The Commitments of Traders is a weekly market report issued by the Commodity Futures Trading Commission (CFTC) enumerating the holdings of participants in various futures markets in the United States. It is collated by the CFTC from submissions from traders in the market and covers positions in futures on grains, cattle, financial instruments, metals, petroleum and other commodities. The exchanges that trade futures are primarily based in Chicago and New York.
While the interpretation of these reports can vary from instrument to instrument, its current reading is sending a potential message for US Dollar Futures prices. With any “indicator” you have to use it as a barometer versus a crystal ball, but historically it has paid to sell USD (vs buy) when commercial hedgers (the green line below the USD prices) have been selling aggressively into topping prices. While I do as much fundamental analysis as possible, I cannot know more than the commercials who are on the ground and know every aspect of the business – so as the old saying goes, “if you can’t beat ’em, join ’em.” The probabilities favor lower USD prices over the next six months over higher (but no signal is foolproof). Hence, the reason for proper risk management and sizing when you enter probability advantaged positions over a series of trades.
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