The commercial trader category in the weekly CFTC Commitment of Traders reports has pretty well nailed the Nasdaq 100 futures, lately. They quickly jumped on the bull wagon closing out 2013 and their buying in February was their strongest since last July. You remember last July, right? The June sell-off led to major buying and a rally that barely paused to breathe until this January, soaring more than 30%. Well, the March weakness has set the stage for a commercial trader buy signal and yesterday’s strength officially triggered it on this chart.
Commercial traders use the futures markets for the leverage. This allows commercial traders to adjust the conviction of their sentiment quickly, easily and broadly. The Nasdaq 100 futures have a contract value of $20 times the index value. Therefore, the Nasdaq futures have a contract value of $72,000 with the Nasdaq 100 stock index trading at 3600. Generally, a money manager can do as many as 40 futures contracts at any market tick, which allows them to move nearly $3,000,000 worth of Nasdaq 100 exposure at their desire.
Commercial traders have increased their bullish bets by one-third over the last week. Their current position is just shy of the February buying. The February signal triggered a rally of nearly 6% in two weeks. We’ll have to see if their buying continues this week which would set the stage for new highs. As it stands, the signal we published last night makes us long the Nasdaq 100 futures with a protective stop under the recent lows at 3535.