Filed under: Trader Dan Norcini
Dear Friends,
This week’s analysis of the Commitments of Traders reports is a continuation of the recent pattern we have seen with Managed Money continuing its exodus from the long side of the gold market as well as some fresh selling from that category with new short positions being established. This category does not have a good track record of making much money while attempting to play the downside in gold. They have a habit of selling bottoms.
They are now at levels last seen in May 2009, 20 months ago when it comes to long side exposure. For comparative purposes, gold was trading at $920 when they were last at this level.
The commercial class continues to cover shorts into long side liquidation further reducing their overall exposure to the short side. Ditto for the swap dealers which for gold are basically the commercials under a different guise.
The general public, having bought the top, continues to exit and is coming down to more reasonable levels as suggested would need to occur in last week’s report at this site. We might need to bleed out another 10,000 of those longs in this camp before we set a bottom. A lot of them were probably caught today and Thursday after the battering gold took so their numbers are lower than today’s report suggests seeing it only covered the action through Tuesday of this week.
The “Other Reportables” camp still seems to me to be a bit heavy on gold exposure but their number of longs is slowly moving lower as some in their camp take out some fresh short positions. Maybe another 10,000 – 15,000 shift needs to occur here.
All in all, the report confirms the same old familiar pattern that we have seen in this market for nearly ten years now during each episode of price weakness.
Managed Money is still the big force in our markets today so until they cease liquidating longs we can head lower but once this camp levels off and returns to the long side, the next leg higher will commence. I like the fact that their numbers are so low on the long side yet gold is holding at a relatively high level, down only some 6% or so from off its recent peak even as their overall net long exposure has been cut nearly 100,000 contracts from September of last year.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January2111COT.pdf
This week’s analysis of the Commitments of Traders reports is a continuation of the recent pattern we have seen with Managed Money continuing its exodus from the long side of the gold market as well as some fresh selling from that category with new short positions being established. This category does not have a good track record of making much money while attempting to play the downside in gold. They have a habit of selling bottoms.
They are now at levels last seen in May 2009, 20 months ago when it comes to long side exposure. For comparative purposes, gold was trading at $920 when they were last at this level.
The commercial class continues to cover shorts into long side liquidation further reducing their overall exposure to the short side. Ditto for the swap dealers which for gold are basically the commercials under a different guise.
The general public, having bought the top, continues to exit and is coming down to more reasonable levels as suggested would need to occur in last week’s report at this site. We might need to bleed out another 10,000 of those longs in this camp before we set a bottom. A lot of them were probably caught today and Thursday after the battering gold took so their numbers are lower than today’s report suggests seeing it only covered the action through Tuesday of this week.
The “Other Reportables” camp still seems to me to be a bit heavy on gold exposure but their number of longs is slowly moving lower as some in their camp take out some fresh short positions. Maybe another 10,000 – 15,000 shift needs to occur here.
All in all, the report confirms the same old familiar pattern that we have seen in this market for nearly ten years now during each episode of price weakness.
Managed Money is still the big force in our markets today so until they cease liquidating longs we can head lower but once this camp levels off and returns to the long side, the next leg higher will commence. I like the fact that their numbers are so low on the long side yet gold is holding at a relatively high level, down only some 6% or so from off its recent peak even as their overall net long exposure has been cut nearly 100,000 contracts from September of last year.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January2111COT.pdf
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