Market positioning from the COT report – as of Tuesday March 19, 2024:
- People who bet that the Japanese yen’s value will go down reached the highest level in 16 years.
- People continued to bet against the Swiss franc, with more bets that its value will go down.
- These big betters have been betting against the Australian dollar for four weeks in a row, and they’ve been doing it more than usual lately, probably because of recent news about the Middle East.
- People who bet that the price of gold will go up increased their bets by a lot, while those who bet it will go down decreased their bets.
- People who manage assets are almost ready to start betting that gold’s price will go up, which they haven’t done for almost five months.
- People who manage assets increased their bets that the VIX (a measure of stock market volatility) will go up.
- People who manage assets decreased their bets that the Dow Jones stock index will go up, reaching the lowest point this year.
US dollar index positioning – COT report:
I noticed that asset managers and big betters had different ideas about how much they wanted to bet on something. With the US dollar getting stronger, it looks like asset managers made the right choice. The US dollar got stronger because of high prices for things we buy (CPI), Federal Reserve members saying they don’t want to lower interest rates, and people wanting to invest in safe things because of tensions in the Middle East.
In the future, I think big betters will start to bet less against the US dollar and start betting more that it will go up. They might already be doing this. I think the US dollar could reach 106 soon and might even go up to 108.
VIX futures positioning – COT report:
Last Friday, tensions in the Middle East made the stock market go down, and a measure of how much the market moves, called the VIX, went up a lot for the first time this year. Before this happened, people who manage assets and big betters were betting less against the market going down and started betting more that it would go up.
Actually, the people who manage assets are almost ready to start betting that the market will go up, which they haven’t done since January. But just a few weeks ago, they were betting a lot that the market would go down because of the pandemic.
I’m not sure what to think about this. Maybe when people who manage assets start betting that the market will go up, it means the market will start going down soon. But in the past, this hasn’t always been true, so maybe we should wait until big betters start betting that the market will go up too before we get too worried about the market going down a lot.
JPY/USD (Japanese yen futures) positioning – COT report:
In July 2007, there were a lot of bets against the Japanese yen’s value. Recently, the value of the US dollar compared to the yen went above 152, breaking an important level. This made even more people bet against the yen, reaching levels we haven’t seen since 2013 and 2017. Now, we’re close to reaching the highest level of bets against the yen ever, which was about 188.
Breaking above 152 was a big deal, and even some officials said that they might not need to intervene in the market as much as they thought. The next important level to watch is 155 for the US dollar compared to the yen. Yes, there are a lot of bets against the yen right now, but if no one tries to change the situation and the US economy keeps doing well, the US dollar’s value compared to the yen could keep going up.
Gold futures (GC) positioning – COT report:
Gold prices went up for the fourth week in a row and briefly reached a new record high above $2400. But there was a sign on the weekly chart that showed the upward momentum might be slowing down a bit. However, this one sign alone isn’t enough to say that gold prices will start going down.
Big betters and people who manage assets still think gold prices will go up, but not by a lot. People who manage assets decreased how much they were betting against gold and increased how much they were betting for it, while big betters increased how much they were betting for gold and decreased how much they were betting against it.
So, even though there might be small drops in gold prices, people are still interested in buying gold when its price goes down a little bit.
Big betters and people who manage assets increased how much they were betting that something will go up for the second week in a row. Just like with gold, they’re not betting on it going up too much. Some big betters were betting a little bit that it would go down, but those bets might have been taken away after some news came out. Just like with gold, people are still interested in buying when the price drops a little bit. But if oil prices aren’t going up a lot because of news from the Middle East, maybe it’s not a good idea for traders to bet that it will go up without waiting for a price drop first.
