Invest With the Smart Money (Or the Dumb)

Ever wonder what the smart money is doing in the markets? What are the people with the deepest pockets and best information buying and selling?

A small handful of analysts has found one way to tell: the Commitments of Traders reports. Devoted fans say they may be the closest thing in the public domain to a Holy Grail of market forecasting.

These obscure reports are issued free every week by the U.S. Commodity Futures Trading Commission. The COT reports list trillions of dollars of futures and options holdings in 100-odd markets - everything from the S&P 500 to orange juice, cruide oil, silver, Treasuries and the U.S. dollar. They include many of the world's largest investment firms, commodity producers and hedge funds.

Market Info for the Rest of Us

The government has been publishing various incarnations of this important data since 1924, when it first started to put out information on speculation and hedging in grains futures. Until fairly recently, it was available only by paid subscription. But since 1995, the CFTC has released the futures and options positions of traders for free each week.

Why is all this information important to have in the public domain? The CFTC says why itself: The data is collected and published to shed transparency on the markets and provide some much-needed accountability.

Which is why I think it's so valuable. It's being provided for the public to use. So let's use it. I see it as a great leveler. The big investment firms have their armies of analysts and banks of proprietary data and trading systems.

What do the rest of us have? The COT reports!

So why don't ordinary people know about it more? Why aren't we using it? Read on, below, and you will learn, my friend...