CFTC week 18: Speculative longs cut by 4% before the carnage

This is one of the weeks were the CFTC data does not give that much of a picture considering the carnage that unfolded last week, especially after the data was comprised on Tuesday May 3.

By then hedge funds and large investors had already begun to react to the early signs of correction which was triggered by the steep drop in the price of silver. By Tuesday positions had been cut by 4% but no doubt that number as of last Friday would have been much higher. Unfortunately we have to wait until this coming Friday to get a feel for how much further positions were cut during the carnage. The sell-off is expected to have knocked $99 billion off market value and will undoubtedly have driven out a lot of speculators, thereby leaving the market in a much better position to recover - conditions permitting.

A brief look at the numbers show that all of the seven largest investments were already scaled back by last Tuesday. Three sectors: metals, grains and meats saw reductions while energy was unchanged and softs rose.

Of more interest was  currencies where the accumulated dollar short rose by 10% to $40 billion just two days before Trichet disappointed the hawks, which sent the Euro sharply lower and the dollar higher. Such were the expectations about continued hawkishness from the ECB President that Euro longs had risen by one third ahead of the meeting.

 Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holdings are typically institutional investors such as hedge funds and CTAs. The above chart tracks a total of 27 different commodities split into sectors.