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IPFS News Link • Stock Market

Traders Are Pushing Oil, Rates, & The Dollar. Are They Right?

• by Tyler Durden

Or, are they about to get smacked by a slower economy and deflationary headwinds?

Once a quarter, I dig into the Commitment of Traders data to see where speculators are making their bets. Such is an excellent metric to watch from a contrarian view. Generally, when traders are positioned either very long or short in a particular area, it is often a good bet something will reverse.

Positioning Review

The COT (Commitment Of Traders) data, which is exceptionally important, is the sole source of the actual holdings of the three critical commodity-trading groups, namely:

Commercial Traders: this group consists of traders that use futures contracts for hedging purposes. Their positions exceed the reporting levels of the CFTC. These traders are usually involved with the production and processing of the underlying commodity.

Non-Commercial Traders: this group consists of traders that don't use futures contracts for hedging and whose positions exceed the CFTC reporting levels. They are typically large traders such as clearinghouses, futures commission merchants, foreign brokers, etc.

Small Traders: the positions of these traders do not exceed the CFTC reporting levels, and as the name implies, these are usually small traders.

The data we are interested in is the second group of Non-Commercial Traders (NCTs.)