Monday, 9 July 2007

COTs Love Silver

The latest Commitments of Traders report has flipped to bullish on silver, according to my trading setup for this market.

This signal is based on fading - trading opposite to - the small traders when they hit certain historic extremes of bullishness and bearishness. The small traders have been getting progressively more bearish for several weeks and have just now hit that magic point where the signal flips from bearish to bullish. The new signal follows suit with my gold signals, which flipped to bullish a few weeks ago.

I really like my silver setup because it scored at super-elevated confidence levels in both profitability and market-beating probabilities in my validation testing. (Click "The Trading Setups" above for details and "How It Works" to learn how I trade new signals. This setup has no trade delay, meaning execution on the next open. Because of the holiday-delayed COTs report issued today instead of Friday, this would mean Tuesday's open.)

In other news, more yield increases are forecast by the renewed 10-year Treasury yield signal. And more mixed renewed signals for the major equities. My composite equity indicator, which I told you about last week, is still at a neutral -0.06 reading. Minus or plus 1 indicate extremes of bullishness or bearishness, so we've got a kind of do-nothing market at the moment, at least according to this indicator.

Another development on the administrative side is we've had three consecutive COTs reports now with no data for the S&P 400. This seems to happen from time to time with this index, and I'm not sure why. I'll inquire with the CFTC and let you know what they say.

New Signals*
BULLISH
-Silver

BEARISH
None

Renewed Signals**
BULLISH
-10-Year Treasury Yield
-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
-Nikkei Average

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)
-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)
-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” 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:

alexi said...

Would you get SLV for silver or is something else better? Thanks.

Alex Roslin said...

Hi Alexi,

I bought SLV.

Take care,
Alex

Anonymous said...

Alex:

It's refreshing to see someone make heads or tails out of these reports, instead of the old adage of just "following the commercials". If it's not asking too much, on top of your usual commentary, once a week could you pick a market and do an in-depth report on what your system looks for in its buy/sell signals and explain the justification for the signal (if that doesn't blow your proprietary efforts).

Thanks,

Jim

Alex Roslin said...

Hi Jim,

Thanks for your message. If you haven't already done so, please take a look at the explanatory info up top to see how my signals are generated. I usually give some specific details on the precious metals markets in my weekly COTs report on the Kitco.com website.

Regards,
Alex