Wednesday, 24 October 2007

New Composite Agriculture Setup Bullish

Just posted the results of a new composite indicator I've created for the Goldman Sachs Agricultural Sub-index, based on the Commitments of Traders reports. (See table on "Latest Signals" page.) My COTs Composite Agriculture Index combines my trading setups for corn, soybeans, wheat and sugar. It's got a 16-2 win-loss ratio and scored at a 99-percent confidence level for profitability, which is pretty good, if I say so myself. The setup gave a timely bullish call with the Aug. 14 COTs report and proceeded to yield six straight bullish signals. I'll create a table with all the historic data and post it some time soon. The setup goes long when my Comp Ag Index hits 0.9 or more standard deviations above its 104-week moving average and goes short when it falls to 0.9 standard deviations or more below the average.

One possibility for trading it would be the DBA PowerShares Agriculture ETF, which has pretty good volume even though it's been around less than a year. DBA has a 0.75 correlation with the GSCI Ag Sub-index, has been about half as volatile, but alas has risen only about half as much since the beginning of 2007.

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