Friday 5 September 2008

Data Says: BKX Going Down, Obama Tipped For Win

Brutal week. Will it hold here? Did commodities find a floor? It's interesting how banks and the Russell 2000 have held up better than the other indexes, but what does it all mean? The impassive mountain that is the Commitments of Traders data seems to just smile at it all. I've just posted my latest signals update (see the table linked at this page) based on this afternoon's trader positioning, as revealed by the U.S. Commodity Futures Trading Commission.

Only one new signal this week: my trading setup for the BKX U.S. Bank Index has gone to bearish. This signal, with a one-week trade delay (meaning I execute it for the open of trading Monday, Sept. 15), is based on trading on the same side as the large speculators in the three-month Eurodollar contract (an interest-rate proxy for global liquidity). When the large specs get very bullish in their net percentage-of-open-interest position, I go long. When they get very bearish, I go short. The signal has been bullish since the week of July 1 (with the entry on July 14), which was pretty much at that hellacious lowpoint of the summer. The fact that it's now going bearish - when technically, the market looks like it might be finding support at the July low - is really not a good sign. No, not at all. Recall, also, that my 10-year Treasury setup went bearish last week, with an execution date of Sept. 29. Something's not right.

Corrections: Just noticed I had omitted to include a bullish signal for gold from my latest signals page table, which came the week of Aug. 26 and is for execution on the open of Monday, Sept. 15. I've now added that pending signal. Sorry about that.

Election '08 Watch: The Stock Trader's Almanac people, incidentally, say that September is not only the weakest month historically, but that a weak September and October typically occur when the incumbent party loses the White House in an election year. A bullish November tends to ensue. Perhaps, at least, Osama (oops, Obama; did I really say that?!) is smiling. With BKX bearish, that makes three of my six equities short, while two are long and one is in cash. I know, I know, this isn't very scientific, but it looks like the derivatives market at this point is giving Obama a slight edge.

TAGS: BKX, Bank Index, Eurodollar, Russell 2000, Treasuries, 10-year Treasury, interest rates, Fed Funds, COT, Commitments of Traders, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer

4 comments:

Anonymous said...

so are you now short Nikkei and short BKX? or cash? when will you update the "portfolio" page?

Alex Roslin said...

Hi Anonymous,

Didn't have a chance to update it last week, and this week there aren't any new trades, so I'll do it again next Monday. The BKX signal has a one-week trade delay, as the post says, so I'm executing it Sept. 15. My Nikkei signal is short, but I didn't put on a short position, simply because of logistical reasons that morning.

Regards,
Alex

Anonymous said...

hi Alex,

The week before last you wrote that the dollar is 'done'. What about this week, are COTs still bearish on the dollar? Why aren't you short the dollar, then?

johnny

Alex Roslin said...

Hi Johnny,

The trading setup for the U.S. dollar index is the same. See the table linked on the latest signals page. I usually haven't traded currencies per se because I find better setups elsewhere. Also, that setup in particular doesn't have the statistical robustness for trading, as you can see from the same table and the accompanying notes.

Regards,
Alex