Smart Money vs. Dumb Money? (CFTC's Commitments of Traders Reports May Reveal Keys to Next Moves)

(KCN26) (ZWN26) (WEAT) 

“Smart Money vs. Dumb Money? (CFTC's Commitments of Traders Reports May Reveal Keys to Next Moves)”

by Jim Roemer - Meteorologist - Commodity Trading Advisor - Principal, Best Weather Inc. & Climate Predict - Publisher, Weather Wealth Newsletter and Climatelligence

Scott Mathews - Editor and Co-Producer of Climatelligence

• June 10, 2026

On June 9,  we posted a similar version of this article on the Substack Climatelligence page: 

https://climatelligence.substack.com/p/smart-money-vs-dumb-money-well-not

Commitments of Traders Reports

40 years ago, when a futures brokerage firm opened a new account, the customer (individual, partnership, company, etc.) had to declare whether he was a hedger or a speculator. There were only two answers necessary, but after a while, a third answer crept into the equation:

Image Source: BestWeather design suggestion, as rendered by ChatGPT

Ever since then, the futures industry has grown in many directions, and classifying the players became more complex. The field of possibilities expanded to include hedge funds, swap dealers, trusts, financial engineers, ETF fiduciaries, etc.

The original purpose was to inform the public about “who” was holding which “cards” so to speak. In the old construct, the equation was to determine where the smart money was betting, and, well, what the gamblers were doing, to put it mildly.

Image Source: BestWeather design suggestion, as rendered by ChatGPT

Generally speaking, the hedgers were participants who needed futures positions in order to protect their physical commodity inventories in producing, consuming, transporting, storing or otherwise handling, tangible commodities. The authorities assumed that everyone else must be speculating.

Today’s COT reports have more doors. However, the condition of the market can still be measured by the percentage of holders who are merely “taking a shot” about commodity X going up or down.

The weekly ebb and flow of these reports is watched closely by many market participants who understand how far this pendulum swings in one direction or the other… as well as what each wide swing may imply for what happens next.

At BestWeather, we have our own version of COT watching, which we rely on for our “Spider Score” analysis. See the image below of our bearish coffee opinion five months ago. Readers should note that the “Anti-Herd Mentality” category is our “Spider term” for the COT implications.

Image Source: BestWeatherInc.com - (Coffee bean photo is royalty-free from pexels.com)

Chart Source: Barchart.com (markers, comments, inset by BestWeather, Inc.

To make a long story short… in our field of weather-reactive commodity contracts, the speculation coefficient in the open interest of a specific agricultural or energy market indeed holds significant weight when it comes to making trade recommendations in our Weather Wealth newsletters.

Here is our latest breakdown on the Managed Money O.I. as of the most recent COT report:

A Word of Caution

The COT report should never be used by itself to make trading decisions. It is most valuable when combined with technical analysis, seasonal tendencies, supply-and-demand fundamentals, and—of course—weather analysis. 

At BestWeather and in our Climatetelligence reports, we monitor weather trends, climate cycles, and market positioning together. When weather risks and COT positioning align, they can provide valuable clues about future opportunities in commodity markets.

For example, wheat prices have collapsed following the stellar April/May bullish move on the worst Plains drought in 54 years. The COT was heavily long at the time and improved global weather in Australia and Russia helped wheat prices collapse nearly 20% the last two to three weeks. 

Image Source - BestWeather's COT data spreadsheet from CFTC report as rendered into pie-chart array by ChatGPT

Notice (in the table above) how there is now a 63% short position among speculators in the “SRW” wheat futures market. To us, this means that any new weather development that may interfere with the wheat crop could send bearish traders in the market to “run for the hills.”

Do you want reports like this with an occasional trade idea in commodities? We will be offering a free trial to our Climatelligence reports soon. Climatellience is a less expensive, abbreviated version of our globally popular WeatherWeath newsletter. 

Make sure you download our SUBSTACK app here if you have not already.  Climatelligence.substack.com

Remember, when trading commodities, always apply risk management, such as stop-loss orders and position sizing, and consider using spreads to isolate the seasonal component of a particular market move.

Thanks for your interest in Commodity Weather Intelligence!

Jim Roemer, Scott Mathews, and the BestWeather Team

Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He is also a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA-registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short-term and long-term trend forecasting in grains, softs, and energy markets, he holds a unique standing among advisors in the commodity risk management industry.