Advanced Positioning, Flow, and Sentiment Analysis in Commodity Markets, 2nd Edition

CHAPTER 1Advanced Positioning, Flow, and Sentiment Analysis in Commodity Markets

Chapter objectives

• 1.1 Positioning Analysis – What Is It?
• 1.2 The History of Positioning Data, the COT Report, and the Agencies that Provide the Data
• 1.3 Misunderstandings and Issues in Positioning Analysis
• 1.4 Futures and Options Data

This book focuses on Positioning Analysis. It is based on new material, but also updates and builds significantly on some of the work in the previous book, Positioning Analysis in Commodity Markets – Bridging Fundamental and Technical Analysis, by Mark Keenan.

New material includes analytics based on the analysis of flow, the decomposition of trading flows, trading activity in the Chinese commodity markets, the inclusion of newsflow into Positioning Analysis, and how machine learning can provide insight into trading relationships.

This chapter introduces Positioning Analysis and positioning data and addresses some of the more common misunderstandings and issues in this area.

1.1 Positioning Analysis – What Is It?

Positioning Analysis is one area of research that provides a powerful framework to better understand price dynamics, risk, sentiment, and behaviour in commodity markets.

Based on standard positioning data and bridging aspects of fundamental and technical analysis, the approach builds on how certain types of positioning patterns – both within the data and in the context of changes in variables like price, curve structure, fundamentals such as inventory, ...