss Franc has the potential to turn with the recent exhaustion signals
Swiss Franc bullish sentiment remains under pressure
Swiss Franc Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
USDJPY Japanese Yen did get the Sequential buy Countdown 13 and this week’s BoJ meeting could see the Yen decline
Japanese Yen bullish sentiment is also near the extreme zone
Japanese Yen commitment of traders
USDNZD New Zealand Dollar started to turn and fell back to support
New Zeland dollar bullish sentiment remains elevated
New Zealand Dollar commitment of traders
RISK On Risk Off
This cross is often used as a risk-on / risk-off indicator
EURAUD Euro / Australian Dollar
Three major Yen crosses
Lower highs continue on all of these crosses
EURJPY Euro / Japanese Yen
GBPJPY British Pound Sterling / Japanese Yen
AUDJPY Australian Dollar / Japanese Yen
US Dollar vs Emerging Markets
USDTRY US Dollar / Turkish Lira was the most volatile currency and now the least volatile
USDBRL US Dollar / Brazilian Real
Brazilian Real Commitment of Traders
USDMXN US Dollar / Mexican Peso could see a reversal this week
Mexican Peso bullish sentiment is extreme at 92% with one of the highest readings in years
Mexican Peso Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators
USDZAR US Dollar / South African Rand spiked after the Sequential 13
USDCNH US Dollar / Chinese Offshore Renminbi (Yuan) did get the Combo (default version) with the secondary Sequential on day 11 of 13 and strict version of the Combo on day 11 of 13.
DeMark Sequential Basics from Bloomberg
More detailed Commitment of Traders explanation
