Technical Analysis Summary - VIX and COT Report
Date: October 13, 2024
Overview
As the US election approaches, traders are increasingly hedging against event risk, particularly through the Volatility Index (VIX). The Commitment of Traders (COT) report indicates a shift in market positioning, with notable changes in exposure across various asset classes.
Key Findings from the COT Report
1. VIX Futures Positioning
Both asset managers and large speculators are nearing a net-long position in VIX futures, reflecting rising concerns about market volatility as the election date nears. This increase in VIX futures has occurred alongside a record high in the S&P 500, suggesting that traders are preparing for potential downside risks.
2. US Dollar Index Positioning
Large speculators have flipped to a net-short position in USD index futures for the first time since April, albeit marginally. In contrast, asset managers have taken a net-long position, which has historically aligned more closely with the dollar's movements. This divergence indicates a potential shift in market sentiment regarding the USD.
3. Commodity Currencies
The Australian dollar (AUD) has seen a significant increase in net-long exposure among large speculators, reaching levels not seen since December 2017. Asset managers have also adopted a net-long stance on AUD/USD, indicating bullish sentiment in commodity currencies.
4. WTI Crude Oil Positioning
Net-long exposure to WTI crude oil has risen to a nine-week high, with large speculators reducing their short positions significantly. However, overall speculative volumes have decreased, suggesting a cautious approach among traders in the oil market.
5. Metals Futures
Traders have reduced their net-long positions in gold, silver, and copper futures. Despite this, gold remains near record highs, indicating strong underlying support. The reduction in long positions may suggest a consolidation phase, but bullish sentiment persists.
6. Wall Street Indices Positioning
Asset managers continue to favor the S&P 500, maintaining a net-long position. However, there has been a slight reduction in exposure, indicating a cautious approach as market volatility increases. The Nasdaq 100 has also seen increased net-long exposure, while the Dow Jones has experienced a more volatile oscillation between long and short positions.
Conclusion
The COT report highlights significant shifts in trader positioning as the US election approaches, with increased hedging against volatility through VIX futures. Diverging positions in the USD index and commodity currencies suggest a complex market sentiment, while the overall cautious approach in commodities and indices indicates traders are preparing for potential market fluctuations.