COT REPORT INVESTING & TRADING - Mastering the Forecaster Terminal - Lesson N.4
Key Points:
COT Report Exposes Institutional Market Positioning: The Commitment of Traders (COT) Report shows how major players like asset managers, hedge funds, and producers are positioned in futures markets. By analyzing their long and short exposures, traders can understand where institutional money is flowing.
Divergences Signal Potential Market Reversals: When price trends diverge from institutional net positions—especially those of asset managers in equities or producers in commodities—it can signal upcoming market tops or bottoms. These divergences are powerful early indicators, though not precise timing tools.
Producers Are the Smart Money in Commodities: In commodity markets, producers hedge their output using futures. If they stop shorting or begin taking long positions, it often reflects deep undervaluation and can precede sharp rallies. Watching producers’ behavior provides a unique edge in commodity trading.
Introduction: A New Era of Market Analysis
Today we will explore COT Reports on different tools. The Commitment of Traders (COT) report, published weekly by the CFTC, offers a clear view into futures and options market dynamics. It breaks down each Tuesday’s open interest, showing positions held by significant traders to help the public understand market sentiment and potential trends.
1. Getting Started with the Forecaster Terminal
The Forecaster Terminal is structured similarly to Google’s interface: a simple search bar at the top and a panel of powerful tools accessible from the menu. Users can take two distinct paths:
Direct Search: Type in the name of any financial instrument to begin your analysis.
Idea Generation: Use built-in tools to uncover new trading and investment opportunities, from which, you can also access the COT Reports.
This dual approach makes the platform both versatile and efficient.
2. What are COT Reports and where do they come from?
Our Forecaster Terminal transforms raw CFTC data into easy-to-understand graphs, making complex COT Report insights accessible to all users. These Commitment of Traders reports are often underestimated, yet they are a great tool for discerning shifts in market sentiment and identifying potential trend reversals, offering a crucial edge to those who understand their power
Our Forecaster Terminal features unique, easy-to-interpret dashboards that visually plot the often-underestimated COT Report data. This allows you to effortlessly view and analyze the positioning of different traders (primarily Commercial and Non-Commercial) within the futures market, offering powerful insights derived from historical data. All the COT reports we support are under the Official Section of the COT Report page in the Terminal.
| Metals and Other |
|---|
| Copper (CMX) |
| GOLD (CMX) (ICUS) |
| Lumber Futures |
| PALLADIUM (NYME) |
| PLATINUM (NYME) |
| SILVER (CMX) |
| Petroleum and Products |
|---|
| BRENT LAST DAY (NYME) |
| CRUDE OIL, SWEET LIGHT (ICEU) |
| GASOLINE RBOB (NYME) |
| WTI PHYSICAL (NYME) |
| Stock Indices |
|---|
| DJIA Consolidated (CBT) |
| NASDAQ 100 Consolidated (CME) |
| RUSSELL 2000 MINI (CME) |
| S&P 500 Consolidated (CME) |
| VIX (E) |
| Treasuries and Rates |
|---|
| FED FUNDS (CBT) |
| US TREASURY 10Y NOTE (CBT) |
| US TREASURY 5Y NOTE (CBT) |
| US TREASURY BOND (CBT) |
| Natural Gas and Products |
|---|
| NATURAL GAS (NYME) |
Synthetic content goes here.
Beyond the official reports, we also offer a synthetic (non-official) reports page, which we’ve created by merging data from various official contracts to provide even broader market coverage.
Synthetic content goes here.
3. COT Reports on Indexes: Where is the smart money?
Let’s dive into some practical examples of using the Forecaster Terminal, focusing specifically on the COT Reports section. We’ll begin our exploration with the Official COT Reports, in particular the S&P 500 index futures.
S&P 500’s COT Report positions can be visualised under two categories of traders: Commercial and Non-Commercial traders.
Commercial traders, This category comes from the legacy COT. It includes Dealer/Intermediary, Asset Managers/Institutional and Leveraged Funds. These players offset that risk in the futures markets, regardless of whether their OTC counterparty was a commercial trader or a speculator.
One section of so called Commercial traders is Asset Managers/Institutional, these are probably the most interesting traders to observe.
These are institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolio/investment managers whose clients are predominantly institutional. These use futures markets in order to bet on the price of the instrument they are trading.
When we observe the activity of Asset Managers/Institutionals, it’s interesting to note past periods where they anticipated an overbought market and consequently reduced their net long exposure. Despite this, the price continued its ascent, leading to a noticeable divergence (e.g., July to December 2021) which ultimately preceded a price reversal.
Conversely, to identify an upside reversal, we can examine the same index later in mid-2022. At that time, the price established a low in sync with Asset Managers’ net positions. However, a few months later, the price made another lower low while net long positions held steady at the previous low’s volume, forming a divergence that preceded a sharp upward move in both price and Asset Managers’ net long positions.
Looking at the three-year chart, a third instance of this pattern is evident: Prices established an all-time high at the beginning of 2024. Significantly, Asset Managers had started decreasing their net long exposure as early as six months before this peak, and a trend reversal ensued shortly thereafter.
What does the COT Report’s Asset Managers / Institutional section tell us about the current situation?
Observing the last few months, we can infer that an entry point at this moment carries significant risk. There appears to be an increased likelihood of a price reversal soon.
Specifically, while prices and net long positions in the last week of March 2025 were at a similar level, the current price is notably higher. However, the net long positions of Asset Managers/Institutionals have decreased significantly since then, indicating a clear divergence
Confirm the potential trend reversal by combining our analysis from the previous section with the Overbought/Oversold section of the Forecaster Terminal. This section corroborates our recent observations: the terminal indicates that the market is currently in an overbought situation, suggesting it has reached elevated levels, Fear of Missing out (FOMO) is high, and may be susceptible to a decline in the near future.
To further prove the efficiency of spotting these divergences on the Forecaster Terminal: looking at the NASDAQ 100 in the last years a similar pattern occurs.
4. COT Reports on Commodities: Where is the smart money?
For a deep dive into commodity market dynamics, users should examine the relevant COT Reports. What makes these reports especially revealing for commodities is the inclusion of a section absent from other asset classes: the “Producers/Merchant/Processor/User” category. This group, as its name suggests, predominantly involves businesses that produce, process, pack, or handle a physical commodity and actively use the futures markets to manage or hedge the risks inherent in those physical operations. Using an example:
- Imagine the spot price of corn rises to $5.50 per bushel by October.
- The farmer sells their physical corn on the cash market for $5.50 per bushel.
- The October futures contracts they sold in May at $5.00 are now trading at $5.50. To close their futures position, the farmer has to buy back at $5.50, resulting in a loss of $0.50 per bushel ($5.00 – $5.50) on their futures position.
- Net Result: While they received more for their physical corn, the loss on the futures market offsets some of that gain. The farmer still effectively received $5.00 per bushel for the hedged portion. They limited their upside, but crucially, they eliminated the downside risk they were concerned about.
This example illustrates how entities like farmers use futures not to speculate on price direction for profit, but to lock in future prices and protect themselves from adverse price movements that could jeopardize their business. They are managing the inherent price risk of their physical commodity operations.
Utilizing the ‘Producers/Merchant/Processor/User’ section of the COT Report can therefore provide a direct understanding of the market’s state, straight from the commodity’s traders who supposedly knows the most about the instrument. As you can observe on the graph below, the highest price points often occur in sync with moments when these entities’ net positions indicate their highest shorting pressure (Indicating they think the price is too high). This also happens the other way round, we can see how prices on important bottoms are often in sync with moments where net positions are on a long stance
