We know funds are buying. 13 new funds went long and 11 funds covered, some of which are Index. Every other sector sold, mostly short. Commercials sold strength of course, mostly against options, but also as origin selling in the forwards, as we see daily.
The implications offered by the COT are, in my opinion, important. The buying by Index, which has been taking place for several weeks, is significant. This is long term buying and if the market were to drop, the Index position would mostly remain intact. Other managed money buying begets more buying as prices rise. We forget the delta shorts who are also forced to buy the more prices rise. Commercial shorts provide support as prices dip. Unless funds decide to revert to selling, dips will be limited. Finally, every sector besides managed money has been selling short. This to me captures the sentiment of the market by these sectors. It seems that most traders feel safe selling at these levels. Yet, the buying is serious as funds have turned to net long in both position and number of traders. Fundamentals, weather, currency and technicals can be argued but the COT report, for now, remains bullish.
The remainder of the week showed a correction of 3.75 cents followed by an immediate recovery the next day and further gains on Friday. The market closed on the defensive. Although the COT shows net selling by all sectors, other than funds, it is certain that there is two way activity by all. Based on the COT, buying by funds, including index, should resume, hopefully.
temporary image host