Here is the main report:
Analysis:
1) [Mutual Funds/Managed Money are never right at market reversals.. they are always on the wrong side because of the nature of the market.. 95% lose]
The ratio of Long/Short for managed money is 11.91. For every $1 in short a so called investmnet professional owns of natural gas, he owns $11.91 in long investments. Since these investment professionals most likely work in the mutual funds division, they are usually wrong at market reversals. For this reason alone, I believe the bear of natural gas to not have ended, but to have just started. I could be wrong and a rally above $5.00 next week will end my bear theory..
2) The Swap dealers are still net short. For every 1$ a market maker is short, the market maker is only long 9.7 cents of natural gas contracts.What does that tell you? The swap dealers also haven't covered their shorts yet, which confirms my theory that natural gas still has not bottomed. However, extreme short positions usually signal bottoms. Why? The reason why these extreme positions are applicable is that they are points at which there are so many speculators weighted in one direction that there is no one left to buy or sell. A major short squeeze could also be coming knocking the swap dealers off their feet.
Summary: From reading the COT Report the smart money seems to be heavily invested in the short side and are not in a rush to cover their positions. I expect at-least 1-2 more weeks of bearishness until mid March 2010 to capitulate the bulls.
Aside. Reading the COT Report
Here is a quick list of some of the items appearing in the report and what they mean:
Commercial - Describes an entity involved in the production, processing, or merchandising of a commodity, using futures contracts primarily for hedging
Long Report - Includes all of the information on the "short report", along with the concentration of positions held by the largest traders
Open Interest - The total number of futures or options contracts not yet offset by a transaction, by delivery or exercise
Managed Money - A means of investment where the investor, rather than buying and selling their own securities, places their investment funds in the hands of a qualified investment professional for a predetermined annual fee.
Noncommercial (Speculators) - Traders, such as individual traders, hedge funds and large institutions, who use futures market for speculative purposes and meet the reportable requirements set forth by the CFTC
Nonreportable Positions - Long and short open-interest positions that don't meet reportable requirements set forth by the CFTC
Number of Traders - The total number of traders who are required to report positions to the CFTC
Reportable Positions - The futures and option positions that are held above specific reporting levels set by CFTC regulations
Short Report - Shows open interest separately by reportable an non-reportable positions
Spreading - Measures the extent to which a non-commercial trader holds equal long and short futures positions
Swap Dealer - An individual who acts as the counterparty in a swap agreement for the fee (called a spread).
