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This weeks COT Index Review
S&P 500: In last weeks report we talked about the strengthening bearish set up developing with the S&P COT. In the most recent COT release the positioning in this setup has strengthened further. The Commercial reading is now 8.56, only 8 points away from a 0 reading which would mean that commercial positioning is very close to the weakest it has been in over 6 months. However this is only one side of the coin, Large trader readings are very bullish reading 100.00 the highest reading in 6 months. This Divergence presents a strong short bias setup, (Commercial traders lead this COT Report.)
Bias: Very Bearish
EURUSD: Although weakening slightly from last weeks positioning COT positioning in the EURUSD remains strong on the long side with the Large traders acting as the leading group with a reading of 85.13, Commercial traders on the opposite end of the scale reading 8.62 (Large traders lead this COT report)
GBPUSD: Although still neutral in terms of the overall readings large traders have made a dramatic shift in positioning from a bullish 72 to a much more bearish 20.85. Commercial traders have made a similar switch. Whilst overall we are still neutral GBPUSD seems to be developing a bearish set up. (Large traders lead this COT report)
USDJPY: The COT report for USDJPY is not yet able to reflect the effects of the earthquake and nuclear fears in Japan. Next weeks report will be the one to watch to see the effects of these events on this pair. At present we are seeing bearish positioning however only a few points are required to tip USDJPY into the neutral zone. (Large traders lead this COT report)
GOLD: After a week or 2 of neutral positioning, Gold traders are now showing us their hand. We’re seeing large traders push to a weaker level in the COT Index with Commercials increasing their positioning strength. By no means is this strong bearish positioning, but the bears do seem to be gathering pace. What’s interesting to note is that S&P positioning has also become bearsh (Large trader lead this COT report)
CRUDE OIL: Crude Oil positioning remains very much close to extremes with a bullish fundamental outlook, the only way to calm this bullishness would be some calm in the Middle East, this doesn’t seem to be on the cards anytime soon. (Large traders lead this COT report)
FX Retail Trader Position Analysis
This report describes a contrarian view on current retail trader positioning in FX Click me to get some background on these reports
USDJPY: 74.64% of retail traders remain long USDJPY, we have seen over the last year how incorrect this positioning has been. The recent events in Japan have really throw things up in the air, with the BOJ and other central banks intervening last week to increase the money supply. Based upon retail positioning we maintain our bearish bias but this is a pair that will have continuing volatility in the weeks ahead.
EURUSD: This week we saw EURUSD retail positioning reach a one year high of 69.33% shorts, this is the strongest short positioning we have seen in the Euro in a long while. What’s interesting to note is that it is happening as EURUSD reaches 5 month highs.
Bias: Strong Bullish
GBPUSD: Contrary to what we are seeing in the COT report for the GBPUSD which was neutral/slightly bearish. We are seeing more decisive direction in the retail trader positioning report, with 63.73% of traders short our bias right now is very much to the long side.