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I logged onto the site and started searching for blogs, forums, papers, or postings by seasoned quants about commitments of traders as a leading indicator in the commodities and forex markets. I found none.

Are commitments of traders disregarded as a viable indicator by sophisticated quants?

Is there somewhere here on Wilmott where I can read what current thought is about them?

Thank you in advance for your assistance.

P.S.
I am specifically interested in COT applications to crude oil and forex. Thanks again.

Welcome! I’ve been in the business for three decades and relatively close to it for another one, and this is not something I’ve really come across. I recognize that it’s a thing, but pretty niche as far as I’m concerned. Our friend @tagoma might have more color, since he’s a commodities guy.

Welcome! I’ve been in the business for three decades and relatively close to it for another one, and this is not something I’ve really come across. I recognize that it’s a thing, but pretty niche as far as I’m concerned. Our friend @tagoma might have more color, since he’s a commodities guy.

Thank you for the friendly greeting.

I read analysis by a professional who published a study of linkage between commitments of traders (COT) as a six-month leading indicator to lumber futures prices, and lumber prices consequently to housing starts. The proposition was clear and convincing. Thus, ever since, I have been undertaking to discern a correlation for COT to crude oil futures prices, and another to the USDCOP forex couple, which I analyze as a hedge. Crude oil prices and USDCOP  correlate coincidentally, but I am looking for a leading indicator). COT data has been difficult to aggregate and correlate with historical COT positions, because the data is so unstructured, but I keep trying, because it would be valuable if the relationship does exist and is predictable. 

Thank you for your interest. I will post more with my progress, if any.

Hey HP,

I'm not sure I've seen COTs (as I understand them = CFTC report) being used as a leading indicator for USD/COP but... maybe synthetically via oil futures?

What other variables are you using? and what's the scope/purpose of the prediction?

Regards,
M

Commodities and Colombia in the same thread... my eyes are wet.

I'll talk based on my personal experience at a major oil company and commodities hedge funds.

So, based on my personal experience, everyone in commodities look at COT data (CFTC, ICE, Euronext, and also some bits of Bursa Malaysia) each week, but there is no "best" way to use them. Likewise other pieces of information, the value you get from COT probably is specific to your company/trading desk/yourself as a commodity trader.
I would say COT data are virtually valuable and spending time/resources to resarch this topic is reasonable. Later you your P&L willl tell you, anyways..

One thing that I have seen quite a lot is people creating over-/under bought indicators and over-/valued indicators that relate COT data for a given commodity to seasonality, history, broader market money flow/allocation, fundamentals of that commodity etc (SocGen publishes a report with such indicators ; there are several such reports online you can find googling) ... when under-bought/valued you buy and vice-versa.  People also tend to convert from contract size to USD ; other people also try to interpret the travel of the point on a chart showing commodity price vs net position ; a large share of people who follow COT look at speculators (data as opposed to hedgers).

Hopfully what I wrote down above kinda make sense.

Note: if you were to publish any research on COT data, I'd be happy to read it. Thank you!

Commodities and Colombia in the same thread... my eyes are wet.

I've always wondered why you have a Medellin flag as a profile pic.

Indeed Colombia is a COMM exporting economy to give you an idea the exports mix is sth like: Oil ~25% Coal~15%, Gold~10%, Coffee~10%, Bananas and Flowers ~10%, the rest as small potatoes and mostly still concentrated on the primary sector of the economy.

But that breakdown right there already gives you an idea of what variables you might (from a COMM COT side look at). 

I can speak of my experience with USD/COP and other EM currencies, back in the day I used to find useful monitoring some of the basic Macro stuff like:

- Local GDP Growth, Unemployment, Household and Corporate Debt, disposable income
- Inflation, CPI(IPC), PPI(IPP), gasoline/diesel-acpm/electricity prices, break-even inflation
- Balance of Trade and Payments,Net Foreign/Offshore flows into financial account side
- Capital controls, CB Intervention, PPP, PBA and PPC Bank indicators (Net L/S positions on USD)
- USD vs COP rates differentials: CB, FXMM, Bond Yields, Swap Rates (DTF-LIBOR now IBR - SOFR)
- EM LATAM appetite, BRL, CLP, EMBI Spread (for peer relative analysis and contagion - e.g. Lula Shock)
- Country Creditworthiness, CDS Spread, Tax Revenue and Reforms (1 every 1.5-2 years)

Other useful stuff:

- Political Cycles in LATAM
- ENSO, Nino/Nina predictions, for crops and power generation mix
- USD/NOK spurious correlation

Rgds,
M

Commodities and Colombia in the same thread... my eyes are wet.

I've always wondered why you have a Medellin flag as a profile pic.

Indeed Colombia is a COMM exporting economy to give you an idea the exports mix is sth like: Oil ~25% Coal~15%, Gold~10%, Coffee~10%, Bananas and Flowers ~10%, the rest as small potatoes and mostly still concentrated on the primary sector of the economy.

But that breakdown right there already gives you an idea of what variables you might (from a COMM COT side look at). 

I can speak of my experience with USD/COP and other EM currencies, back in the day I used to find useful monitoring some of the basic Macro stuff like:

- Local GDP Growth, Unemployment, Household and Corporate Debt, disposable income
- Inflation, CPI(IPC), PPI(IPP), gasoline/diesel-acpm/electricity prices, break-even inflation
- Balance of Trade and Payments,Net Foreign/Offshore flows into financial account side
- Capital controls, CB Intervention, PPP, PBA and PPC Bank indicators (Net L/S positions on USD)
- USD vs COP rates differentials: CB, FXMM, Bond Yields, Swap Rates (DTF-LIBOR now IBR - SOFR)
- EM LATAM appetite, BRL, CLP, EMBI Spread (for peer relative analysis and contagion - e.g. Lula Shock)
- Country Creditworthiness, CDS Spread, Tax Revenue and Reforms (1 every 1.5-2 years)

Other useful stuff:

- Political Cycles in LATAM
- ENSO, Nino/Nina predictions, for crops and power generation mix
- USD/NOK spurious correlation

Rgds,
M

Hey @Mercadian . How is your research going? How can one follow you / read your writings / look at your code?