These markets have been challenging to say the least. We might get frustrated and we might let it get to us on some level but the key thing to remember is that there is always a lesson to be learned. When something doesn’t play out as we expect we must remember that there is a reason and the challenge is to figure out the WHY!
Recently we had the #EURUSD contacts some supply and we could see that long position being held by the banks were at all time high numbers. When we examined previous high numbers of long positions we could see that price eventually made a large move down but in this recent case price only slightly reversed before heading up a little higher. WHY WAS THIS? This is the key to discovering more about the markets.
In a recent Level 3 session we went into this in some detail and what we discovered is that there were higher timeframe agendas that were in play that overrode what the COT data was suggesting. At the end of the day we had MASSIVE demand that was in play and the pressure to the upside more was greater than the pressure from the profit taking we noticed on long positions. They only took enough profits to allow them to start accumulating again for another push. Recently we have seen that they are again starting to pile on to their longs while during this whole process short positions only slightly increased while remaining cooled off. Within all this is valuable information we can add to our knowledge base about the markets and be able to use in our analysis moving forward.
Kevin Araujo