Prediction
Cocoa is expected to rise over the next 1-3 months as Commercials, the smart money, are positioned at the 96th percentile, while Speculators, the crowd, are at the 9th percentile, indicating a potential reversal in the market.
Commercials at 97th percentile · Speculators at 9th percentile · 5-year range.
Key points
- Commercials — 96th percentile, Speculators — 9th percentile
- Open Interest +8.63% month-over-month
- Extreme positioning persisting 13 weeks
Why it matters
The convergence of factors, including the 87-point divergence between smart money and crowd, matters because it suggests that the crowd's bearish bias may be overextended, and the smart money's bullish positioning could be a leading indicator of a price reversal. Historically, such extreme positioning has often been followed by a move in the direction favored by the smart money.
What confirms the thesis
Commercial positioning stays elevated and Cocoa holds or reclaims its recent range.
What invalidates the thesis
Commercial accumulation fades quickly or Cocoa breaks to fresh short-term lows.
For informational purposes only. Not investment advice. Disclaimer.