Friday, 13 July 2007

COTs Down on Energy, Gloomier on Equities

Equities are again getting a mixed prognosis in today's Commitments of Traders reports from the Commodity Futures Trading Commission, while there's renewed bearishness in the energy sector.

Friday's report - based on data as of last Tuesday - didn't give any new signals for any of my setups. This means my existing signals are all still good.

My COTs Timer composite equity indicator has deteriorated somewhat to a -0.19 reading. Plus or minus 1 basically means a historic sell or buy signal. A "1," for example, would mean that on average all of my U.S. equity setups just gave a buy signal.

Doesn't happen very often. And we're still nowhere near any kind of extreme reading right now, although the COTs are looking a tad gloomier for stocks.

Another sign of the market's ambivalence - the renewed buys for the Dow Jones Industrial Average and NASDAQ 100 alongside the renewed sell for the S&P 500.

I'll try to find some time soon to check my composite equity indicator against some of the major indexes to look for shorter-term signals.

New Signals*
BULLISH
None

BEARISH
None

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

BEARISH
-Soybean Oil
-Natural Gas***
-Crude Oil, Light Sweet***
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO
-Oil Service Holders, OIH
-S&P 500

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/TSX Composite (15-Aug-06)
-NASDAQ 100 (27-Mar-07)
-Dow Jones Industrial Average (20-Mar-07)
-Russell 2000 (1-Aug-06)
-Silver (3-Jul-07)
-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
-13-Week Treasury Bill (27-Feb-07)
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO (3-Apr-07)
-Oil Service Holders, OIH (3-Apr-07)
-S&P 500 (26-Jun-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)
-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” above.
** 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 “The Trading Setups” above and check the table 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 five weeks later). The existing signals are often several months old and are listed here as references, not trading recommendations.

4 comments:

Anonymous said...

I guess the COT data may be quite subjective and open to different interpretations. A few other blogs are claiming the Commercials are pounding huge net long positions instead, i.e, we should be looking to go heavily long:

http://garyscommonsense.blogspot.com/

http://www.sentimentrader.com/subscriber/chart_in_focus/videos/cot_20070709/cot_20070709.swf

While the following blog seems to agree with your interpretation more or less:

http://stoxinvestor.blogspot.com/

T

alexi said...

Alex, you're probably aware of this site but I wanted to bring it to your attention just in case. I think it's pretty helpful to see this stuff on a chart.

http://www.timingcharts.com

Alex Roslin said...

Hi Alexi,

Thanks for your message. That's a great site.

Regards,
Alex

Alex Roslin said...

Hi T,

Thanks for your message. The data is certainly open to interpretation, much like the broader market. One thing to investigate about any system is how it arrives at signals - specifically, whether the system is properly backtested and validated.

I haven't studied the specific sites you mention, so this isn't a comment on them. But using mere visual inspection of charts and comparing apparent similarities between fluctuations in the COTs and prices doesn't count - although that's what most folks out there seem to rely on!

Regards,
Alex