I recently received an email that referred back to an article I wrote in 2009. It referred to a tool that I use in order to identify probable turning points in the markets. The student asked if this was still a valid tool and if I still used it today. The tool is the Commitment of Traders report.
The Commitment of Traders (commonly referred to as the COT) report has been published by the Commodity Futures Trading Commission since 1962 and provides information on the open interest of futures contracts. The report, which can be found at www.cftc.gov, is published every Friday and contains the data from the previous Tuesday. A futures contract is a derivative which gets its value from an underlying asset. It is traded to either profit from future values of the asset or to hedge a position in the asset against a drop in price. The COT shows open interest in a multitude of commodity, currency, and stock index futures. Open interest differs from volume in that volume is the number of contracts actually traded per day while open interest is the number of contracts entered into, either long or short, that have not been offset by transactions or exercise. They are new or open contracts which may offer… Continue Reading