The Commodity Futures Trading Commission(CFTC) publishes a weekly report entitled, “Commitments of Traders.” This report classifies the markets’ largest positions by trading groups – speculators, managed money, index traders and commercial traders. Our research focuses on the commercial trader group. We’ve been able to quantify correlated movement between the commercial traders’ net position and commercial trader momentum with the underlying market movement accurately enough to use this as the first screen in our trade selection process. We hypothesize that their accuracy is due to the laser focus necessary when one’s livelihood is derived solely from the movement of an individual market.
The Euro currency and Swiss Franc had been artificially tied together since 2011. Eventually, as with all single markets tying themselves to a larger commonwealth, the single market eventually needs out. It can happen for a variety of reasons either the larger group’s or the individual country’s but eventually, the fluid movement of a single country’s needs will find itself at odds with the larger group’s stagnancy.
This morning’s piece for TraderPlanet combines all of the classic elements necessary to create a Commitment of Traders buy signal in the cocoa futures market. We discuss the macro factors that have kept the commercial traders on the short side of the market during its extended sideways range near the highs as well as the cause of the recent sharp sell off. Finally, we examine the technical nature of the market and exactly what this trade is setting up and the risk entailed.
Fully mechanical Commitment of Traders markets and equity curves.