Friday, 12 October 2007

NASDAQ 100 Goes Bearish

My trading setup for the NASDAQ 100 has flipped to bearish. This is because the "dumb money" large speculators have suddenly gone from being heavily net short in their futures and options positions to a historically extreme net long position as a percentage of the total interest, according to today's data from the U.S. Commodity Futures Trading Commission.

The large specs, whom I fade in my setup for the NASDAQ 100, have hit a specific level of bullishness that has signaled a good chance of a market turn, according to past data. The new signal brings to an end this setup's bullish run since the March 27 COTs report (executed on April 9 with an opening price of 1,816.99; today's close was 2,177.99).

The new signal and much more are all updated on the table at my "Latest Signals & Results" page in the Navigation bar, which shows all my signals from this afternoon's Commitments of Traders report. This table also gives important details about the NASDAQ 100 setup, including risk data and the largest past drawdown. The setup works best with a one-week trade delay, meaning I will execute the trade for the open on Monday, Oct. 22. See my "How It Works" page to learn what I do after a new signal.

In other news, my U.S. Composite Indicator, which is based on four of my COTs-based equity trading setups, has declined again to a reading of 0.58 from last week's 0.98. (For newbies, a "1" means all four setups are on average giving a bullish signal for execution on the open of next week's trading, while a "-1" means a bearish signal across the board.) The falling number could signal some coming market volatility, although it still maintains a fairly bullish tilt. Hope you have a good weekend and fare well next week. Drop in again early next week to see other highlights and thoughts from today's COTs report.

9 comments:

Dave said...

I know your setup normally has you trading monday AM. Is that your current plan? The only reason I mention this, is that Mon is the 15th, which is a possible 401K distribution day. The QQQQs may be up, which would drop the QID. Assuming you trade the QID.

Just a thought, and am certainly not telling you what to do.

Cheers!
Dave

Anonymous said...

Thanks for your work Alex.

You're always a good read.

Surprised you haven't started a "pay" signal timing service with all this info.

Chris

Anonymous said...

Not sure I follow you on this post and the bearish call. Are you using the same data reflected in this chart?

http://www.softwarenorth.net/cot/current/charts/ND.png

Large specs are net long, yes, but hardly at a historical extreme. And they went long a few weeks ago. Plus, commercials are still net long.

Please clarify thanks.

Anonymous said...

Not sure I follow you on this post and the bearish call. Are you using the same data reflected in this chart?

http://www.softwarenorth.net/cot/current/charts/ND.png

Large specs are net long, yes, but hardly at a historical extreme. And they went long a few weeks ago. Plus, commercials are still net long.

Please clarify thanks.

Jonny Q said...

I follow the COT's using another method somewhat similar to yours.

I have a neutral bias on the Nasdaq 100. I will be closing my QID positions, but I won't be taking actual shorts on the Nasdaq.

I'm also similarly bullish on Soybeans, as you mentioned in a post last week.

I'm quite bullish still on the S&P 500 as well.

Do you have any plans for analysing and publishing data for EUR/GBP and EURO/YEN or any of the livestock like Live Cattle, Lean Hogs, or Pork Bellies?

Other ones which would be interesting to see are Cocoa, Coffee and Cotton.

Cheers.

About Alex Roslin said...

Hi Dave - the trade delay for this setup is one week (see the "Latest Signals" page), so it's for the open of the 22nd.

Regards,
Alex

About Alex Roslin said...

Hi Anonymous - thanks for your comment. Two points: My measure of historic extreme is based on a specific combination of moving averages and standard deviations that has proven in the past to yield a robust market-beating signal. It's not a question of being net long or not. I merely noted that fact to situate the readers a little who may not have looked at the raw data.

Regarding the commercial position, it's irrelevant to me in this setup. You will find one of the problems of reading the COTs data is that the three groups of traders often don't "agree" in their positions. I resolve this issue by going with the one group that tested best in the past. Otherwise, the data becomes fairly useless in my opinion because it's so often contradictory.

Regards,
Alex

About Alex Roslin said...

Hi Jonny Q,

Do you have any plans for analysing and publishing data for EUR/GBP and EURO/YEN or any of the livestock like Live Cattle, Lean Hogs, or Pork Bellies?

Other ones which would be interesting to see are Cocoa, Coffee and Cotton.

Cheers.

Thanks for your comment. All the markets you mention are of interest to me. Expect to see setups, if I find ones, up here soon in those areas. Except for the Euro. The problem is the Euro data doesn't go back very far and thus may not yield statistically robust setups. I may still explore it but would suspect we need a few more years to get enough data.

Regards,
Alex

Anonymous said...

Alex, great work! You always make a good short read (not lengthy analysis). Keep it free though (at least for students like me)... I was once told by my grandfather that "best things in life are free".