Friday, June 26, 2009
Smart Money Traders Turn Bullish on S&P 500
No new signals for this coming week from any of my trading setups based on the weekly derivatives data in the Commitments of Traders reports. But a big change in the data today signals a possible shift to a more bullish future. Or maybe just a one-week blip. Who knows? I've just updated my latest signals table based on this afternoon's new data.
Especially interesting: the "smart money" commercial hedgers have finally gotten off the couch and jumped into the S&P 500. If you're a regular here, you'll know the commercial traders haven't been exactly enamoured by the rally since March and have faded it with a large net short position in futures and options.
This week, big change. The commercials reduced their net short position significantly, triggering a bullish signal from their side in my S&P 500 setup. They haven't been this optimistic about the market since mid-March.
Note, however, my commercial signal works with a three-week trade delay. So no action until the open of trading Monday, July 20.
Another caveat: the other signal that makes up that setup - fading the small traders, who tend to be wrongly positioned at market turns - has moved closer to flipping from bullish to bearish. That's because, as you'll note on my latest signals table, these wrong-way folks have suddenly bumped up their net long position as a percentage of the total open interest. These people tend to be so wrong, in fact, backtesting suggests you could have reliably done the opposite and made good money.
So if they hit a bullish extreme in their positioning in coming weeks, that would put their signal in the bearish column. They're still not quite there yet, so things look good for the bullish side for now. Regardless, the S&P 500 setup will go bullish July 20, for at least one week.
Tune back in here early next week for a more detailed look at the other markets I'm covering with my setups and for a portfolio results update. Have a fine weekend.