Wednesday, 1 October 2008

New Platinum Setup in Cash

New trading setup for platinum is in cash. I've posted details of this new setup on my latest signals table. Here is how my commodities setups stack up this week: two are bullish (silver and crude oil), one is bearish (gold) and two are in cash (copper and platinum). Because of my risk-control rule for highly correlated markets - which these five are - I would not trade any new signal this week from this group. My rule needs a majority of the markets to be leaning in the same direction for me to take a new trade. Some other highlights from last Friday's Commitments of Traders data release on trader positioning in derivatives markets:

- My S&P 500 setup has given a brief, one-week bearish signal effective the week of Oct. 13. It will remain in cash until then, and will go back to cash for at least one week after. So no all-clear from that setup.

- The large speculators in Dow Jones industrials futures and options have suddenly jammed up their net position as a percentage of the total open interest to a mighty extreme of bullishness. They haven't been this bullish relative to past data since the end of March - just before the market topped. Not a good sign.

- No data this week from traders in the Russell 2000, likely because the number of traders fell below the minimum 20 for reporting purposes.

- Large specs have massively ramped up their net long positioning in gold futures and options. It's now 1.3 standard deviations above the moving average - well above the bullish signal line. The setup has a bullish signal from two weeks ago, which takes effect on next Monday's open, Oct. 6, due to the setup's three-week trade delay.

- Commercial traders in silver have also been reducing their net short position to extreme bullish levels - also 1.3 standard deviations above the average.

Platinum: My new setup for platinum combines signals from two groups of traders: the large speculators (hedge funds, big investment firms), whom I trade opposite to when they hit extremes in their positioning, and the total open interest of the small traders (meaning their long position plus their short position), which I trade opposite to as well. In other words, the setup goes long when the large specs are at an extremely bearish positioning in the futures and options markets AND the small traders' total open interest falls to an extremely low volume. Out-of-sample and walk-around testing results are on that table as well. See more about my walk-around testing in the table notes.

TAGS: silver, gold, copper, crude oil, S&P 500, Dow Jones industrials, Russell 2000, platinum, COT, Commitments of Traders, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer, out-of-sample testing, walk-around testing

2 comments:

Energy Saving Lighting said...

Alex:
Can you explain this week's COT data on silver?
The commercial increases long 3484 contracts, decreases short 486 contract? Do we have bottomed on silver?
Thanks!
gy zhao

Alex Roslin said...

Hi Gy,

Thanks for your message. The latest week's fluctuation is very minor in relation to recent data, but in general the silver positioning I use in my setup for this market - the commercial hedgers - has been very bullish since the week of July 29. The setup has been on a bullish signal since that week. At this point,the setup still maintains a significantly bullish bias, though somewhat less so than back then. It was 1.48 standard deviations above my moving average Friday, compared to 1.34 standard deviations the week before. Incidentally, my gold setup gave a bullish signal for this morning's open.

Regards,
Alex