MarketMentat CoT Charts

The Dumb Bull Ratio is the proportion of 'Non-Reportable' open interest (positions held by small speculators) which is held 'long'. Small speculators tend to be latecomers to any significant move, and once the preponderance of small traders are positioned on one side of the market, a reversal is likely.

When a commodity has an unusual concentration of long positions amongst small speculators this represents a sentiment extreme: it is useful when used in conjunction with other sentiment-based analysis such as the Contango cgharts and price-based oscillators such as the commodity Channel index and Williams %R.

The Dumb Bull Ratio II is the proportion of all open interest which is held as long positions by 'Non-Reportable' traders.

When long positions amongst small speculators rise as a proportion of all open interest, this represents another indication of a sentiment extreme, and reinforces the Dumb Bull Ratio above. Note that it is possible for the DBR and the DBRII to indicate different things: small traders may be overwhelmingly bullish among themselves, but small-spec long positions may be shrinking as a result of increased bullishness amongst large-traders (it is reasonably rare for both large and small traders to become bullish at the same time – usually small speculators are attracted into already-bullish markets).

The final pane in our Commitment of Traders Analysis is the proportion of small speculative positions (both long and short) in total open interest.

When the market concentration of small speculators rises, it indicates that larger traders – hedgers and large speculators – are becoming 'less keen', both on the long and short side, than the small specs. In other words, smart money has decided to reduce its exposure to this market. The ideal contrarian setup within the CoT charts is for the DBR and DBRII to be at an extreme and for Small spec concentration to be rising.