For another week COT data is tough to analyse as you don’t know exactly what happened later in the week but you have to infer with ETF fund flows and advancing volume. (SPY didnt sell much earlier in the week and was a gainer on the week including Thursdays data – have to wonder how reliable that data is after Mondays ETF madness)
ES appears to be retracing some of the drop. I wish I started earlier but looking at this move relative to the October ebola panic.
In Oct 14 price fell 7.5% drop this was followed by a rally to new highs. That was when there was little overhead resistance above the prior high, just fresh air and all time highs.
The Commercial category went -300k to short equities, something that you should normally see when the market is at overbought levels. The -300k extreme jump is just for 2 days of the week’s trade (edit: actually it is 7 days trade but the majority of the move was Thurs-Mon so 3 days). Commercials have been short and this is normal but leveraged money needs to be buying to see higher prices. Leveraged money have been short too. Nobody was left to buy the market except small speculators.
See what happens in these charts if Commercial and Non-Commercial are both net short at the same time – price really struggles to move up.
This -300k jump possibly includes some selling that you would normally expect in advance of contract rollover (2nd Thurs September). I think this rollover will be a big test for the market. Some simply have to sell the front month putting pressure on prices into that event.
I will be looking to see if price shows weakness to break into the prior range (indicating overhead supply resistance). Important to see whether high volume selling appears. Need to see if commercials and leveraged $ remain short in next weeks COT data.
This might sound crazy but the only example I can find of ES going that short by Commercials that quickly was in 2008 after price dropped from 1200 to 1000 but then went < 700
In 2011 it showed the bottoming pattern of Commercials long at the bottom …
On NQ leveraged longs paid up to Commercial shorts:
On Forex the moves may be explained by closing EUR shorts and USD longs as opposed to opening new positions … not sure here. Euro looking weak and Dollar strength hurting emerging market currencies.
On US Ten Year – selling appearing with Leveraged money going short and Commercials near their lowest net long level since 2013 (no extremes showing, just a small shift in price also).
Gold – commercials adding short here , leveraged pushing large net +
I added some trend lines on Gold – that 1070 area was fundamental to the 2010 breakout and rally – note it had large speculative support then.
I found an old PDF from 1994 about Wyckoff theory – I often post links to documents containing charts from this.