The COT Report

One of the many indicators that traders look at is the weekly Commitments of Traders report.
In a nutshell, traders in commodity futures contracts (including stock indexes and currencies) are classified as being "commercial", "large traders", or "small speculators". To qualify as a "commercial" a trader must have a direct dealing with the commodity or financial instrument in question either as a producer or end user. In the gold contract for instance, a commercial trader might be a mining company that hedges production, or a major bullion dealer or jewelry fabricator. In a grain contract, a cereal manufacturer would be an example of a commercial. The "large traders" are usually hedge funds, and the "small speculators" rubric encompasses anyone who holds less than the minimum number of contracts that would qualify them as a "large trader". The information value of the COT report is generally viewed as a function of the divergence between the relative bullishness/bearishness of the commercial traders (usually seen as the "smart money") vis a vis 1) the small speculators (often leaning the wrong way at turning points), as measured over a given period of time, 2) the distance of the current price in the underlying commodity from price extremes over the same time period. So, for example, if the commercials currently hold the largest net short (long) position in a commodity they have had over the past year, the small specs have the largest net long (short) position, and the price of the underlying is at or near a yearly high (low), the risk reward ratio would favor going short (long) with the commercials...
(Rampant Speculations)