Commitments of Traders Report and Seasonality | Trading Futures
good morning hey there there's the interrupted by the bell there's there you go folks uh john mcnichol here welcome to another fantastic week of education you have reached trading futures what we'll go ahead and discuss today we'll take a look at the major market indices for futures as we go into our first week of earnings uh we'll talk about the commitment of traders report give you a bit of an intro on that and we'll also take a look at seasonality charts so stick around [Music] all right it's great to see those of you that are live with us here this morning such as radio wayne uh neil vijay sarah krishna we've got chesapeake bay tony i think i missed a few others coming around tm david kathleen and everyone else mr ken rose is helping out on the chat any questions i am unable to get to he'll be more than happy to help and uh you're welcome and encouraged to uh follow us on twitter you see my twitter handle on the screen at j mcnichol underscore tda if you wish to follow myself along with other fine instructors such as ken let's go ahead and take her disclosures and we'll get right into it content is intended for educational information purposes only non-investment advice or recommendation options not suitable for all investors spread straddles other multi-leg options strategies often involve greater more complex risk than single leg option trades make note as far as the wrists whether it's a long or a short option position as far as the risk of the entire position on long positions as well as with short positions the uh potential of being exercise or assigned at any time now you're encouraged practice what you learn with tools such as paper money software that application is for educational purposes and successful virtual trading during one time period does not guarantee successful investment of actual funds during a later time period as market conditions change continuously futures not suitable for all investors and futures and futures options train services are provided by charles schwab futures and forex llc those trained privileges are subject to review and approval not all clients will qualify and make note of the commissions and transaction fees as well and wallace webcast may discuss technical analysis other approaches include fundamental analysis may serve very different views and back testing where some investors put their example with the commitment of traders back testing his evaluation particular trade strategy using historical data results are hypothetical not actually occurred no guarantee the same strategy implemented today will produce similar results and as always folks all investing involves risk including the risk of loss there is a brief uh background on me for those of you that are new to this webcast welcome let us know if you are new so we can give you a nice welcome there and do appreciate those that continue to join us each and every week and as i mentioned from the intro we'll uh start off looking at the futures uh seeing how things are settling up this week uh did have a bit of a turnaround there uh i believe last tuesday there and a little bit of a fade on friday there but we'll see how we're starting off the week with our with earnings we'll do an intro and this will be the first of uh a few different uh spending some time on looking at the commitment of traders report a report put out by the commodity trading futures commission which basically tracks large positions from basically hedgers commercial users and various different organizations there and we'll see how we can possibly implement that and at least get an understanding of bias in different commodities we'll focus on the index futures today keep it simple and then we'll also talk about seasonality charts uh from a technical standpoint that could be the direct result of how uh various hedgers commercial users non-commercial users of different commodities as well as supply and demand may come into play uh on different commodity contracts so we'll be taking a look at that as well all right let's go and bring up the thinkorswim platform and like i said if you do have any questions uh feel free to utilize the chat we'll do our best to answer them and uh starting off uh probably a good reference uh if i i'm gonna go over to twitter again at j mcnichol underscore tda on friday afternoon went ahead and that was before i ate the pizza later that night we had posted a weekly chart on the indices uh giving us some insights potential insights as we again kick off the earnings season uh this is the cash index for the s p uh the dow the nasdaq and the russell and uh you know with as as we look at trends uh from the s p dow nasdaq you know long-term trend uh still intact uh we have a potential bounce at least holding support with the nasdaq uh s p little more consolidation uh coming off those lows on a bounce and holding same thing with the dow over the last several weeks uh finding that support and likewise with the russell uh two now uh notice from a technical standpoint it's it's a matter of the follow-through is earnings gonna give that follow-through uh to see a break of you know the slide that we've seen over the last month and uh basically looking at some of the previous trading ranges from previous weeks uh sell-off uh days or would refer to as distribution days the indices still need to kind of break above those resistance areas and see if there's any follow-through momentum interestingly as far as with the russell which we've talked about for quite some time i've been in a sideways range for this past year and you know kind of right uh in the center there um even over the last four weeks back and forth um looking at some potential leadership uh from energy financials uh uh cyclical stocks uh have been generally outperforming uh since the summer coming off of those lows whereas the nasdaq is actually lower than where it was in some of those summer months uh russell has actually been demonstrating some recovery a little bit on the industrials as well but notice again kind of mid-range of that sell-off week from last month still acting as resistance so from a technical standpoint as we start with earnings is look to see if these levels break out whereas if things turn south you know breaking below support uh that can have more downward momentum particularly in the example of the nasdaq since the nasdaq is uh much closer to their trending support and has not had too much of an opportunity to consolidate as some of the other indices have so interesting technical patterns there and just another way of kind of learning what's going on and also another note also a belated uh post uh usually i try and send it down on saturday night but with uh china and with their property market uh weigh in on world markets as well uh kind of a chart on showing kind of how skewed uh their uh wealth is as far as asset classes uh compared to things such as equities and bonds i also found it interesting in the u.s markets still quite a bit of parity between both equities uh and bonds and you know now withstanding our potentially inflated property market yes great value but relative so question you know which asset is overvalued here and it's been a kind of a bit of a talking point for some time on you know whether chinese equities are oversold uh us is overbought or maybe somewhere in between earnings could be kind of a a factor there on evening that out and you can see also other markets around the world there too with that believe chinese tech stocks continue to rise a bit after finding some support and kind of getting a lift from last week there now very similar to us equities is we still have a downward trend and so keep an eye on some of those overseas markets as well as the u.s markets as we continue through this earnings week and beyond uh can give some ideas as far as some of that direction all right so looking at the futures uh let's bring up a forward slash es for the s p futures as we bring that up and bear with me for a moment as i try and manipulate something in the background there you know looking at the daily chart for the futures and i know i got a few fibs that are overlaying it from the intraday [Music] let's see if i can go ahead kind of a quick tool is if if you want to maybe temporarily hide some of the drawing tools kind of a quick trick is saving the drawing set uh down here at the very lower right uh you can go ahead and uh right now it's on the default there what i can do is i can go ahead and switch i already created one but you can save a new drawing set and call this like no drawings click save and notice right now i'm showing no drawings on the bottom there i can go ahead and right click on the chart or right click on the drawing tools uh clear the drawing set there we go and if i want to go back to my existing drawings i can just go to that default tab right there so kind of a quick little way there so yeah as we look at the s p futures you know we are getting a little lift off the lows there uh bulls may be looking to see you know is this more of a bullish reversal you know are we seeing a transition from lower lows to higher lows kind of uh attempting to flag a little bit at that resistance or form a pennant uh if i go ahead and put those drawings back on you know i did have more of a diagonal trend line that you know potentially break in depending on how one has that drawn if i go ahead and look at the intraday here i got on a five minute chart a little more of the draw down over at least this past week notice we are seeing a break of that downtrend uh as well at least on the five-minute time frame and as we're setting up uh for earnings looking at the pivot points uh both the weekly and the daily at least leading into earnings the s p is holding that weekly pivot which is in gold so at least continuing to find some support and hold that support the daily pivot which is in purple here notice is still acting as some resistance there and there is a bit of a confluence with the fibonacci draw topic we've talked about in the past and has came into play if we go ahead and select the percentage tool under the drawing tools and since this is a downward move looking for some potential resistance uh drawing from the high of that swing down to the low of that swing and looking in between the 50 and that 61.8 retracement notice there's a bit of a confluence with that 61.8 resistance and this daily pivot point uh so from a bullish perspective uh traders may be looking for prices to be uh breaking above that 43.90 probably
that psychological level of 4 400. and yeah as sjl says a little more range bound and probably expected as uh the market awaits uh earnings there uh if one's looking at the glass half full uh you know potentially a double bottom on that intraday again this is shorter term uh pattern in nature uh but at least uh looking for that shorter term reversal seeing that heading into earnings and again a follow through would be a break above that pivot point uh if there's a failure and breaks down into the trend uh some traders may be looking at you know whether it's around that 50 percent retracement uh or that 38 retracement sign of reversal to see if it attempts to test those lows but so far from the overnight as we start off uh into this earnings season you know we can see at least on that intraday uh attempting you know to make some higher lows there and pushing out at least in the higher range from the overnight by contrast looking at the russell which is the small caps and it's been kind of a theme uh that uh been discussing for uh some time over the last several weeks and beyond both on twitter and the webcasts uh is you know what uh sectors uh are leading and as we start off this week materials are continuing to strengthen up energy consumer discretionary financials all inflationary and potentially a benefit uh from some inflationary uh uh moves and particularly on the supply chain um on discretionary side all that that can at some point you know create some demand destruction there but we're seeing outperformance in that area so we'd expect to see the russell the small caps uh doing something similar and we can see that as well uh was actually below the pivot point and dancing back and forth um given some concerns there at least for the moment but again kind of breaking out of that range from the overnight you know here's the daily pivot uh which is upwards around that 2240 there so probably would expect to see things possibly chop around back and forth uh until we start seeing earnings with banks being the big the big move this week and i think a lot of it really starts ramping up starting on tuesday there there's no reports today uh for columbus day or indigenous people's day and i think government offices are closed as well and let's go ahead and take a look at tnx and then we'll go ahead and start looking at the commitment of traders report so looking at yields yields are pushing higher um so uh you know interesting as far as you know looking at the broad market with the indices you know s p is pushing positive uh russell positives up quarter points on both sides and looking at the nasdaq even the nasdaq uh up uh a quarter percent as well so not as being impacted by uh the yields this morning as the market kind of adjusts and a lot of it may be tied to uh being comfortable with some of the yields just not the velocity of it so starting up for the week uh you know not necessarily on an overall negative note there all right so let's go ahead and get into and talk about the commitment of traders report now i want to preface this this is more of an introduction we'll kind of build on that and try and keep it simple and when you look at the report you'll probably see why uh the commitment traders report has been released going back i believe to the 1920s and what it does is uh and it's been released at different periods of time uh over the years but currently it's released i believe every friday and what it does is it takes the volume and open interest reported by institutions and large traders or certain filing requirements for that and that information is reported on a tuesday compiled up on a wednesday and released on friday so just based off of that timeline don't look at this as you know real-time actionable information it's kind of like looking at a chart you know kind of looking for trends uh as far as different positions uh whether certain large institutions are you know accumulating a particular commodity or being long the commodity uh which may be bullish uh or if they are short a particular commodity which may be bearish depending on who the participant is as there are different participants when you started learning about futures you learn that there's two main main participants there are the speculators which you know can be hedge funds can be a different institutions that are just trying to profit from the moves in those commodities and take risks and then there's also the hedgers the institutions companies that actually may produce or utilize those different commodities and stuff and so all these large participants would have to file uh reports on their positions and their combined uh into the commitment of traders report and like i said released every thursday and compiled from volume and open interest on tuesdays you can actually bring that up by go in and uh let's see it looks like i lost the page here let's see if i can bring it back up should have it in just a moment uh the website is cftc.gov cftc.gov i'll go ahead and post it so this is government website and anyone who is interested in commodities know that some various government websites uh will release reports on different commodities uh you know such as the ers you know wasde report for grains things like that so i went ahead and posted that link for those that are here live for those you're looking at the recorded webcast again cftc.gov and you can go ahead and find just right over on the margin commitments of traders report and when you go there you'll get a little bit of a background there as far as with the types of reports and what we're going to do is we're just going to scroll down a bit as you can see a lot of the history that comes across and then you'll start seeing some of the reports dated october 5th and again this was from [Music] from last week so again from tuesday's uh report which was released on friday uh and then you can see some of the different commodities as far as agricultural petroleum natural gas metals and others we'll spend more on time on a few of these in coming weeks as we may look at individual commodities both technically and fundamentally uh there's the financials we're actually going to spend some time on that one and you can scroll down you can see reports from you know other by exchange on top of the cme and other ones there so i'm going to go ahead and go over here on the financial side and one can look at a report for futures only if they want to see a combined report as far as with options so you can do that again i'm going to keep this attempt to keep this fairly simple here for today and when i click on uh the report we will see and you can see that this report is probably still printed out on the same dot matrix printer when i first learned about uh commodities in the late 80s so as you can see not the prettiest report and if you're not a data wonk your eyes may be glassing over already uh but again we're gonna zero in uh on some information that uh may be pertinent as far as the indices and so just kind of highlighting uh if you go over to the far left you can see what contract they're talking about okay so we can see canadian dollar swiss franc uh british pound uh you can see the yen if we keep scrolling down we should start running into you know different indices so for instance uh there is the dow jones uh index with the ten dollar multiplier uh there is the mini contract with the five dollar multiplier so notice we're kind of getting into some of the indices so we're looking for the s p 500 uh that is the large contract notice you can see the multipliers here if you're looking for a particular one and for instance you know here is the uh mini that says mini energy contract so that's not it we're going to scroll down a little more and so here is the e-mini s p 500 stock index there's that 50 multiplier and so from the report it showed open interest at uh two million four hundred and thirty seven thousand shares now what some traders may do is look for trends uh as far as with volume and open interest whether going up or down and then also look at the participants that are doing this so for instance and this is going to be a little different compared to when we look at some of the other commodities but so financial futures are going to be a little bit different where you have dealer intermittent aries think of these these are basically the sell side brokerages that are typically dealing with the retail public as well as you know possibly institutional clients too uh here is asset managers uh more on the institutional side as far as with their positions and then you have leveraged funds kind of think along the lines of hedge funds there all right now as we go down and take a look you can see for each one of these it's going to show their positions that are long short or as far as in spreads okay and with the spreads you know maybe it you know a little hard to uh determine as far as bias with that and sometimes even with long or short it may be a challenge it's trying to think of you know what uh you know are they likely looking at so uh for instance you know asset managers institutions uh it would make sense you know that they're probably going to be looking at trends uh over time more longer term and as we look at their positions as far as long versus short uh you can see that their positions at around just shy about 1.2 million is
significantly more than their short positions and that would make sense whereas a sell side on the dealer may have a lot of shorts to offset risks of long positions uh that they may have so we can see significantly more uh on the dealer side and then you can see as far as with hedge funds as we look at hedge funds for the s p futures at least currently notice that there is a bit more parity between the long and shorts as far as hedge funds now as far as looking for trends and this some will look at uh you know possibly on a week to week basis as a bit of a snapshot so we make some comparisons is looking at changes so from the previous week and let's focus on you know asset managers institutional institutions there uh from the previous week again with the report uh from report from tuesday and so this is before the market had turned up a little bit okay uh institutions actually added to their uh short positions and kind of scaled back a little bit on their longs whereas on the dealer side they actually lightened up a little bit on their short positions and added to the longs and again this could be one of those things when that bias changes that things can flip around more as far as on some of these positions as possibly more retail traders may end up going short okay uh so that was for the s p uh futures now let's go and see how things look on some of the other futures along that line for instance let's look for the nasdaq and it should be down here a little bit we'll go back and look at the russell there i'm missing the nasdaq there and i have to see if i can do a find here okay there's nasdaq right there looks like i was just right on top of it so here's the mini contract with the 20 multiplier there and uh notice here as we look kind of similar notice the nasdaq uh not as weighted on the long side compared to the s p still a little more on the long side but not as weighted to the high side and then notice again added more toward the shorts there and interested on the leverage funds leverage funds uh had scaled back on some of those short positions as well uh as well as looks like a little bit on the long let's go ahead and look at the russell and when i was looking at this prior you know again one's looking at trends and maybe information supporting uh some of the things that i mentioned in the past let's find the right one russell 2000 so here's the russell 2000 contract with 50 multiplier as we look at it from the the asset manager side particularly on the leverage funds uh they've been adding on both sides on both the long uh and the short and uh particularly on the hedge funds being a bit more short on the russell it'll be interesting to see if this change is if the russell breaks to the upside there uh again on the asset manager side a little more parity on the long and the shorts as uh not necessarily institutions fully rotating into the uh the discretionary or the cyclical stocks and this may be something to be keeping an eye on now also keep in mind from the asset manager side uh if the shorts uh continue to increase that could be uh potentially utilize an offset some longer cash positions as well and it's kind of interesting here looking on the uh dealer side on the sell side not as much on the sell side on the russell as the longs are about three to one so let's kind of contrast that with the s p so we got the longs about three to one here on the uh on the russell if we go back on the s p which i think was just above here notice it's kind of flipped to the other side where the s p is more short to the tune of about three to one so be interesting to see if this possibly shifts in the coming weeks as we go on earnings so we'll look at that particular trend let's see what else we can look at here i guess we can look at the dow so we don't leave the dow left out uh you know the dow which you know you got a lot of financials uh industrials uh they can benefit a little more from the uh uh the cyclical uh trade notice we're seeing a little more parity here on the dow futures on the asset manager side longs are up about four to one and even on the hedge funds we can see them being longer nose kind of a shift as shifting from short positions to longer positions so we'll take keep an eye on this one to see if that continues in the long direction next week all right now uh that's all i'll spend on it for uh today uh hopefully you found that uh educational where we kind of just zoomed in on just some simple areas there focus on what we know as far as with indices and seeing what some of those institutions have so gave you a little nibble of that by looking at those four major futures indices we'll continue building on that as we may explore some other commodities and then more importantly as we go through this earnings season to see how the futures market uh may shift as far as on how those different earnings events come out there all right and if you do have any questions on that in follow-up sessions uh feel free to comment uh on the uh whether on the chat there and i'll make sure ken follows up with me on it or on the comment below on the td ameritrade or on the the youtube channel for trader talks which by the way uh probably a good point for me to uh bring up is uh when you are following us on this channel so i'm trying to bring up my thinkorswim platform and on the scratch pad if you enjoyed what you learned here today make sure you consider clicking like that lets us know that uh you enjoyed what you learned and other people having the opportunity to do that and also you'll also potentially see a subscribe link for trader talks and if you click on subscribe you can turn on notifications and be informed to all of our other various webcasts for instance later in the week if you turn on notifications you'll be alerted to it but if you do go to the education site under webcasts and then click on the webcast calendar you'll see later in the week uh mr ken rose does futures basics and beyond that's going to be at i believe 12 p.m eastern time and so it's a great follow-up to what we're discussing here today and earnings will just start coming out here so he'll be able to go through on what some of the impact of some of these initial bank reports are okay awesome all right let's go ahead and hit up on some seasonality charts so let's double check seeing what we're covering here today again we did a look on the index future see how things are setting up for the week gave you a little intro to the commitment of traders report with the focus on the indices and we'll continue to look for some of those trends another way of looking for some trends is possibly utilizing seasonality charts i think i brought it up momentarily last week but let's uh take a closer look here as we bring up the thinkorswim charts we can go ahead and bring up forward slash es and you know we can go and take a look at it over the last year last six months so we're going to bring that up and when we go up to uh the gear there's two ways of doing this you can either go up to the gear or you can right click in the chart when in doubt right click let's go ahead and do the right click and as you go down looking at the chart you can see style and once on style you'll see that there is a chart mode and we can go that chart mode and change it to seasonality and so right now by default it's going to go ahead and bring up let's get the no lines on there oh i guess no lines doesn't mean no lines haven't no drawings there we go so by default what it's going to do it's going to bring up the your chart in this case forward slash es plus a five year average i believe it's the default setting for that what we can do is we zoom in for the last three months of the year uh we can look on average you know september going early october been a bit muted but things picking up towards the end of the month and that may make sense from the standpoint of you know we're just starting the earnings season and if uh companies are more optimistic as far as with growth and knocking it out of the park as far as with earnings you know we may see that outside performance going into the end of the year now it's not a guarantee that'll happen if we want to break this down more we go up to the gear on the top of the chart click on the gear select appearance and under the chart mode this is also where you can change it from a standard chart to seasonality uh but we can display yearly and the average so we can go back look at the last five years make some comparisons i know i'm slightly colorblind but you should typically see the legend up at the top as far as different years so it looks like we got uh you know 2016 you know over this period and again we're kind of looking at the period we're looking at right now and it looks like you know out of the five years all of them were generally had an upward bias uh with the exception of 2018 were things that sold off in december there and keep in mind there can always be unknown events uh that can cause this i think the one that comes to mind at this last quarter is we kick the can to december uh for the debt limit and uh there's no signs there's gonna be full agreement there at least not at this point that can add some volatility and can also change what that trend is okay we can do the same thing with some of the other indices which you know one may expect to see similar trends you know there's the nasdaq again upward bias across uh all those years with the exception of uh 2018 being a sell-off so that would be the question mark we're going to look more like the average or we're going to look more like 2018 okay looking at other commodities and then what we may do is match some of these up with the commitment to traders report again i didn't want to go too deep on on every commodity because and this may be a personal bias for me on looking at a dot matrix printout so we'll kind of localize it on certain things uh for instance in upcoming sessions uh we'll possibly look at the trend of crude and some of these other commodities and so looking at crude and if we want to go and play around this we can go ahead and click on the gear again go to appearance let's go and just bring up the average question is can you display the label next to each line i'm not sure if there's a default setting uh to do that if i go up and go to the appearance i'm not saying that stands out uh on that although let's see if i can do this now it doesn't seem to react if i put my mouse as i maybe put the mouse at or near it it may give us that information but looks like it would actually just appear up on the top here and there you go so there's 20 21 and then there's the average there as we look at crude um it looks like crude did have and let's zoom in on this a little bit more you know after on the five year kind of selling into early november kind of had an upward bias going into the end of the year uh if i go back and click on that gear and let's go ahead and go to appearance let's look at the yearly and the average we'll click apply and uh from you know october it's kind of interesting we can see you know there's 2018 2018 was bad for equities as well as crude uh weather with over supply or with a drop in demand you know that's another relationship we can be keeping an eye on potentially to see if things do taper off with crude which unfortunately they have not if i want to go ahead and switch this back again we can go ahead and click on the gear or if i right click on the chart go to style go up to chart mode again change it back to standard yeah we can see crude's uh not going anywhere at the moment as it hit a high at around 82. you know the technical trend uh you know may even see it push close to the 90s and there was a report believe it was from jp morgan uh consumers may disagree but the mark the market call is that the economy can potentially handle crude between 100 and 150 again and that was sighting back to that 2005-2010 period where we were able to get through that painful as that may be [Music] let's go ahead and look at gold forward slash gc and a lot of uh gold bugs are disappointed that gold's not making the moves that one would expect if things were more inflationary you know there's also some supply coming online as well and there's some projections at least longer term of price breaking down below 1700 although the fibonacci support is near that area so that's going to be a potentially longer term view to see if we're able to hold that 61.8 kind of a make or break area for the trend and notice uh kind of similar what we saw with the russell i think those material stocks energy stuff like that you know kind of form in uh that squeeze or i should say cyclical stocks so be interesting to see if the russell does break to the upside or to the downside will gold follow it now we can again go ahead and bring up a seasonality chart now just because uh you know not necessarily the commodity may behave uh to certain seasons there let's even go ahead and get that chart mode here first seasonality speaking of seasons i'm slightly congested so i do apologize if i sound a little off looks like we got the five year average here and as far as looking at gold you know it's generally been a little muted there at least from the october to uh december time frame uh the only time and kind of interest in 2018 uh so kind of that inverse relationship gold was going up during that time uh so it probably brings up another uh question let's go back we'll hit the gear there let's go ahead and just change it back to a standard chart let's try one more time i'll right-click go to style chart mode click on standard let's go back to 2018 and we'll go and we'll wrap this up just see what bonds we're doing uh at that time so this was gold's rally going in the end of the year from 18 going into 19.
and that was a pretty good expansion for 2019 going first half of 2020. let's look at tnx for treasury yields and what was interesting yields were dropping considerably during that time thus looks like benefit and gold there as well so this may not be what we're looking at going into the end of the year but traders maybe keep an eye on the bond markets whether we're looking at tnx for the 10-year yield which is already starting off on the positive there and looking at the 10-year futures bond which is forward slash zn which should be the inverse looks like it's making some lows here see if there's going to be any support here or not all right well folks let's go ahead and wrap things up let's take a quick snapshot uh at the uh s p futures see where we're at if we hold held that break so it looks like still pretty positive breaking through the daily pivot on a positive note so at least starting off the week a little more of a follow through from uh friday's uh fade there so we're actually above a good part of friday's trading range so let's see if that daily pivot holds throughout the day and support the current market bounce so do encourage you join us here today folks once again if you enjoyed what you learned make sure you click like and remember in order to demonstrate the functionality of the platform we did have to use actual symbols keep in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility so thanks for joining us here folks we'll talk to you again real soon have a great day bye now