Friday, 14 March 2008

Gold Back to Bullish, Natural Gas Commercials Get Longer

Another totally insane week! I've just updated my Latest Signals table with the word from my trading setups based on the weekly Commitments of Traders reports. Some highlights:

- My gold trading setup, based on trading on the same side as the large speculators, has flipped back to bullish after a week in the bearish camp. This setup works with a two-week trade delay, so that means I'll buy something to short gold for the week of March 24, then go back to long. One-week trades are rare in this system, but they do sometimes happen, particularly it seems when there's market indecision. Or is it indigestion. One note of caution: the "dumb money" gold small traders once again increased their net long position as a percentage of the total interest. The wrong-way crowd now stands just a hair from triggering a bearish signal for my setups for the HUI Gold Bugs Index and XGD iShares Canadian Gold Fund.

- My five-year Treasury setup has gone from cash to bullish (meaning it thinks the yield will fall).

- Large speculators in 3-month Eurodollars, whom I trade alongside in my setup for the BKX U.S. Bank Index, maintain their fairly solid bullish bias. This means the setup thinks the recent maniacal volatility for the sector will resolve itself on the upside.

- Despite the recent vertiginous rise in the price of natural gas, commercial traders in natural gas futures and options significantly bumped up their net percentage-of-open-interest position today, meaning they appear to believe still more gains are coming. I've been holding a leveraged natural gas ETF since the signal went bullish in January, so I don't mind. But really now. Incredible.

Not much else that's new! Slow week. Have a great weekend and good luck to us all next week!

9 comments:

Anonymous said...

First I want to say, "Keep up the good work" it is great to find a neutral source of information aside from all the fear in the market lately. A couple of questions though on what otherwise appears to be a flawless system.

I noticed that you went bearish on silver back in February when the price was under $18/oz, and as of today, the price is over $20/oz. I'm not sure what the means, is your system not working, or have you not reached your drawdown point, or what?

Also I noticed a similar thing where you went bullish on NASDAQ and it has dropped slightly since. In neither case do the spreadsheets appear to be showing losses due to those two trades, so perhaps I'm just not understanding everything that is going on. How long typically does it take for the system to show a profit on trades like these?

Also, any comments on corn, wheat, soybeans and sugar? You last signal was in December of last year and was bearish, and indeed the market was bearish for about a month, but then it took off sharply higher as evident by ETFs such as DBA.

P.S. Sorry about the anonymous post... I have a blogger account but - while it seems to like my password for logging in, it insists I create a google account, which I'm not ready to do, yet it doesn't accept the same credentials for posting.

Anonymous said...

you might be interested to know that Horizon have brought out some new funds including HAD which is short grains. I believe it was up 8% on Friday
I was surprised by the bullish gold signal you got for 2 weeks time. if you could be short silver oil and copper any upside on gold would seem limited unless there is a significant correction first. I would expect the gold silver ratio to rise so being long gold and short silver might work, but if the funds are going to be bounced out of their long positions I'd expect the correction to last several weeks at least

Silverharp

Anonymous said...

I use you as my contrary indicator. I'm backing up the truck.

Anonymous said...

You said:
dumb money" gold small traders once again increased their net long position as a percentage of the total interest.

Looks like smart money to me right now. Up 30 bucks oz.
When it comes to gold from now on it's go long or go home. No use trying to be a top caller.

ComicsMomma WebTV said...

you are dead wrong, gold is up $50 and clearly broke thru $1K
Your work on silver is even worse, a week ago you were selling, now you flip the switch.

Alex Roslin said...

Thanks for your comment. Signals in this trading system - and every other one I know of, whether mechanical or discretionary - don't win 100% of the time. They are based on probabilities of what happened in the past when traders put on similar positions. See the table on my Latest Signals page for all the win/loss results in the various setups, plus the maximum past drawdowns. It's impossible to say how long it takes for the setups to achieve a profit. The stops are achieved when the loss hits that past max. drawdown.

Regarding updates to the silver and NASDAQ setups, the results are updated as of the dates on that table. I plan to update the setups every year or so.

Best regards,
Alex

Alex Roslin said...

Hi Silverharp,

Yes, I was surprised by the gold bullish signal too. Just shows how one trader group might not agree even with another group of traders in the same market, as the small traders in gold still give me a bullish signal. I look at it more as a hedge against my XGD Canadian Gold iShares position, presuming I'm still holding it at that point.

Regards,
Alex

Alex Roslin said...

Hi other Anonymous,

Haha! Glad to be of use. Good luck,

Alex

Alex Roslin said...

Hi ComicsMomma,

My silver setup hasn't changed. It's still on bearish. Perhaps you have me confused with someone else?

Alex