Monday 18 August 2008

Markets Lean Bullish for Commodities, Indecisive for Equities

Are commodities finally done? Are equities back for good? Not so far, says regulatory data issued Friday. The latest Commitments of Traders report, which highlights trillions in dollars of positioning in over 100 markets, suggests the U.S. dollar is still in trouble, that commodities may have bottomed (at least temporarily) and that equities face more headwinds. You can check out my signals from my trading setups based on this data at the table linked here. Also see my newly updated portfolio page for my latest positions. Some highlights:

- Still no sign of better times from my trading setup for the S&P 500. The commercial traders remain decisively negatory with their net position as a percentage of the total open interest. My commercials signal is in bearish mode. The other signal in this setup - based on fading the small trader total open interest - is in bullish mode. Since these two signals don't agree, this setup remains in cash.

- My Russell 2000 setup has gone bearish for this week. But I should note this is a short-term trade that will last only one week. This is another combined setup that follows the signals of two groups of traders, when they agree. Based on the trade delays for the two signals, the overall setup will either go to cash or bullish as of the open, Aug. 25.

- My setup for silver is in bullish mode and is showing the second-most bullish reading in relation to historic positioning since the data started in 1995. The commercial traders are now 2.7 standard deviations above the moving average I use for this setup in their net position as a percentage of the total open interest in silver futures and options. This, coupled with the fact that commercial traders in the U.S. dollar index are at a historic extreme in their bearish positioning, suggests the recent rally in the greenback is done (at least for now).

Good luck this week!

TAGS: S&P 500, Russell 2000, silver, U.S. dollar, COT, Commitments of Traders, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer

8 comments:

Anonymous said...

Hi Alex,

I was hoping that the Nat.Gas signal continues to be bullish for this week :( It's been brutal! Aren't we nearing the seasonal bounce of last year ;)? Oh well.. I guess only the cold weather or a hurricane can turn this around.
How's this article for more bearish momentum:
http://seekingalpha.com/article/90882-natural-gas-clean-fuel-with-a-dirty-little-secret

BTW: The signals chart needs to be updated today, since it's still showing last weeks info.

Rgds.
Pete

Alex Roslin said...

Hi Pete,

Thanks very much for noticing that. I had updated all the signals, except the natural gas "cash" signal. Appreciated.

Regards,
Alex

Bora Kizilirmak said...

Natural Gas cash position

It was not clear to me either it is still bulish and you got stop loss OR you got bearish signal.

Can you please clarify?

Alex Roslin said...

Hi Bora,

The natural gas setup is in "cash." That's because the two signals that make up this setup don't agree with each other. I didn't get stopped out. You'll always see that and the other new, current and pending signals on the latest signals page table. If I was stopped out, I'd indicate that as well.

Regards,
Alex

Anonymous said...

sure silver is bullish because silver price dropped by 10% and silver is now greatly oversold and therefore undervalued. it looks like the COTs data are no longer driving the market, they are following it. therefore the predictive value of these data is now in doubt. and what about the bearish signal for gold next week? something seems not right.

Alex Roslin said...

Hi Anonymous,

Thanks for your insights. Your comment includes both factual and logical errors. Firstly, silver went on a bullish signal because of how the groups of traders lined up the week of July 29, before the price had entered its recent correction.

Secondly, price has yet to reverse, so the growth in bullish positioning last week would hardly be following the market, as you put it. The positioning is clearly anticipating a rally. I don't know if one will occur, but clearly the data isn't following the price decline because in that case we'd see a larger net short position.

Regarding the gold signal, you should be sure to check the latest signals page table, where you'll see that a number of commodities have new signals for the open of next week.

That, in addition to any new signals from this coming Friday's data, means next week is a completely new situation that I can't say much about at this point.

Finally, I'm not sure how you conclude that a couple of weeks' interaction between price and COT data tells us anything about the COT data's predictive value. Perhaps you can explain the foundation of such a claim?

Regards,
Alex

Anonymous said...

Hi Alex,

How are you invest in CAD?
Options, forex?

Alex Roslin said...

I don't currently have a specific position for the Canadian dollar setup. However, much of my portfolio is in C$ simply because I'm based in Canada.

Regards,
Alex