Friday, 22 May 2009

Go, Go, Go for U.S. Banks and Crude Oil

What to make of such a week? Still no real hoped-for resolution to the question: Are we going up or down? Precious metals look like they've broken out, while natural gas has really gotten chainsawed. No time this afternoon to write up a detailed report on what the latest Commitments of Traders from today says about all this, but I have just updated my newly revamped latest signals page based on the new COT report.
Very interesting stuff, with plenty of new signals to keep me busy on next week's open: bullish for the BKX U.S. Bank Index and crude oil, cash for gold and for my brand new setup for Japan's Nikkei Average. I've also included breakdowns on that page of how the new numbers are lining up, so you can get more insights. 

I'll say right now the BKX bullish signal is of special interest because it comes from a setup that uses three different groups of traders to confirm the trades. Because of that, it's in cash three-quarters of the time. In fact, this setup has been in cash for 12 weeks, since March 2.

As for that new Nikkei setup, it outperformed the market in backtesting by 980 percent since 1995, including a 18.6-percent gain in 2008 (when the Nikkei crashed 43.5 percent). Sweet! The setup has just flipped from a bearish signal that ran all of one week to cash for next week's open of trading. It'll stay in cash for two weeks, then go back to bullish. I'll provide a more detailed post on all these hot new numbers early next week, plus the usual portfolio update. I'll also update my backtesting results table early next week with more details on the new Nikkei setup.

Hope you have a beautiful weekend - it's sure gotten nice and warm up here in Quebec's Eastern Townships all of a sudden, and none too soon - and to U.S. readers a fantastic long weekend.

13 comments:

Anonymous said...

Hi Alex,

Thank you for the updates. Nat.Gas is my nemesis :( More beatings due to inventory! I guess Nat.Gas will be free soon at this rate of price decline!

Would you trade the symbol FAS for the banks, a 3X hedge for short term bull moves, opposite of FAZ 3X bear. The decay values in these 2X or 3X ETF's long term is simply brutal. When the last time the XLF was around 11ish the FAS was at 17... Now its less than 9. Mind you the move of FAS from the March lows of 2.70ish to now was quite impressive. The daily swings and rebalancing of these 3X is nutso... Also which Canadian BKX ETF symbol do you use?

Thanks.
Pete

In Debt We Trust said...

Can you elaborate on your thoughts w/the Nikkei? USDJPY has been trending sideways for a while now and needs to really pick up here for Japanese stocks to rally. But w/the way the US Feds seem intent on destroying the dollar....

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fiki said...

Hi Alex
What would your prefered eft:s be for bkx and nikkei?

Alex Roslin said...

Hi Pete,

I'd consider the triple-leveraged ETFs for very short-term trades. Yeah - natural gas is a real good one. I'm short right now, but the massive bullish divergence on the MACD going back to September suggests it's coiling for an explosion upward eventually.

In my opinion, you can't really expect to trade a Canadian banks ETF as a stand-in for the BKX U.S. Bank Index very successfully. But as it happens I don't have spare money in my U.S. dollar account, so I'm forced to use a Canadian ETF - HFU. I guess it's the next best thing for me, but not really a great solution.

Regards,
Alex

Alex Roslin said...

Hi In Debt...,

The data on my latest signals table gives you some more details. In my update which I'll write up in the next day or two, I'll include some more info. I don't have any thoughts on the USDJPY.

Regards,
Alex

Alex Roslin said...

At least not from a COT perspective.

Alex Roslin said...

See previous response for BKX. In the U.S., there are a few financials ETFs. I don't like to recommend anything in particular - but I do make sure to check out the daily volume. There should be decent volume on the ETF so you can get a good fill on trades. Take a look at Don Vialoux's website, where he has an updated ETFs list:

http://dvtechtalk.com/specialreports/specialreport1.htm

Regards,
Alex

Anonymous said...

Hi I do agree that BKX looks like strong but going long in such overpriced mkt seems a little scary ...is there any chance that, since you derive your signals for the sector from eu trading, Bonds dislocation and USD/Gold playing funny, your signals are not that trustrable as they wee before? TIA

Alex Roslin said...

Hi Tia,

The BKX Bank Index signal isn't based on the Euro currency, but rather the 3-month Eurodollar contract. Eurodollar is essentially a measure of liquidity and is the single-most traded market in the COT reports. See more here:

http://en.wikipedia.org/wiki/Eurodollar

This setup worked in all sorts of backtested market conditions. Dropping it based on a perceived notion of what might be happening in the markets isn't the way to trade a mechanical system.

Regards,
Alex

Anonymous said...

Hi Alex,

Do you have target projection on covering your short position in Nat.Gas? Or you'll let it ride lower based the inventory weekly report?

Much Appreciated.
Pete

Alex Roslin said...

Hi Pete,

I don't use targets or fundamental data. I use a trailing stop based on TDST lines, minus a volatility-based "buffer" from the Average True Range. Right now, my stop for HND (200% leveraged natural gas inverse fund in Toronto) is $12.48 based on a TDST line on the 15-minute chart.

Regards,
Alex

Alex Roslin said...

Hi again Pete,

Update on natural gas: I got stopped out of my short position earlier today with a gain. What's interesting is gas had just completed a full 9 count of a TDST Seq Setup, and it bounced from a TDST support line on the daily chart at $5.57.

Regards,
Alex