GBP/USD, S&P 500, gold, WTI analysis: Commitment of traders report (COT)

Large speculators were net-short GBP/USD futures for a fourth week and by their most bearish level in six months, with gross shorts rising to a 52-week high. Commodity FX pairs remain unloved with AUD, CAD and NZD futures remaining net short. Net-long exposure to EUR/USD futures rose marginally for a second week.

There were no significant change last week of net exposure to FX majors, with all pairs coming in less than 7.5k contracts. Asset managers reduced gross-long exposure to Swiss franc futures by nearly -50%, and large speculators and asset managers increased gross-short exposure to NZD futures by 20% and 15% respectively.

Safe-haven demand saw investors pile into gold futures for a second week while simultaneously trimming shorts, and with positioning not near a sentiment extreme is suggest bulls may have record highs in mind.

Interestingly, large speculators flipped to net-long exposure to S&P 500 E-mini futures for the first time since June 2022. Yet the relationship between large specs and S&P pricing is spurious, which is why I prefer to track asset managers – and their net-long exposure fell to a 24-week low and gross exposure rose to a 23-week high.

Commitment of traders – as of Tuesday 24 October 2023:

GBP/USD (British pound futures) - Commitment of traders (COT):

Traders continued to pile into GBP/USD shorts on the futures markets, based on the well-grounded belief that the BOE will hold interest rates this week. Large speculators increased gross shorts to a 52-week high to bring net-short exposure to its most bearish level since in six months. And as GBP/USD formed a bearish engulfing / outside week, it’s possible it could be set to break to new cycle lows if the BOE deliver a dovish hold – whether it be revealed within the statement, press conference or increased number of MPC members voting to hold (6 or higher).

Gold futures (GC) - Commitment of traders (COT):

Investors continued to pile into gold futures, with large speculators and managed funds pushing net-long exposure to 15 and 12-week highs respectively. Both sets of investors reduced gross short exposure and added to longs for the past two weeks, which is what we’d expect in a healthy bullish move. And this was before prices broke above $2000 on Friday, meaning traders are likely to have further trimmed shorts and added to longs since. Net long exposure is not at a sentiment extreme, and with prices gapping higher at Monday’s open its possible we could be looking at a run for the record highs sooner than I originally thought. However, the highs around 2075 have repeatedly seen gold roll over, so it would be prudent to allow for some volatility and profit taking should gold attack those highs once more.

WTI Crude oil future (CL) - Commitment of traders (COT):

Oil prices fell in line with last week’s bias, which was against the consensus view. However, whilst managed funds increased short exposure for a second week, they also increased longs slightly alongside large speculators. WTI crude oil prices also found support along the 20-week EMA, and I’ve noted that the April high has provided decent buying opportunities for some choppy trade on the daily chart. It’s possible we may see prices bounce whilst prices hold above the $83 area, but I am also looking out for evidence of a swing high and for prices to fall to $80 or even $75 as part of a 3-wave correction from its September high.

S&P 500 futures (ES) - Commitment of traders (COT):

The S&P 500 broke a key trendline last week after a mixture of below-par earnings and risk-off sentiment weighed on the broader indices. Asset managers increased their gross-short exposure to a 23-week high and dragged net-long exposure to a 24-week low. Whilst the S&P 500 has risen over the past 16 Mondays and looks set to attempt a 17^th, the path of least resistance seems to be lower and bears are likely looking for areas of resistance to fade into.

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