Friday, 13 March 2009

S&P 500 Rally Could be Short-Lived

A nice little rally this week, but was that really the bottom? Reading some of the latest free reports this week and last from Montreal's BCA Research makes me doubt that it is. As well, the indices are still well below their Tom DeMark Setup Trend lines on the daily charts. The monthly charts are even worse, especially for the Nikkei, S&P 500 and Dow. And what about the Commitments of Traders data? Some of the latest data from today's release doesn't give any fresh hope for a real recovery, in my opinion. I've updated my latest signals table with the calls from my trading setups based on this data.

- S&P 500: The small traders are still far too bullish, as they've been since November during the entire decline. This is a bad sign, if historic trends are any indication. Friday's data shows their net position falling ever so slightly from 1.60 to 1.56 standard deviations above the moving average as a percentage of the total open interest. The "smart money" commercial traders are still deeply bearish, though a tad less so than last week, with their net position going from 1.02 to 0.84 standard deviations below the moving average. I had a bearish signal from this trading setup from three weeks ago that takes effect on the open of trading this coming Monday, March 16. The latest bearish reading of the data means the setup will remain in bearish mode for at least the next three weeks.

- Gold: This setup remains in cash another week - the sixth straight week. But a bullish sign is that the large speculator total open interest has fallen again. It's now 1.21 standard deviations below the moving average I use for this setup, down from 0.72 standard deviations below. This signal has been bullish for two weeks in a row now, but it works with a seven-week trade delay. The other signal that makes up this combo setup - based on fading the large spec net position - is already bullish. So the setup could go from cash to bullish in six weeks' time if the large spec net position signal is bullish at that time.

Hope you have a relaxing weekend. I'll update my portfolio page early next week with the bearish S&P 500 position.


Ariel said...

Nice analysis, I like your work.

.: moogle fishy :. said...


New here. I have a lot of questions to ask. Was wondering if you could help or suggest ?

Are the CFTC reports in HTML? Exactly what are you pasting in excel? Correct me if I'm wrong.

I am seeing a bigger portion of LARGER/LARGEST 'shorting' gold ?

Alex Roslin said...

Hi Moggle Fishy,

I download the data weekly from this page:

Scroll down to "Other Available Formats" - specifically the options and futures data. They used to have some simple downloading instructions, but took them off the site a couple of years ago. The CFTC was kind enough to resend me those instructions and I was meaning to post them on my blog somewhere, but didn't get the chance.

The basics of it is you save that file as a text file, then close it and reopen it as an Excel file. When doing so, you check the "Delimited" box, hit "Next," then click the "Comma" box, hit "Next" and "Finish."

Regarding your other comment on gold, if you mean the large specs, their net long position fell a little last week, but it remains fairly bullish, at 0.67 standard deviations above the average, compared to 1.06 standard deviations above the previous week. However, they've got to rise to 1.9 standard deviations above for my setup to turn bearish. So that signal is still in bullish mode for my setup.


Anonymous said...

That COT url got cut off. Here it is again:

Anonymous said...

Hi Alex,

Nice call last week to go in cash on your S&P short. Was the signals weak to make it bullish for that week?
Which ticket are you using HSD.TO or the SDS to short the S&P 500?


Anonymous said...

In light of Tuesday's rally coupled with a pretty decent showing since March 10th, are you rethinking your current strategy.

Over at, they seem to be in your camp but are wondering if perhaps the big players may have been lightning up on the short side since the 666 low.

I'm seeing divergences on the 60min charts that in times past have signaled pull backs but those pull backs need not last more than a few hours or maybe a day or two.

Anyway, just curious about your view as of March 17th.

DavidDT said...

That was a great time to be on cash since last week - none sure wanted to double their futures accounts. System works!

Alex Roslin said...

Hi Pete,

Thanks for your message. The two signals that make up the SPX setup didn't agree for that week, so it went to cash. You can read the post for that week for more details. To trade the current short signal I'm using both SDS and HSD.TO.


projectsen said...

Alex -- love your work. Quick question: Why is it that when comparing the S&P e-mini (ES) to the S&P ($250 contract) commercials will get less bearish on the e-mini and more bearish on the big contract? Likewise, small-specs get more bullish on the e-mini and more bearish on the big contract.

Intuitively I'd think commercials would do the same thing on both contracts of S&P -- but they seem to oppose. What am I missing?

Alex Roslin said...

Hi procestsen,

Thanks for your message. I imagine the reporting thresholds are different for the two contracts - which means the commercials in one contract aren't the same as those in the other. Or if that's not the case, the same groups of traders are using the two contracts for different purposes - because the size is different.


Alex Roslin said...

Hi Anonymous from March 17,

Thanks for your message. Long-term trading strategies don't get rethought because of a single day of losses - or even a week's losses. Losses are expected in every setup on a regular basis. That's why folks use stops. No one has a 100% win ratio.