Asset managers flipped to net-long VIX exposure, USD positioning mixed: COT report

Market positioning from the COT report - as of 15 Oct 2024:

• Futures traders were net-short USD in aggregate by -$1.4 billion, which is their least bullish exposure in eight weeks
• Large speculators were net-short USD index futures for a second week, asset managers increased net-long exposure to a 10-week high
• EUR/USD futures traders were their least bullish in 14 weeks, and net-long just 17.2k contracts
• Large speculators flipped to net-short exposure NZD/USD futures ahead of the RBNZ’s dovish 50bp cut
• They also reduced net-long exposure to AUD/USD futures by -14.2k contracts, while asset managers flipped to net-short exposure

VIX futures positioning (IMM data) – COT report:

Asset managers flipped to net-long VIX futures exposure, adding 5.2k long contracts and reducing shorts by -6.4k contracts. I noted in last week’s report that bullish bets for the VIX were rising alongside the S&P 500, on the assumption that traders were hedging event risk heading into the US election. While that likely still remains a factor, it should also be noted that VIX futures fell between Wednesday and Friday, which saw the VIX snap a 4-week winning streak. S&P 500 futures however printed a new weekly record high.

I am therefore curious to see whether longs were closed, or shorts increased (if not, both). But we’ll need to wait until the latest data is released on Friday. Even so, it is not often we see either large speculators or asset managers flip to net-long exposure, so to see both so close to the threshold underscores some nervousness in the air as we approach the election with stocks at or around their all-time highs.

Wall Street indices (S&P 500, Dow Jones, Nasdaq 100) positioning – COT report:

A slightly mixed picture last week from asset managers on Wall Street indices, with net-long exposure down on the Nasdaq, up on the Dow Jones and effectively flat on the S&P 500. None of the indices show an immediate need to move swiftly lower, although the S&P 500 remains highly favoured by the real money accounts.

USD positioning (IMM data) – COT report:

The USD index rose for a third week, net-long exposure among asset managers increased for a second. Net exposure of asset managers continues to track the direction of the USD index more closely than large speculators, who were actually net-short for a second week. However, take note that asset managers have been reducing shorts and not really adding to longs to suggest the USD rally is fuelled by a short squeeze and not bullish initiation. Still, USD futures in aggregate are on the cusp of flipping to net-long exposure, which they may well do if US data continues to surprise to the upside.

CHF/USD (Swiss franc futures) positioning – COT report:

The Swiss National Bank (SNB) might be pleased to see speculators are towing the line, after sending a clear message that they want a weaker currency. And many suspect the central bank have already been active in the market to push back against a strong Swiss franc. Net-short exposure increased for the third week in four among both sets of traders, and driven mostly by a rise in short bets. Large speculators are also trimming longs, although asset managers are also increasing longs.

Commodity FX (AUD, CAD, NZD) futures – COT report:

All three commodity currencies were lower against the USD last week. Large speculators flipped to net-short NZD/USD exposure ahead of the RBNZ’s dovish 50bp cut, asset managers reverted to net-short AUD/USD exposure ahead of the strong Australian jobs report. Large speculators remained net long but by a reduced amount, but we may find asset managers reverted to net-long exposure on the back of the strong employment figures. The fact we’ve seen traders piling into short CAD bets ahead of this week’s BOC meeting needs to be factored in, as they may need to also deliver a dovish 50bp cut to avoid a short-covering bounce for CAD.

WTI crude oil (CL) positioning – COT report:

The general theme surrounding crude oil is lower market exposure, from both longs and shorts across large speculators and managed funds. Lower volumes shows a lack of enthusiasm for either direction, and is the main reason I’m not anticipating a larger, directional move in the foreseeable future without a fresh catalyst. Traders therefor may want to be more selective with their setups, not seek home runs and instead stick to lower timeframes and hold times.

Metals (gold, silver, copper) futures - COT report:

Net-long exposure to gold futures increased for the first week in three for both sets od traders last week, and prices went on to reach a new record high. This is the trend that just keeps on giving. And if it is close to a top, there are no imminent signs of danger on price action. However, speculative volumes as a percentage of total open interest has been declining in recent weeks, so it does show a slight loss of appetite for gold futures at these giddy heights.

Copper futures retraced for a third week and net-long exposure was lower among both sets of traders, but it continues to look like a market that could play nicely with dip buyers at some point. Silver futures also closed above $30 as they tracked gold prices higher, although we did not see a rise of net-long exposure from either set of traders.

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