In my efforts to better understand the COT Reports that come out every week, I have done some digging around as it was never very clear to me what theses COT Report charts really mean, or what information they are trying to portray. In my online digging I have fallen on a different way to portray the information which makes more sense to me, so I figured it might be helpful to others as well.
I also want to use this information as an experiment as it seems we might be in the midst of a EURUSD reversal and this might be a good time to put this information/strategy to test. I have gone back and tracked the COT Report information for some past weeks in order to make this experiment worthy of testing.
The Main COT Report shows the percentage of longs to shorts for each pair of Non-commercial and Commercial Institutions, with a total of Net Positions and the difference from the prior week with the percentage of change. In this file we can see that as of last week EURUSD was still 69% into long positions to 31% to shorts which is a -6% over the prior week.
Now where this information gets interesting is in the next chart EURUSD COT Report when we tally up the information and add a 13 week average of the past information for the same pair. We can see that Non-Commercial Institutions are still holding greater amounts of long positions than the average and less shorts positions of the past 13 weeks, which means the market is clearly still in a bullish trend. I will be monitoring this on a regular weekly basis to see if the long positions will be becoming less than the average and the shorts greater than average in the past weeks and how the market will react in accordance to the data collected.