Non-Commercials, also called Large Speculators or Large Traders, are primarily institutions and major investors who are responsible for a lot of the liquidity in the futures market. They are primarily looking for contract appreciation, but may also hedge on some futures. For instance, in US Dollar Index futures, they may apply what's called a "long-long hedge" by buying USDX futures to offset losses on their spot positions in, say, the Euro against the USD. That notwithstanding, the bottom line is that they are mainly speculators in the market, making them distinct from Commercials. Large Speculators are a key group in that they are the primary movers of futures prices, and while the activity of the Commercials is significant, we tend to give more weight to Large Speculator trading trends as far as market direction. Using Our COT Charts
Our COT charts focus on Large Speculator net long/short open interest data that allows the user to follow the sentiment trends, and in particular to note extremes in bullish or bear sentiment, as such extremes tend to promote trend reversals. These are not designed for timing per sé, since the time lag in the release of COT data makes it somewhat impractical for precision timing (for that, we use Elliott Wave). Instead, the charts should be viewed with respect to persistence or potential reversal of trend. For example, if the data is displaying extremes of optimism, then there is a high probability of an impending reversal. -----------
contrarian investors are buying / selling the divergence between fundamentals and expectations |
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