Friday, 6 June 2008

NASDAQ 100 Flips to Long, Banks to Short

Well, wasn't that just insane? Crude up 8 percent in one day? How does that even happen? I'm happy as a raccoon in a compost heap (I'm getting a trap tomorrow, you bastard!) with my 200-percent leveraged crude ETF (HOU trading in T.O.) and of course my leveraged natgas ETF (HNU) did well this week, as usual, as did gold bullion. But it was a mixed bag as my long bank position tanked today. Yikes. What did we do before all this volatility? Are you getting PTSD yet?

So turning to the nifty ol' Commitments of Traders data, whaddya know? My trading setup for the BKX Bank Index gives me a bearish signal from this afternoon's data. That's based on a seven-week selloff by the large speculators in the three-month Eurodollars contract (not Euros the currency, but the interest rates, which function as a global liquidity measure). This setup works with a one-week trade delay, so I'm selling my long position and going short on the open of trading of Monday, June 16. What else? Check my Latest Signals page (see the table at the first link) for all the fascinating details from my 40-odd setups based on this fascinating government data. Yes, the government is good for something. Here are some more highlights:

- Not all is gloomy. My NASDAQ 100 trading setup has just flipped to bullish. This one was in cash last week. Today's data shows the commercial traders in NASDAQ 100 futures and options getting less bearish relative to the recent data, so the setup is going long for the open of next Monday, June 9. (No trade delay for this setup.)

- Are commodities going higher? Is the greenback headed further down? The "smart money" commercial traders in U.S. dollar index futures seem to think so. They just went massively short. Compared to recent data, they're now more bearish than any time since late Dec. 2007. It wasn't long after that that the dollar broke down from a four-month trading range amid the latest installment of the subprime horror show.

- My platinum setup flipped to bearish with the April 8 COTs report, with an eight-week delay for the execution of the trade. Which brings us to next Monday, June 9. However, as faithful readers will recall, I've got a rule for highly correlated markets, which requires the majority of setups in such markets to be lined up in the same direction for me to take a trade. In the case of platinum, it is highly correlated with five other markets: gold, silver, copper, heating oil and crude. As of Monday, three of this group will be bearish (including platinum) and three bullish. This means I will ignore the platinum signal. For more on how this rule works, check my, you guessed it, "How It Works" page. Have a great weekend, and tune in next Monday for my latest portfolio adjustments and updated trade results. Good luck next week!

TAGS: Commitments of Traders, COT, NASDAQ 100, NDX, heating oil, crude oil, U.S. dollar, platinum, banks, Commodity Futures Trading Commission, CFTC, BKX

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