The latest CFTC Commitment of Traders (COT) report reveals a divergence across major futures markets. Bullish positioning on the Dow Jones continues to build, while traders are becoming more cautious on the S&P 500 and Nasdaq 100. Meanwhile, sentiment towards gold and WTI crude oil is beginning to stabilise, raising the prospect that both commodities could be nearing swing lows after prolonged declines.
Source: LSEG
Wall Street Index Futures Positioning (S&P 500, Dow Jones, Nasdaq 100) | COT Report
Dow Jones Leads Wall Street as Bullish Positioning Builds
The Dow Jones is the leader on Wall Street, and currently the only one of the big three US indices to break to new highs. And that is also being reflected in traders positioning on the futures market.
Short covering has been a main theme on Dow Jones futures, falling 63% in the past six from 21.1k contracts to 7.9k. Gross-longs have also been trending higher, rising 74% over the past 12 weeks. This has sent net-long exposure to a 21-week high of 10.2k.
S&P 500 Futures Show Signs of De-Risking
S&P 500 futures are trying to retest their record highs, but are yet to confirm the breakout seen on the Dow several weeks ago. It is interesting to note that gross longs and shorts have fallen in recent weeks, meaning futures traders are effectively de-risking from Wall Street. Perhaps this could work against the Dow in the coming weeks.
Nasdaq 100 shorts have risen over the past few weeks but were flat last week, and account for roughly one third of gross longs. However, bulls bets have also been scaled back, which leaves me questioning whether the Nasdaq can go on to break higher. Note its bearish engulfing candle two weeks ago, hinting that bears may still have the upper hand.
Net-long exposure among large speculators has been trending lower since peaking in March, falling by more than 50% from 233k contracts to 110k. For much of that decline, the move was driven by a combination of falling gross longs and rising gross shorts. However, that dynamic may now be shifting. Large speculators trimmed gross longs by 5.2k contracts last week, while gross shorts also edged lower. Although neither change is significant in isolation, it suggests bearish conviction may be beginning to fade.
That could support the case for a swing low to form in WTI crude oil. Last week's trading range was the narrowest in five months following an extended decline in prices. If bearish momentum continues to fade, the conditions for a corrective bounce may continue to improve.
Source: CFTC (COT), CME, LSEG
Gold (GC) Futures Positioning | COT Report
It has been 22 weeks since gold last posted a record high, during which time it has fallen 29.7%. With bearish momentum continuing to wane and a small bullish hammer forming last week, perhaps the conditions are improving for a bounce in gold, as well as oil.
Net-long exposure among large speculators has been creeping higher, reaching a 22-week high of 194k contracts. This has been driven primarily by an increase in gross longs. Perhaps more importantly, total open interest is also beginning to curl higher, suggesting a swing low may be near—or may have already formed.
Source: CFTC (COT), CME, LSEG
Precious Metals
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