There are two situations that lead to big events in the markets and they represent psychological mirror images of each other. The first issue is overconfidence. Whether this is overconfidence in a market, a strategy or one’s self, overconfidence leads to carrying the largest position at the most inopportune moment. The second issue is indecision. There are times when a market approaches critical levels yet; the trading population appears uninterested or, scared. Either way, indecision leads to fewer participants while overconfidence leads to too many. Therefore, our focus today is the examination of a very bullish net commercial trader position in the face of the lowest commercial participation rate since the economic collapse of 2008-2009.
We’ve also posted a snapshot of the mechanical program’s soybean meal results. This program is based on the commercial traders’ actions as reported to the Commodity Futures Trading Commission’s(CFTC) weekly Commitment of Traders(COT) report.
Is this the first failure of the coming weakness? We’ve been planning ahead in, “Equity Rally Waves a Caution Flag.”