Traders small and large remain heavy long in commodities
Bias remains at the extreme levels in gold and oil for institutional traders despite reduction in longs for the latter.
GOLD: Finishing the week higher after a brief plummet at the start of the week
Last Monday’s price drop spooked longs, but the pair’s price managed to retrace back up to finish higher for the week, and keep its current stalling bull trend technical overview intact on the weekly, while taking the price on the daily back above the last of its main long-term moving averages. Retail bias has dropped 5% on long profit-taking in the middle of the week, and while Commitment of Traders (CoT) bias is unchanged in percentage terms at an extreme long 86%, there has been a significant reduction of long positions by 47,593 lots compared to a smaller reduction in shorts by 4,142 lots. Buying on reversals were tested last week but eventually panned out, though should risk appetite get volatile and breakout strategies for limited profit-taking may be more ideal, be it to the downside or upside.
SILVER: Barely finishing higher for the week as silver underperforms compared to gold
Hardly any change in the pair’s price by the end of the week, though plenty of volatility in between with a buy on significant reversal the only ideal strategy that worked. As a result, both retail and institutional bias is only slightly changed for the week, the latter reducing silver longs by 4,035 lots and reducing shorts by 3,121 lots. On the weekly, its previous stalling bull trend technical overview has stalled significantly, and as a result it’s a shift back to a more consolidatory outlook but with long-term positive technical bias. More unexplained moves have continued to occur in this pair, and hence while fading for an upside move might be tempting, it’ll be more prone to a stop out should volatility rise again, with another preference for a buy on reversal.
OIL – US CRUDE: Traders get squeezed as waning demand fears drag oil prices lower
In the absence of a supply side shock – and it could easily occur at any time – the focus thus far has been on short-term moves driven by worsening manufacturing and economic data globally and a trade war that looks set to expand. The net result is that traders both small and large have been getting squeezed heavily, with retail bias surging 12% since the start of last week to an extreme long 85% at the start of this week. As for institutional bias, larger speculators remain extreme long but have reduced that bias by 4% on a 13,664 lot reduction in longs and a simultaneous increase in short positions by 21,179. Its price has crossed below the last of its main weekly moving averages (MA) and a crucial one, the 200-week MA, and now rests near a mid-term support level. In the absence of a clear direction (and negative technical bias is forming no doubt), volatility strategies for breakout to the upside or downside may be most ideal.
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