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Stephen Briese is the leading expert on analyzing the Commitments of Traders data published by the Commodity Futures Trading Commission. Briese has published a newsletter, Bullish Review, since 1988 and has written articles for several industry publications and spoken at a variety of industry trading and technical analysis conferences.

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Praise for The Commitments of Traders Bible

"This book provides an important understanding of how the crowd operates in the markets. Steve Briese has given us a complete explanation of the metrics that are required to actually use contrary opinion methods."
―Woody Dorsey, President, Market Semiotics, and author of Behavioral Trading

"Steve Briese is the master of the COT and here gives us the benefit of many years of experience in using the Commitments of Traders reports in his trading. Steve guides us, with wit and humor, through how the COT is calculated, why it is valuable, and, more importantly―how to use it to uncover an edge in your trading and investing. You will profit from this book."
―Charlie Wright, Chairman, Fall River Capital, LLC

"I have followed Steve Briese's analysis for two decades in trading the commodities markets. His methods and conclusions from COT data are fact based and often properly contrarian. In today's world, where commodity hedge funds have become even larger players, Steve Briese's work assumes an even higher importance level for commodity market participants, individual and professional alike."
―Brent R. Harris, Head of PIMCO Real Return and Commodities Desk; Chairman, PIMCO Funds

Aus dem Klappentext

The Commodity Futures Trading Commission's weekly Commitments of Traders (COT) report has established the U.S. futures market as one of the most transparent exchanges in the world―and created a level playing field for commodity and futures traders of all sizes in the process. But the information found within the COT report extends well beyond the confines of the commodity pits and can be profitably applied to virtually any market sector, from equities and treasuries to forex, gold stocks, and exchange-traded funds.

Nobody understands this better than author Stephen Briese, an industry-leading expert on COT data. And now, with The Commitments of Traders Bible, he shares the insights and experiences of his successful career to help put the COT report in perspective. Written in a straightforward and accessible style, this detailed guide skillfully examines the predictive power of COT data and reveals how you can accurately interpret it in order to analyze market movements and make the most informed investment decisions possible.

Divided into two comprehensive parts, this reliable resource:

• Takes you through a brief history of the COT report and explains how it has evolved over time
• Illustrates how the dozens of numbers published on specific markets expose the positions of the biggest and smartest market insiders
• Describes how to properly view the COT Index and use it to avoid the traps that most observers fall into
• Offers technicians and chartists various ways to incorporate COT analysis into their existing programs
• Discusses individual idiosyncrasies and patterns that appear in certain markets―from oil to interest rates
• Lists hundreds of securities from all over the world whose prices are highly correlated with commodities contained in the COT report

Regardless of your trading methods, and no matter what markets you're involved in, there is a COT report that you should be reviewing every week. With The Commitments of Traders Bible as your guide, you'll gain an invaluable edge over uninformed market participants as you learn how to use legal "insider" information to enhance your everyday investment endeavors.

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The Commitments of Traders Bible

John Wiley & Sons

Chapter One

"Look," began the spokesman when the door closed, "the Grain Futures Administration has made a complaint that you are carrying too much open stuff." It would be hard for me to make anyone other than a La Salle Street trader understand how I felt then, unless it might be some Russian farmer who has tasted the bitter flavor of government interference in matters which should not concern it. -Arthur W. Cutten and Boyden Sparkes, "The Story of a Speculator," The Saturday Evening Post (November 17, 1932)

My great-grandfather A. E. Briese went bust four times in his life; the first was in 1918, in commodities. He had been growing potatoes to feed the troops during World War I, and loaded his crop on railcars at Plainview, Minnesota. Then the war ended, and the Army canceled his contract. He wasn't alone. Farmers across the country ramped up to meet demand for wheat, corn, and oats, brought on by the Great War and the Russian Revolution and famine of 1917. And nobody was hedged (only partly due to the closure of the Chicago Board of Trade during the war). Wheat prices, which reached almost $3.00 per bushel during the war, began eroding, along with land values, immediately following the Armistice. When the Chicago Board of Trade reopened in 1921, there wasn't an empty grain bin or railcar in the country, and pit prices reflected the overwhelming supply. At least farmers now had somebody to blame besides the government: the Chicago grain speculators.

THE GRAIN FUTURES ADMINISTRATION

Congress, which was dominated by farm-state members, was quick to respond to the crisis, passing the Grain Futures Act, signed by President Warren G. Harding in 1922. The act, for the first time, required Chicago Board of Trade (CBOT) members to report their aggregate trades to the newly formed Grain Futures Administration, which posted these figures in its first annual report to Congress in 1924. From the beginning, a key feature of the report was to differentiate speculators from the "trade" (commercial hedgers who used futures markets to protect their ongoing cash business from price volatility).

In response, the Chicago grain traders first sued (unsuccessfully) to maintain their trading privacy, and then formed the Board of Trade Clearing Corporation in 1925 (now the Clearing Corporation) to provide trader anonymity in aggregating and reporting trades. Even though position sizes were only informally controlled (by the CBOT's Business Conduct Committee), large traders like Arthur Cutten-who by 1926 took delivery of 5 million bushels of wheat-were contemptuous of government oversight, an attitude that continues among certain large traders to this day.

THE COMMODITY EXCHANGE AUTHORITY

Monthly reporting continued under the Commodity Exchange Authority (CEA), created by the Commodity Exchange Act of 1936. This act empowered the CEA to establish speculative position size limits as well as prosecute market manipulators, and banned option trading on commodities-a restriction that was not lifted until 1982. This act, and subsequent amendments, added markets to the CEA's portfolio (Table 1.1).

In 1942, the "Commodity Futures Statistics" report was published separately from the U.S. Department of Agriculture's USDA annual report. The new publication included monthly trader statistics (though still published annually). The CEA published the first monthly Commitments of Traders (COT) report on July 13, 1962. This listed large trader positions for 13 agricultural commodity markets as of June 30.

THE COMMODITY FUTURES TRADING COMMISSION

Congress created the Commodity Futures Trading Commission (CFTC) to succeed the CEA in 1974. By this time, several additions were made to the COT (Commitments) report, including adding data on the numbers of traders in each category; a new-crop, old-crop breakout; and concentration ratios that show the percentage of open interest held by the four and eight largest traders. Under the CFTC, the COT report release interval has been incrementally shortened beginning in 1990 with mid-month and month-end reports, to every two weeks beginning in 1992, and to the current weekly schedule in 2000. The delay between tabulation and release has been shortened, as well, and you can now collect the data at the CFTC's website at 3:30 P.M. eastern time each Friday (from tabulations made on Tuesday's close).

By appearances, the Commitments report is little changed during its first 45 years, but looks, as they say, can be deceiving. Although the format available at the CFTC's website is very similar to the pre-1982 report (Figure 1.1), numerous subtle changes have affected both the nature of the large trader reported and the analysis of the report. You will not find a quiz at the end of this chapter, but I will highlight the evolving nature of the COT report so that you can appreciate how earlier authors may have offered a different take on analyzing the report's contents.

I first became aware of the COT report soon after beginning my trading career. My choice to trade commodities was really a matter of timing. In 1973, when I became interested in investing, stocks were locked in their worst bear market since the Great Depression. After studying all of the various investment possibilities covered by Morton Schulman's Anyone Can Still Make a $Million (Schulman 1973), I settled on commodities. I went long three silver contracts at $3.97 and made $1,500 my first week. I guess I will never forget my father's response, "That's a pretty good living if you can do it every week."

There were not a lot of commodity books in print in those days, so I dove into Larry Williams's How I Made One Million Dollars Last Year Trading Commodities, when it was published (Williams 1974). One of his key resources was something called the Commitments of Traders report, so I immediately subscribed. It was a free subscription in those days, with separate reports mailed from Chicago and New York on about the 11th of each month, covering the previous month's trading.

You undoubtedly have heard the old market saying that the easiest way to make a small fortune trading commodities is to start with a large fortune. Larry's contention was that traders became large by anticipating market moves. I'm oversimplifying Larry's techniques when I tell you that he recommended using the COT report "to alert you to the `deals' you should be scouting out" (p. 96) by comparing the size of large speculator long positions to their short holdings. If large noncommercials are overwhelmingly long, look for a long trade; look to go short if large speculators are net short. He specifically warned against using the Commitments report for trade timing-understandable, since it was a monthly report that reached you halfway through the following month.

THE MODERN COT DATA

During the 1970s, the large noncommercial category was most likely dominated by large individuals la Richard Dennis of Turtles fame. In the 1980s, this began to change as commodity funds gained popularity (including several that were run by former Turtles). So, too, did the interpretation of large...