#148: Is the First Cut the Deepest?

Author

micksonmatch
September 19, 2024

S2N Spotlight

Yesterday, the Fed’s FOMC cut rates by 50 bps to 5%. In the table and chart below, I show the S&P 500 return 3 months, 6 months, and 1 year from the first cut. If the average of the 12 previous occasions is to be relied on, we can expect to see a positive return 6 months to a year from now. However, as you can see in the table and chart, there are occasions where the returns up to a year are pretty awful.

S2N Observations

One of the alternative data sources that has intrigued me for decades is The Commodity Futures Trading Commission Commitments of Traders (COT) report. Last year I was able to build a chart with this data after weeks of struggling to get the data into a format that I could work with. Many people pay for subscription services to access this data, even though the data is free from the source.

After spending quite a few hours working on this, I am back in business. I will add the code to the S2N website soon so you can pull whatever data you want. I have chosen to share 2 symbols today. The Japanese Yen because of the huge swing in Large Speculators net position. I am no expert in using these reports but there is no doubt useful information in the data. For your interest, there are a few segments that make up the report. Our charts focus on the Smart Money. I throw Open Interest into the mix. This all requires more explanation. Today I will just say that it is clear that carry trade unwind in Japan has seen a massive reversal from short to long the Yen. The large coffee speculators are net long to make today a trilogy of talking coffee.

Ciao I am off to get an espresso.

  • Large Speculators (Non-Commercial) = Smart Money

  • Small Traders (Non-Reportable) = Dumb Money (small retail traders)

  • Commercial Hedgers (Commercial) = Neutral (Hedging rather than speculating)

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