Friday, July 17, 2009
All Systems Go, Market Ready to Bounce
What a sweet bounce this week in the markets. Looks like good chances of more of the same next week, if my trading setups based on the Commitments of Traders reports are an indication. I've just updated my latest signals table with my readings and signals based on this Friday's latest data release from the Commodity Futures Trading Commission. A few highlights:
- S&P 500: My trading setup for SPX goes bullish on Monday's open of trading, after seven weeks in cash. It'll be a short-lived trade, lasting just one week before the setup goes to cash.
- BKX U.S. Bank Index: U.S. financials had a great ol' time this past week, and the good times look like they're still on - at least according to the data today for the three-month Eurodollar contract. (That would be the interest rate, not the currency.) That data, which gave great signals in backtesting for the U.S. Bank Index, remains bullish this coming week and has actually gotten even more so on balance, as you'll see from the figures on my latest signals table.
- Natural gas: Another long position of mine - in natural gas, based on a new trading setup I recently introduced - also did nicely last week. It remains in bullish mode this coming week, too. Large speculator and small trader total open interest remains very buoyant and shows no signs of breaking down.
- Crude oil: Derivatives positioning in black gold remains on track for a prolonged bullish period starting in mid-August (by "prolonged," I mean at least two weeks and counting). I've got a coming bullish signal for the open of Aug. 10.
- Nikkei: Small trader net positioning in Nikkei futures and options remains ridiculously elevated - actually, a bullish sign in this market. (The small traders are usually seen as the "dumb money"; in fact, that view is not based on any kind of actual testing I've ever seen and is not always correct.) Astute readers will recall that last week these folks hit an astounding 4.08 standard deviations above the moving average for their signal - an all-time record.
This week, they're down to a slightly more reasonable 2.91 standard deviations above the average - which is, nonetheless, still super-high. As you'll see on my results and signals tables, these guys operate with an eight-week trade delay, on balance, before the data has a reliable impact in Nikkei prices. So brace yourself for the possibility of some crazy action the week of Sept. 7.
What will be especially interesting is to see how the large spec net position evolves next week. That signal works with a six-week trade delay - so next week's positioning will take effect that same week in September. Wonder what will happen.
Have a good weekend, and be sure to tune in early next week for a portfolio update.