Friday, 19 October 2007

COTs Still Bullish, Mostly

What a miserable day in the markets. Ghosts of '87 seem to have folks spooked. What say the wise little numbers of the Commitments of Traders report issued today at 3:30 EST by the U.S. Commodity Futures Trading Commission? Ah, yes. Calm and soothing, as usual.

The latest report strikes a fairly reassuring tone for bulls, with renewed bullish signals for the S&P 500 and Semiconductors and nary a bearish signal in sight for equities. Last week's new bearish signal for the NASDAQ Composite Index is the only downer note among my equity setups. (That setup works best with a trade delay of one-week, meaning execution on next week's open of trading.) But somewhat troubling: My COTs U.S. Equity Composite Indicator, based on four of my equity setups, has declined again to 0.46 from last week's 0.58, the third straight decline. That's just a hair above where it stood as of the Sept. 11 COTs report (0.42) and the July 24 report (0.40) during the "Crash of '07." However, this indicator is still on a bullish signal. It's also far from the "-1" reading that would mean a bearish signal was just given on average by all four setups, for execution on next week's open.

See my "Latest Signals" page in the Navigation bar for more of my latest signals, and click "How It Works" for, you guessed it, how all this COTs stuff works. Check you back here early next week for a more detailed report on today's COTs data. Hope you fared well this week and have a relaxing weekend.


Erik said...

Hi Alex,
In these turbulent times it is great to be able to get a rational view of the market through your COTs analysis.

One thing I would like to ask though - you mentioned that the Sept 11 and July 24 2007 composite had readings of 0.42 and 0.40 (just before the correction I guess). Does this mean they never hit -1?

Or, to put it another way, this week's value of 0.46 could indicate another correction up ahead?

Have you ever looked at the week-on-week rate of decline as containing a signal (0.98 to 0.58 to 0.46)?

Thanks for the great work!

About Alex Roslin said...

Hi Erik,

Thanks very much. The week-to-week correlation with the SP500 is 0.36, so too week to go on alone. Oddly enough, the SP500 small traders also have a 0.36 correlation with the SP500 open price for the same week, despite the fact that it turns out to be profitable to fade them. I haven't looked at the data in other ways - though there are no doubt many methods it could be studied with.