COT Report - what it is and why we should care about it.
The weekly Commitment Of Traders report summarizes the total trader positions for open contracts in the futures trading 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). Find CFTC criteria here: (http://www.cftc.gov/MarketReports/CommitmentsofTraders/ExplanatoryNotes/index.htm).
The Commitment of Traders report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions data that was reported as of the previous Tuesday (3 days behind).
Each currency contract is a quote for that currency directly against the U.S. dollar, a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and a net long position expect that currency to rise versus the dollar.
(The charts overlay the forex closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.) See more information and explanation on the weekly COT report from the CFTC website.
To the charts!
The data shows that large traders and currency speculators increased their positions in the US Dollar Index futures for more than 15 consecutive weeks now.
If they are still betting on the dollar getting stronger, what should we do?
That's rhetorical, isn't it?
Unless somehow you can afford to be proven wrong week after week after week for fifteen weeks now.
That's why COT matters.
At least you'll know what NOT to do next.
Here's some data about the main counterparts to the dollar trade for the last week.
Happy pippin'!
