The COT Report — How to Read What the Big Money Is Doing

When a Markets Triad signal shows Strong Bull on crude oil, checking whether WTI is in backwardation adds confirmation. If the curve disagrees — if the market is in steep contango while the signal shows bullish — that tension is worth noting before sizing up.

The futures curve is a second opinion. Use it as one.

Post 2: The COT Report — How to Read What the Big Money Is Doing

Every week, the US Commodity Futures Trading Commission publishes one of the most underused datasets in all of trading: the Commitment of Traders report. It tells you, broken down by category, who holds long and short positions across every major futures market. For traders who know how to read it, it's a window into institutional positioning that few retail traders bother to look through.

What the COT Report Contains

The CFTC publishes the report every Friday, covering positions as of the previous Tuesday. It separates market participants into three main groups:

Commercial hedgers are companies with a direct business interest in the commodity — oil producers, grain processors, mining companies. They use futures to hedge real-world exposure. If a corn producer sells corn futures, they're locking in a price for their harvest, not speculating.

Non-commercial traders (also called large speculators or managed money) are hedge funds, CTAs and institutional traders taking directional positions for profit. This is the group retail traders most want to track.

Non-reportable positions are smaller traders whose positions fall below the CFTC's reporting threshold — effectively, retail traders.

Why Institutional Positioning Matters

Large speculators don't always get the direction right, but they move markets. When managed money is heavily net long a commodity, it signals that institutional capital has made a bullish bet. When they're crowded into a short position, it signals the opposite — and also sets the stage for a potential short squeeze if the market turns.

Extremes in COT positioning are particularly useful as contrarian signals. When large speculators reach a historically extreme net long position, the trade is crowded. New buyers are scarce. Any negative news can trigger a cascade of selling as those longs unwind. The reverse is true for extreme net short positions.

How to Use COT Data Alongside Signals

COT data is a slow-moving, macro-level tool. It shouldn't override a technical signal on its own, but it adds meaningful context:

• A bullish signal with rising speculative net longs suggests institutional money is aligned with the trend.
• A bullish signal with extreme speculative net longs suggests the trend may be mature — upside is limited if the trade is already crowded.
• A bearish signal with historically extreme net short positioning could mark a bottom, particularly if the technical indicators are also turning up.

The COT report is published at cftc.gov and updated weekly. It takes about ten minutes to learn to read. That's a worthwhile investment for any serious commodity or futures trader.