The latest COT Report shows the Professionals are heavily short.
Commitment of Traders: Professionals -14.5% (short)
During the last 2 weeks, the Professionals have markedly increased their Short positions. Their net Short positions now account for -14.5% of total open interest.
The red line in the chart above is also negative, showing that the SP (large contract) Professionals are more bearish than the ES (mini contract) Professionals. Back testing shows that the SP Professionals are a more reliable indicator of market direction.
This is not good news for the market. We are over-sold and could well get a bounce in the Emini. However, with the COT Report showing the Professionals increasing their Short positions, I believe any rally will be weak and or short lived. If you look back at the COT Report data for the 2000 to 2002 bear market, a strong rally was not possible until after the COT data started to show a Bullish Divergence with the market.
Commitment of Traders: Oscillator -21
The Commitment of Traders Oscillator rose again this week to -21. This indicates we might get a rally soon which should take the Oscillator above the zero line. However, I’m questioning my bullishness over the last few weeks given the large Short positions held by the Professionals. Rather than express an opinion, I should just report the data.
Remember, the Commitment of Traders data is collected weekly after the close on Tuesday and the Commitment of Traders Report is published after the close on Friday.