Wednesday, 5 December 2007

Sweet!

Hi all. Here are some additional highlights from the latest Commitments of Traders report issued last Friday, Nov. 30:

- Overall, a happy picture for the seasonal equities trade seems to be forming from around here into the New Year. Happily, COTs Timer appears to have managed to convince "Helicopter" Ben to lower the Fed Funds rate, after some initial noises that he didn't want to play helicopter any more. You're welcome, world.

- As I mentioned Friday, my COTs U.S. Equity Composite Index is giving a second renewed bullish signal. And the "smart money" commercial traders in Dow Jones industrials futures and options are now also supremely bullish, giving my setup for this market a renewed bullish signal. Their net position is 50 percent above the signal line I use for this setup. Meaning: they're looking positively Christmasy.

- At the same time, the "dumb money" large speculators are really quite gloomy about the Russell 2000, judging by their rapidly growing net short position as a percentage of the total open interest. Their net position has fallen to 2.1 standard deviations below its 23-week moving average, triggering a renewed bullish signal for this setup.

- Could the high-flying Canadian dollar soon be due for a bounce? Even before it started correcting at the beginning of November, the "dumb money" large speculators were already cutting back on their all-time-high net long futures position (which peaked in early October). They've steadily reduced their net long position until it now stands just a hair above a new bullish signal.

- Similar situation for copper. Here, the large specs are building a large net short position, just as copper prices have collapsed. How do these guys stay in business? Not quite enough to flip this setup to bullish, but getting steadily closer.

- My COTs Agriculture Composite Index has fallen back to a less-than-stellar 0.37 reading, down from last week's 0.90, which had triggered a renewed bullish signal for this setup (which gives me signals for the DBA PowerShares Agriculture Fund).

- Sugar is looking sweet. (Yeah, I know, that's lame.) The commercial traders have suddenly shortened their net short position to a historically low figure, flipping my sugar setup to bullish.

Good luck this week. I'll be traveling for the next two weeks, so my next COTs update won't come Friday afternoon as usual, but more likely sometime over the weekend. But since this COTs stuff is so low-maintenance (see "How It Works: My 10-Minute Workweek" in the Navigation bar), my reports should continue more or less on schedule while I'm visiting with Mickey Mouse.

2 comments:

woyo said...

Hello,

I am curious as to your sugar setup claiming a bullish signal right now.

You stated that the commercials have reduced their short position to a historic low, but as of the week of the signal - the commercials had 510,389 contracts short.

Looking at the past year this figure for Sugar #11, is well above the average for the rest of the year.

For the past 6 months, the commercials had around 450K short contracts on average and before that it was even less.

Note: I am just looking at Futures data, and not Futures and Options data.

Alex Roslin said...

Hi Woyo,

Thanks for your question. My sugar setup is based on the combined futures and options data, which is a different dataset than the futures-only set. Also, I use the net percentage of open interest position, not the number of contracts. These are the key differences.

Regards,
Alex