Friday, 28 March 2008

Hello, Silver! S&P 500, Gold Flipflop

How about that! A nutso week capped off by an equally nutso Commitments of Traders report. What to make of this mess of data! Nothing like a new COTs report to get me all riled up. Check this out:

- Silver, I'm baaaack! The "smart money" commercial traders have cut their net short futures and options position back from its recently bearish extremes. I've got a bullish signal for execution on Monday's open. What do you think about that, silver bugs?

- My gold bullion setup is still in its flipflopping mode like something out of Cirque du Soleil. It's now back to bullish. That's four consecutive new signals in four weeks. What this means: the setup says to go long next week, then short April 7, then back to long April 14. Should qualify again for the reduced active trader commission really soon at this rate.

- My trading setup for the S&P 500 is also trying to get in on the flipping around fun. It's just gone back to bullish. That setup uses a three-week delay and already gave a bearish signal for execution Monday. So this means I'll be short three weeks and go back long on April 21.

- My setup for the Russell 2000 has also gone back to bullish. It has no trade delay, which means my short position that I put on Monday gets sold this coming Monday and I go back to being long.

For more details, check my Latest Signals page.

Housekeeping: You might notice on the Latest Signals table that I've reorganized how I post signal information a little. I realized there might have been some confusion about what the current and next signals are, especially since some setups have somewhat long trade delays. In the "Execution Date for Next Pending Signal," I'm just going to post the next upcoming signal date (red for a bearish signal, green for bullish and black for cash). If there is an additional pending signals, I will enter it only when it becomes the most immediate next one so as to avoid confusion. As well, the "Current Signal in Force" column will refer to the signal in effect on the date this table was last updated (which is in the top left-hand corner). I'll include some notes to this effect on that table soon.

Also, you might have noticed I'm getting more frequent signals these days in some of my setups. That's because most of my newly revised setups based on the COTs data are using shorter moving-average periods - generally between four and 16 weeks - than the older ones. You'll notice, for example, that most of these setups had more trades (see the "Winning/Losing Trades" column). I chose these setups because they are more responsive to the data and gave what I believe to be more reliable past profits. Very often, the setup I chose was far from being the most profitable setup in a market. What was key, however, was its statistical robustness. I'm still revising some of the setups and starting to do some walk-forward testing on them, to see how they performed on out-of-sample data. Thanks for your patience as I go through these vital refinement steps. I think they'll pay off handsomely.

9 comments:

Guo Ying said...

your setup for silver and gold this week is excellent. That can be proved by investor's pessimistic to precious metals. As reported by Mark Hulbert from marketwatch.com, now among the gold newsletters, the bullishness index reached one of the lowest percentage. It is the right time to go back the Silver and gold. As a gold and silver investor I already positioned my money in SLV and CEF this week. Bull market climbs the wall of worry.

Anonymous said...

initial thoughts, I think you maybe a bit early with gold and silver, given that the info is from Tuesday, this was exactly when gold and silver hit oversold levels so the commercials would have covered their shorts at this point, in the meantime we have had good technical retracements this week, so you would you not think that the commercials have gone more net short given the price action?
from another angle you are bearish on oil and given that all 3 commodities will generally go in the same direction one or more of the signals is late/early?
it was an interesting week and I must say I found the MACD very useful, I resisted going short on Monday due to the oversold readings, however I did put on some metals shorts on Thursday and yesterday. I know you want to keep your system as simple as possible but a thought would be when there is high volatility as we have had, would some technical signals be useful?

Anyway have a nice weekend
Silverharp

Alex Roslin said...

Hi Silverharp,

Sure some other filters are always worth exploring. I've tested a few price-based filters, but the pure, unadulterated COTs data seems best so far. But still exploring.

Best regards,
Alex

lhslancers said...

Filled on the open in the metals today? Got stops?

Alex Roslin said...

Hi Lhslancers,

Yes. The stops are indicated on the Latest Signals page. See the max. past drawdowns and the notes for same. As well, see the more detailed explanations on my "How It Works" page.

Regards,
Alex

Anonymous said...

I'm a believer, I am. But the weekly and daily charts for silver (SLV) and gold (IAU) look like screaming shorts. MACD, which is one of my last signals, isn't even hinting at long yet.

On another note, how are you finding your setups other than changing multipliers and eyeballing where things line up? What version of Excel do you use? How are you scanning the data? I mean, my eyes start to cross with 15 years of data across 30 markets.

Alex Roslin said...

Hi Anonymous,

Thanks for your comment. I think one of the great things about the COTs data is it has no direct relationship with the price data, unlike most technical indicators, which effectively repeat back the price action in various ways.

But if you want to look at it chart-wise, it all depends on how you look at it. Gold today tested the mid-March lows and so far that level held, so I wouldn't necessarily be quick to be short here. As for MACD, I never found it to be useful. In fact, I really dislike sentiment indicators like MACD, RSI, ROC, etc. I think they're pretty much useless to be honest. Not to say you haven't found a good way of using them, but for my purposes, I always found the best indicator was price if I wanted to trade technically.

Regards,
Alex

Anonymous said...

Alex, I agreed with your buy signal for Mon on Silver, and bought some SLV, and waiting to buy GLD again. I was worried when I saw the Fed and Treasury Sec. Paulson, makes their announcement, on the bail outs and financials etc.Well ,we know that PGMs have gone down Bigtime since, although Silver is hanging onto being just -2%. The Dow is over 300+. Whats your take on the volatility, and how can a holder of PGMs trade in a fair market place, when the commercials, longstanding short position, and now the USGov, the Fed, and their Central Banks all leveraging against PGMs? Whats your take on this uncharted territory. The US Gov, has over stepped its place, and is now openly a de facto, short on Gold, Silver etc. Is this correct?Thanks, Jim

Alex Roslin said...

Hi Jim,

That's a pretty tough question to answer. The fact is the COTs data shows reliable patterns going back to 1995, which take into account past government actions as well. If there were no discernible patterns in the precious metals markets, I would not trade them. In my experience, precious metals do in fact show similar price and COTs data patterns that exist in other markets.

Regards,
Alex