Good Sunday everyone,
the weekend is the best time to do analysis because as WD Gann said long time ago, it allows investors to focus on what has already happened without having the risk, at least in the very short term, of being immediately proven wrong with sudden movements in the markets. This is also important to study with all the calm possible every possible movement that the markets can make in the near future.
For this purpose we look at market salso on weekends and today we are attaching the chart of the Commitment of Traders of the Commodity and Futures Trading Commission (the CFTC), the American agency responsible for regulating derivatives in the USA and which publishes a weekly report on how the different players in the market are positioned.
This type of chart and analysis isn’t new to our clients because we send them these analyses periodically. If you are interested to receive our reports and newsletter, please subscribe here.
In the graph what interests us is to follow the green line, that is, the institutional investors and from the COT and more precisely from the movements of the institutional investors we can understand how they were behaving and how they are behaving now.
If we look at the first graph called “COT before” we see how from January 2025 the more the Nasdaq index rose the more the institutions lightened their exposure, a sign that they did not believe in this rise and that they expected a potential decline. (Be careful, institutions are not far-sighted but their movements certainly have an effect on the market and are almost always on the right side. It can happen, rarely, that the institutions want to take the market in one direction but the small investors manage, with their quantities, to impose their direction on the institutions).
Since the end of February with the Nasdaq making only minus three percent the Large have entered consistently on the index and then lightened their position, a sign that they too have been too hasty. At the moment their allocation remains at a reasonable peak similar to the previous periods of September 2024 and just below December 2024 and early January 2025.
Next week we will be able to see if the allocation of the Large Traders, i.e. the institutional, has changed and how, but if it were to remain identical or see an increase in upward exposure, we will have a reasonable probability of expecting a good rebound of the index because the institutional, with their money, really believe in it. They are putting their mouth in the pudding as they say.
The target of the rebound, if we wanted to use the COT, could be around 21,000 future points which is the previous level of the index at which the current levels of exposure of the institutional were: in the second chart called “COT now” you can see that current Large Traders’ long exposure equals to the above mentioned index level that corresponded to last January.
Have a good Sunday from the Framont and Partners Management ltd. Trading team
This analysis is shown only for academic purposes and is not in any way an advise to buy or sell any security. For advices please contact your personal financial advisor.
