The Data always tells the Truth

As you know if you follow me I pay a lot of attention to relevant data that moves markets, I also like to analyse data each week such as the Committment of Traders Report. Today I would like to highlight to you some data I have been analysing and share my thought process on why we might be about to see a shift in markets.

Last friday the latest batch of Committment of Traders (COT) data was released, and the patterns appearing here are starting to get very interesting. Its important to note here that I only pay attention to the large speculators as they mainly consist of hedge funds, and banks who trade currency futures just for speculation purposes and have the largest positions and therefore the largest amount of influence.

The COT report helps determine what side the professional money is on, and how and what they might be thinking, for a while now I have harboured a thought that these traders must be starting to think about pulling some money out of risk and placing it in more safe options like Yen and USD. I have analysed the COT data from the last few weeks and the results are shown below.

Canadian Dollar
20th October - 85% have bullish position
27th October - 88% have bullish positions
3rd November - 86% have bullish positions
9th November - 79% have bullish positions
17th November - 75% have bullish positions

This data suggests that there are some flows away from the CAD as the trend of the last month would suggest.

Gold
20th October - 89% have bullish positons
27th October - 90% have bullish positions
3rd November - 88% have bullish positions
9th November - 87% have bullish positions
17th November - 85% have bullish positions

This data suggests that there are some flows away from gold and whilst still very bullish the trend of the last month would suggest a change is not too far away.

Japanese Yen
20th October - 73% have bullish positions
27th October - 66% have bullish positions
3rd November - 67% have bullish positions
9th November - 68% have bullish positions
17th November -79% have bullish positions

As expected with flows away from risk, conversly the yen see's more flows to it with an uptake of bullish positions.

British Pound
20th October - 21% have bullish positions
27th October - 29% have bullish positions
3rd November - 36% have bullish positions
9th November - 39% have bullish positions
17th November -45% have bullish positions

The pound is interesting cause its now abundantly clear that the professional money see's it as undervalued, even as it fell hard in the last phase of last week, the professional money was buying the pound agressively, it can only be a matter of time until its starts going up.

Finally I want to share with you a small snippett of information I found trolling around on the web this weekend, which caught my eye.

"There has been rush of cash into very short-term US Treasuries. The three-month bill, which takes you over the turn of the year, yields less than 2 basis points and has flirted with negative yields in recent sessions. If investors are willing to pay just to get their money back, a phenomenon we saw at the depths of the financial crisis, how can risk assets still be anywhere near a premium? Something has got to give. If the market is telling us it is that jittery, we should anticipate one of those big downdrafts in the emerging markets in coming days. Developed markets are only a few percent below their rebound highs. They would have plenty of downside room as well."

Hope we all have a great week ahead.