Friday, 30 March 2007


My system has given a buy signal for the NASDAQ after large speculators in today's COTs numbers reached a historically extreme level of bearishness in NASDAQ futures and options.

I will execute the buy trade after a one-week delay (i.e. on the open on Monday, April 9). Historically, delaying the trade by one week has resulted in the most profitable trades, according to my trading system for the NASDAQ.

For more details on the NASDAQ trade, see my upcoming story in the May issue of Technical Analysis of Stocks and Commodities.

The largest drawdown historically for this trade was 9 percent since the data started in 1995.

All other signals remain the same. (See below.)

Friday, 23 March 2007

10-Year Treasury: Sell

Today's COTs numbers generated one new trading signal: sell the 10-year Treasury bond. I'm planning to sell my bond holdings on the open next Monday. (I don't plan on shorting bonds because I don't know of any inverse bond ETFs on the market yet.)

My system went long the 10-year Treasury on Jan. 19. I did the trade using the iUnits Canadian Broad Bond Market Index Fund on the Toronto Stock Exchange (symbol: XBB.TO) as a proxy for the 10-year Treasury, since the two securities appear to have a high correlation.

The trade had a 0.7-percent profit as of the close today.

I calculated the amount of my position based on the largest drawdown that this trade has seen since the data started in 1995 (17 percent) and my risk threshold of 2 percent of total assets. (In other words, I don't want to risk losing more than 2 percent of my total assets on any single trade.)

All other signals are unchanged this week. See the next message below for my current signals.

Sometime in mid-April, I hope to give a lot more specifics about how my COTs timing system works. As you will see, trading my system involves significant risk. Some of the trades have maximum drawdowns as high as 35 percent, so I adjust my position size accordingly. Stay tuned!

Wednesday, 21 March 2007

Current signals

- NASDAQ: Sell
- S&P 400 Midcap: Sell
- S&P 500: Buy
- DJIA: Buy
- Nikkei: Buy
- USERX: Sell
- XGD.TO: Sell
- 10-year Treasury: Buy
- USO: Buy
- XEG.TO: Buy
- OIH: Sell

* Please note that my system gave these signals many months ago in most cases. These signals shouldn't be construed as trading suggestions. Trading signals in my system often last for many months and even longer. My profit/loss calculations were based solely on taking trades immediately after the signals were given or at most several weeks later.