Weekly CMR COT Charts Review _ Equities (Continued)

Stock Market Futures Trader Positioning Review

Published by The CMR Team on behalf of Jason Shapiro

This weeks CMR COT Charts will focus on Stock Market Futures again. The charts are based on Futures trader positioning data published by the CFTC called the Commitments of Traders (COT) Report. To learn more about understanding CMR COT Charts, you can watch this video.

The information contained in this post is high level with a goal of educating readers on the value of trader positioning and how it is a great risk management tool, that provides opportunities for high reward/low risk trade, where over time, it provides an edge for positive returns. To learn more about COT, risk management and what it takes for long-term success, you can join our CMR Community where we offer our standard members the weekly Crowded Market Report (CMR), weekly COT charts for over 200 markets, weekly CMR Index that tracks level of crowdedness, TradingView CMR indicators, private Discord server where members and Jason are active on a daily basis and the newly added Sunday Zoom Q&A Call for members to ask Jason questions right after the report is published.

---

CMR COT CHARTS: EQUITIES

The Equities chart that combines positioning for all four major indices, showed both Large and Small Speculator buying week over week, as Commercial traders inversely reduced their net long position. This is the least long Commercial traders have been since June of 2022.

The COT index is showing a sell in the Nasdaq, Dow, and Russell. The Nasdaq chart received a lot of attention on X the last few days as it was reposted by accounts who were making the bearish case for the markets. To clarify, just because Speculator positioning is crowded, does not mean the market will go down. This process has a ~40% win rate historically, and the expectation remains the same for this trade. IT ALSO NEEDS A NEWS FAILURE EVENT. Crowded positioning alone is not enough to enter the trade.

The bearish case for the Nasdaq can be made based on the price action starting on Thursday, 12/28/2023, which was a news failure day, through last Friday, where bullish news was coming out and the Nasdaq closed down each day. With that said, shorting stocks is a scary trade and a tough way to make money. You have to consider the upward drift in stocks over time. This trade also seems too easy.  Was it really just as easy as waiting for the end of the year and then sell everything, right at the top? 

With today’s Nasdaq price action higher and Consumer Price Index (CPI) data being released on Thursday, 1/11/2024, one possible scenario is price continues to drift higher into Thursday, CPI data is lower than forecast, and Nasdaq ends the day red, which would be considered a news failure. The high of that day would become the stop level if a short trade is entered at the close.

A few people have pointed out the S&P COT is not at extremes and in fact shows Large Speculators short and commercials long. What I would say to this is I don’t think I have ever seen all four indices showing maximum crowdedness at the same time, either long or short.  In fact, I don’t remember a time when any sector showed all the assets max crowded positioning at the same time, be it Currencies, Grains, or whatever category. 

Thank you for reading this week’s newsletter. Our goal in 2024 is to post CMR COT charts on Mondays and share markets of interest based on positioning. If you are interested in joining our CMR community and becoming a member, just click the button below.

Jason Shapiro & The CMR Team
Don’t Trade…Fade

By accessing this post you agree to our Terms of Service