Friday, 22 June 2007

Thumbs Up for Equities, Down for Energy

Today's Commitments of Traders has generally bullish news for equity markets, if the three renewed bullish signals I've gotten are any indication.

But there were more bearish tidings for energy, with several renewed bearish signals in this sector. No new signals to report this week.

Below is my first series of signals using my new list of trading setups based solely on the COTs reports. I have greater confidence in these setups because I was able to statistically validate almost all of them at a high level of confidence, both in terms of profitability and against the underlying markets I'm trying to beat.

In many cases, the new setups are more profitable than the old ones. In a few cases, I had to make small sacrifices in terms of profitability to get a setup in which I can have more confidence about the future results matching past profits. The problem with some of the old setups was that the small number of trades made it impossible to say with confidence whether the profitability was due to excessive curve-fitting. Now, I've managed to find setups with enough trades to be statistically validated.

Most of the existing signals remain the same, but there are a few notable changes. All of my gold-related setups are now in the bullish column, having just flipped from bearish. As well, you'll notice that my new setups for the NASDAQ Composite, Semiconductor Index (SOX) and the Nikkei are now in the bearish column.

The changes come as I've switched which group of traders I follow for these markets. In the Nikkei, for example, my old setup followed the commercials, who have been highly bullish the Nikkei, but the new one fades the small traders, who've also been highly bullish. Go figure! It's a bit of surprise for me because I've got a profitable position in the Japan iShares ETF (EWJ) as a result of the earlier signals. I'm going to find a good technical spot to unload it.

Note, however, that my setup for the NASDAQ-100 is still bullish, so I'm holding on to my Ultra QQQ ProShares ETF (QLD), which tracks that index.

New Signals*
BULLISH
None

BEARISH
None

Renewed Signals**
BULLISH
-Dow Jones Industrial Average
-NASDAQ 100
-Russell 2000

BEARISH
-Soybean Oil
-Natural Gas***
-Crude Oil***
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO
-Oil Service Holders, OIH
-Semiconductor Index, SOX

Existing signals (date of original signal in parentheses)****
BULLISH

-30-Year Treasury Yield (3-Jan-07)
-10-Year Treasury Yield (17-Apr-07)
-S&P 500 (20-Mar-07)
-S&P/TSX Composite (15-Aug-06)
-NASDAQ 100 (27-Mar-07)
-Dow Jones Industrial Average (20-Mar-07)
-Russell 2000 (1-Aug-06)
-Gold (29-May-07)
-US Global Investors Funds US Gold Fund, USERX (12-Jun-07)
-S&P/TSE Canadian Gold iUnits ETF, XGD.TO (22-May-07)
-Gold Bugs Index, HUI (29-May-07)

BEARISH
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO (3-Apr-07)
-Oil Service Holders, OIH (3-Apr-07)
-NASDAQ Composite (26-Dec-06)
-Semiconductor Index, SOX (20-Mar-07)
-S&P 400 Mid Cap (3-Jan-07)
-Nikkei Average (19-Dec-06)
-Soybean Oil (11-Nov-06)
-Silver (1-May-07)
-Copper (10-Apr-07)
-Canadian Dollar (10-Apr-07)
-U.S. Dollar Index (3-Oct-06)

NEUTRAL
-Crude Oil, Light Sweet (3-Apr-07)***
-Natural Gas (27-Mar-07)***

Notes
* For an explanation of what I do after a new signal, click “How It Works” to the right.
** A “renewed” signal is when a market is already on a bullish or bearish signal, and traders again register an extreme net trading position in the same direction. I normally ignore renewed signals unless I don't already have a trade on in this market. I haven't studied the profitability of trading on renewed signals.
*** See my special caveats for my Crude Oil and Natural Gas setups (click “Profit/Loss Results” to the right and check the footnotes).
**** The date in parentheses is the date of the COTs report that gave this signal - not the date I would have executed the trade (which can be up to four weeks later). For details on how I trade this system, including trade delays and portfolio allocations, click on "How It Works" and “Profit/Loss Results” to the right. These "existing signals," which are mostly several months old, are listed here as a reference, not a trading recommendation.

7 comments:

Mr. T. said...

ok. so what do I do with this post of yours? do we discuss it? do I go out and buy whatever you say is bullish? do I get the spreadsheet anytime soon so I can appreciate what you are talking about? or do I figure you are more interested in talking to yourself than those who read your blog? honestly, sir, I do NOT know the answer to these questions. please advise.

Alex Roslin said...

Dear Mr. T,

I've been busy updating a couple of dozen trading setups for the past couple of weeks and haven't gotten to making a new sample spreadsheet or sending it to anyone yet, as I mentioned in some previous posts. Sorry to all those who've requested one, and thanks for your continued patience!

In the interim, the parameters I've used for the S&P 500 and NASDAQ setups are posted on this blog (see the "Profit/Loss Results" page, by clicking the link on the right), so anyone can generate the signals for themselves if they take the time.

In addition, I think I've been pretty clear that I believe readers should do their own homework before trading the markets. If my observations can be helpful during that process, I'll be pleased.

Best wishes,
Alex

Mike G said...

Going through your comments on the Gold opinion and trying to validate with my COT Database. Finding it difficult to see where your database shows a buy signal. Could you share the # of weeks you are averaging and the deviation you are using? I am sure others are also curious. I find my database to still be in a sell for Gold.

Thank You, Your information is still educational tom me, not ready to actually trade based upon it, but may in the future.

Alex Roslin said...

Hi Mike G,

Thanks for your comment and curiosity. I'm still debating how to release the parameter values. I've got another magazine story coming out soon in which I'll revealing details of the Russell 2000 setup. I may release details of a gold-related setup in another upcoming story and here on this blog. Some details for setups are already posted in my "Profit/Loss Results" table notes.

In the interim, you can always send me your parameter values, and I'd be happy to compare them with my results. Perhaps you've found a superior setup to mine! What are your backtested results?

Take care,
Alex

Babak said...

Alex,
I'm glad to see we agree about energy. I sounded off on it last week: Energy & Oil - Caution is Warranted

As for what we are supposed to do with the info provided on Alex's blog:

We are to use it as inspiration for our own thinking!

That's what I do atleast.

Cheers

Alex Roslin said...

Thanks, Babak! Thanks also for mentioning me a while back on your very interesting blog:

http://www.tradersnarrative.com/

Take care,
Alex

Babak said...

You're welcome Alex. I'm a big fan. Keep up the great work pushing the boundaries and ignore negative people.

Cheers

Trader's Narrative