Friday, 25 April 2008

Oh-Oh! Sell Signal for Banks, Cash for NASDAQ

This afternoon's Commitments of Traders data has given me a few interesting new signals in my setups based on these free weekly government reports about trader positioning in futures and options markets. The details are up on my Latest Signals page table. Most notably, my setup for the BKX Bank Index, based on trading on the same side as the large speculators in the three-month Eurodollars contract when they hit specific extreme levels of positioning, has just flipped from bullish to bearish. This setup uses a one-week trade delay, so that means execution is for the open of trading May 5. Also, my setup for the NASDAQ 100 index, about which I was just blogging in a post earlier today here, has gone to cash as of next week's open of trading. This setup combines the signals from the "smart money" commercial traders and "dumb money" small traders. If you follow the bright lights out there and avoid the wrong-way crowd, how can you go wrong! Turns out that the commercial traders have reduced their net long position as a percentage of the total open interest to an extreme level of bearishness, which has flipped my commercials setup to a sell. When the two signals don't concur, the overall NDX setup goes to cash. Have a good weekend and good luck next week!


Anonymous said...

Can you see anything in the COT that suggests a buy on the US dollar. I had been following some technical work that registered a downside capitulation a couple of weeks back on DX, this suggested upside to the 20WK moving average 4-6 weeks later, 76 or so from memory, I have been positioning based on this, so far so good.


Anonymous said...

Excuse me if this is a dumb question but I note that silver is supposedly bullish. Yet it's been tanking. I did sell on your last sell signal but bought back in, and I believe you also have a position. Do we just wait and hope?

Patrick said...

You are on the money regarding the Banks. Market Watch just released the same note that banks will be down next week.

I am short QQQQ (on puts) and I have a small position in a Banking Sector Fund that has some good returns thus far. I am looking at move all my trades to ETFs vs Mutual funds so I can get in and out faster. Thanks for the great blog!

Alex Roslin said...

Hi Anonymous - yes I do have a long silver position based on the current bullish signal. Not every signal makes money. Take a look at the win/loss ratio for various setups to see that all setups lose money on trades sometimes. This is true in any type of trading, and that's why I use stops and appropriate position sizing to control my risk. I have no way of knowing if this signal will turn around, but I have overall confidence in my system, which is why I hold onto trades until I get an opposite signal.