I have noticed those that seem to be on "cot watch" every Friday for some time. Personally, I haven't found any use in it for my own benefit...especially shorter term but that is likely due to my lack of interest and ignorance in it.
Fwiw, I'll link the following: www.capitalstool.com
>>This weeks COT report confirms what I speculated would happen. The commercial hedgers went net long. This is EXTREMELY BEARISH for the intermediate term. The last time the commercials were net long at this level was the weeks of March 13-21 of 2000, at the EXACT TOP of the bull market.<<
>>Wednesday a week ago, the Bank of Japan intervened in the currency markets in an action designed to suppress the yen. They bought dollars. The media reported that a number of hedge funds got caught in the "war trade." They were short dollars and stocks, long gold and bonds, and were highly leveraged. Reuters reported on March 20:
Before the first shot was even fired in Iraq, a handful of hedge funds lost hundreds of millions of dollars when markets turned against them on hopes the fighting would end quickly. So-called commodity trading advisors, or CTAs, who rely on computer models to track long-term trends, were hurt badly when stocks and the dollar suddenly swung around and raced higher. Some of these funds recorded declines of as much as 25 percent in five days, sources familiar with their trading said. ‘For many CTAs, this was the perfect storm,’ said Philippe Bonnefoy, head of alternative investment strategies at Commerzbank Securities. ‘Most of the CTAs suffered double-digit reversals because all of the trends changed in one fell swoop, in one day, in fact." (End of Reuters snip)
That set off the chain reaction disaster (for bears) that we are currently in the middle of. Last week, was, of course, scam week, when options and fucutures expire. Until last week, the CFTC had reported that commercial hedgers had near record levels of short positions for several weeks. What most stoolies fail to recognize is that the "Commercials" are not merely the biggest players in the markets, in order to be classified as "Commercials", they must be hedgers, just like a pig farmer who hedges his pigs in the pork bellies markets.
While pig farmers may be the "smart money" in the pork belly market, commercial hedgers of stock index futures are simply big dumbass institutions, playing not with their own little piggies, but yours. The commercial short positions reached record levels because the big dumbass institutions, instead of selling their stocks throughout the bear market as they did in the past, steadily increased their hedging by selling index futures and individual stock and index options. Instead of creating real liquidity by selling their stocks, they created artificial shortage by pledging them against these hedges.
This current Commitment of Traders report through March 18 shows that the net short positions of commercial traders has declined precipitously, and was at the lowest level in nearly 3 years and is barely net short. Considering the action of the last 3 days, it is even lower now, than it was on Wednesday, when the COT was filed. Obviously they were covering their hedges. At the same time, they were buying in stock to deliver against their covered calls. It was, in effect, the perfect storm, the equivalent of shock and awe in the markets.<< |
