Monday, 20 August 2007

COTs Overall Bullish Equities

Wondering if stocks are doomed? I sure am, especially after the absolutely stunning moves in the 3-Month T-Bill today and last week.

Believe it or not, Friday's Commitments of Traders report is overall bullish on equities. This, according to my COTs Composite U.S. Equity Indicator.

The latest reading for this indicator is 0.58, virtually unchanged from the previous week's 0.59. In fact, this indicator gave me a renewed bullish signal for the S&P 500, according to a trading setup I developed comparing the indicator's performance with the S&P 500.

A caveat: I devised this S&P 500 setup not to trade but merely to get a sense of when this indicator has hit specific historic extremes that have signaled a high probability of moves in the market. Think of it as a pulse of the broader market.

Personally, I'm still short the S&P 500 based on a different setup that relies on the Commitments of Traders combined futures-and-options data for the S&P 500.

My U.S. Composite Equity Indicator, on the other hand, combines the signals from four of my U.S. equity setups - the S&P 500, Dow Jones industrials, NASDAQ 100 and Russell 2000. A "1" means that on average all four setups just gave a bullish signal for the following weekly open of trading, while a "-1" means a bearish signal.

For details on both setups, check the "Trading Setups" link above.

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