Regardless of your trading methods, and no matter what markets you’re involved in, there is a Commitments of Traders (COT) report that you should be reviewing every week. Nobody understands this better than Stephen Briese, an industry-leading expert on COT data. And now, with The Commitments of Traders Bible, Briese reveals how to use the predictive power of COT data—and accurately interpret it—in order to analyze market movements and achieve investment success.
Table of Contents:
List of Illustrations xiii
List of Tables xix
Preface xxi
Acknowledgments xxv
Part I COT Theory
Chapter 1 The COT—Assorted History 3
The Grain Futures Administration 3
The Commodity Exchange Authority 4
The Commodity Futures Trading Commission 5
The Modern COT Data 6
COT Options and Futures Combined Report 8
COT-Supplemental Commodity Index Trader Report 9
A Fable 11
Chapter 2 COT Reports—Counting 1, 2, 3 . . . 15
The Long Form 17
The Short Form 23
COT-Supplemental Commodity Index Report 24
Chapter 3 Player Introductions 27
Sizing Them Up 27
The Reporting System 31
Commercial Hedgers 31
Large Speculators 33
Commodity Index Traders 34
Small Traders 36
Chapter 4 Fading Small Speculators and Other Half-Baked Schemes 39
TIP: Always Follow Commercials 39
TIP: Net Long Is Bullish; Net Short Bearish 40
TIP: Always Fade the Small Speculator 43
TIP: It Is Only Logical to Compare Hedging to the Seasonal Average 43
TIP: The COT Is Old News by the Time It Is Released 45
Chapter 5 Net Positions 47
Open Interest 47
Constructing Net Positions Charts 47
Large Speculator Patterns 51
Commercial Patterns 56
Small Trader Patterns 59
Commodity Index Traders 60
Chapter 6 The COT Index 63
COT Index Calculation (Commercials) 63
Alternative Look-Back Periods 66
The COT Index as the Great Normalizer 67
Interpreting the COT Index 69
Heal Thyself 72
Chapter 7 COT Movement Index 75
Commercial Movement Index 75
40 Point COT Surge Rules (Commercials) 76
Combining the Indexes 77
Fund Movement Index 79
Chapter 8 View from the Gallery 83
Keynes’s Theory of Normal Backwardation 84
Can Speculators Forecast Prices? 85
Returns to Speculators and the Theory of Normal Backwardation 86
Returns to Individual Traders of Futures: Aggregate Results 87
Luck Versus Forecast Ability: Determinants of Trader Performance in Futures Markets 87
The Returns and Forecasting Ability of Large Traders in the Frozen Pork Bellies Futures Market 88
Hedging Pressure Effects in Futures Markets 88
Hedging Demand and Foreign Exchange Risk Premia 89
Investor Sentiment and Return Predictability in Agricultural Futures Markets 89
The Behavior and Performance of Major Types of Futures Traders 90
Exchange Rate Changes and Net Positions of Speculators in the Futures Market 93
The Profitability of Speculators in Currency Futures Markets 94
Summary 95
Chapter 9 View from the Pits 97
The Study Data 98
The Trading Rules 98
Trading Rules Test Results 100
Trading System Considerations 100
Chapter 10 Chart Pattern Validation 105
A Brief Charting Primer 105
Bottom Formations 106
Top Formations 108
Continuation Patterns 111
Chapter 11 Getting Technical 115
COT-Stochastics 115
COT MACD-Histogram 117
COT-RSI 120
Standard Deviation (Bollinger) Bands 121
Conclusions 122
Part II COT in Practice
Chapter 12 Crossing Currencies 127
Commercials 129
U.S. Dollar Index 129
Currency Correlation Tables 132
Currency Futures Historical COT Charts 133
Chapter 13 Taking Stock 145
The COT Beats the Averages 146
Stock Index Correlation Tables 148
Stock Index Futures Historical COT Charts 148
Chapter 14 Test of Metal 155
Marking Time in Gold 155
The Gold/Silver Ratio 157
The Copper Caper 157
Commercials 158
Metal Correlation Tables 161
Metal Futures Historical COT Charts 161
Chapter 15 Oil’s Slick 165
To an Uninterrupted Gasoline Supply 165
Commercial Hedgers 168
Petroleum Correlation Tables 168
Petroleum Futures Historical COT Charts 169
Chapter 16 Interest in Rates 175
What Drives Rates? 175
Commercial Hedgers 176
Treasury Futures Correlation Tables 176
Treasury Futures Historical COT Charts 176
Chapter 17 Bean Counting 183
The One That Got Away 183
Commercial Hedgers 185
Soy and Grain Correlation Tables 189
Soy and Grain Historical COT Charts 189
Chapter 18 Moonlighting 195
It Might Be Corny, But. . . 195
Small Can Be Beautiful 196
Commercial Hedgers 196
Livestock Correlation Tables 197
Livestock Historical COT Charts 201
Chapter 19 Cedeless Oranges 205
Continuous Commodity Index 206
Food and Fiber Correlation Tables 208
Food and Fiber Historical COT Charts 208
Chapter 20 Now You CIT, Now You Don’t 217
The COT-Supplemental Report 217
Historical COT-Supplemental Charts 218
Epilogue 233
Appendix A: Alternative Net Position Formulas 237
Appendix B: Dodging the Pitfalls in COT Data 243
References 251
Glossary 257
About the Author 269
Index 271
