Monday, 10 August 2009

Cool Mention

Wow! I am blowed away. Trader and blogger Stephen Vita has listed COTs Timer among his top 10 favourite trading blogs at Blogs.com. If you don't know who Vita is, check out his free AlchemyOfTrading.com blog here. A subscription to his paid site is probably the smartest thing any trader could get, whether beginner or experienced, vegeterian or Martian or paraskavedekatriaphobic. I've never found anything to remotely compete with Vita's mix of trading smarts, hilarious commentary on the daily market grind and morons running our collective economies, and over-the-shoulder look at his decision-making as a trader and money manager. Although his approach is disretionary and COTs Timer is mechanical, I've learned TONS from him, and this trading strategy wouldn't exist in its present form without him. Thanks for your great site, Stephen. I'm humbled you'd think of me.

15 comments:

In Debt We Trust said...

You have an excellent blog and I bookmarked you a long time ago.

Here is something that might assist you w/the banking analysis. Eurodollar futures T/A. Nicole Elliot is pretty good at charting although she isn't 100% accurate of course.

http://www.fxstreet.com/technical/
analysis-reports/technical-analysis-
eurodollar-futures/

Any opinion?

In Debt We Trust said...

I am confused about your gold comment. I use pricecharts.com to see the data.

There is a large positioning (12 month high) for long gold, short dollar index DXY (12 month high), and short 10 year bond (12 month high). These seem pretty bullish signals to me. Do you view them as contrarian signals?

Perhaps I am missing something basic in your analysis. Thanks.

Alex Roslin said...

Hi In Debt...,

My gold setup relies only on the COT data for gold, not that for the dollar index or the bond. Integrating all that other data into a setup for gold would likely reduce backtesting results and probably result in a tiny number of weeks in the market per year.

Going from one group of traders to two in a setup usually reduces time in market to about 50 percent, while adding a third group typically takes it down to 25 to 33 percent.

Each additional dataset adds about a dozen trading rules to the strategy, which tends to reduce robustness and reduce the number of weeks you can use for the moving average and standard deviation periods. (That's because more rules means less available degrees of freedom.)

The large jump in long positioning in gold that is a concern to me is in the large spec net position as a percentage of the total open interest. My testing found it's best to fade the large spec net position. As noted in my post on Saturday, the spike in the large spec bullishness put their net position at a more extreme relative level than any time in more than five years. That's very bearish.

But the setup doesn't go short because there is an eight-week trade delay the other signal in the gold setup (i.e. fading the large spec total open interest).

Regards,
Alex

Alex Roslin said...

Hi In Debt...,

Thanks for the link. Looks interesting. I have no opinion on her strategy. I've read about Ichimoku patterns, but I'd be curious to see her track record or some backtesting of those patterns.

Tom Bulkowski doesn't cover these patterns in his testing of candles at ThePatternSite.com.

Regards,
Alex

Anonymous said...

Alex,

I hope that you do not become known by the company that you keep. I was shocked to see Carl Futia's name on that list. I wouldn't wish him on an enemy...well actually that's probably a good idea. Futia remained stubbornly bullish for much of 2008 constantly calling for new highs. He constantly ridiculed bearish magazine covers.

Here's what he said on Guesstimates on September 3, 8:15 am ET (2008)
"I still think we are in the early stage of a move to 1500."

http://carlfutia.blogspot.com/2008_09_01_archive.html

That's not one point in time. That was his drumbeat from January 08.

Anyone who is reading this comment don't take my word look through the 2008 archives.

Alex Roslin said...

Hi Anonymous,

Never heard of the guy, but if Stephen Vita reads him I can say with confidence there is a reason for it...

Hey, hold on a sec. I just visited his monthly trading record - here:

http://carlfutia.blogspot.com/2009/03/blog-trading-record.html

... and he has amazing numbers, including during the recent bear market. Who are you? One of his competitors? I should have stuck your comment in the trash. The only reason I won't is to give this guy some more well-deserved recognition.

Alex

In Debt We Trust said...

Thanks for the clarification.

So far, it looks like the way to trade has been to stick w/contrarianess (eg. fade the longs).

Alex Roslin said...

Hi In Debt...,

Yes, in this particular case it is. Not always though. As you'll see from the latest signals table, some markets allow us to trade alongside large specs and even small traders.

A lot also depends on the timeframe and standard deviation bands through which the data is seen. With some parameter values, you're better off fading the commercials, while with others you should trade alongside them. It's never black-and-white. I don't put much stock in anyone who says otherwise with this data.

Regards,
Alex

In Debt We Trust said...

I see what you mean - the sugar numbers continue to be super bullish and those trading along the big traders have benefitted. But when I start to read media reports about 28 year highs, that is a signal we are nearing the end of a bubble.

"Yes, in this particular case it is. Not always though. As you'll see from the latest signals table, some markets allow us to trade alongside large specs and even small traders."

Alex Roslin said...

Hi again -

Another thing I found is the absolute net numbers of contracts don't give very reliable signals. The key is to compare the positioning with recent data.

The fact that a group of traders is always net long or short - or even that they've reached a major high or low in their absolute positioning - often means surprisingly little in any tradable sense.

Another twist is it's important to figure out what constitutes a meaningful move in positioning. The move in price may coincide with a change of trend that happened long before the traders hit the extreme positioning.

And the price trend may reverse not when the traders are hitting extremes, and not even when they've hit the brakes and started reversing their positioning, but when their position hits the opposing extreme.

Regards,
Alex

fr4nc01s said...

I would like to take advantage of the Nikkei and the US 30yr T, is there any ETF that would do a good job? I have never done futures.

Alex Roslin said...

Hi Fran├žois,

I don't make ETF recommendations. Check out DVTechTalk.com for a regularly updated ETFs list for the U.S. and Canada. (See the "Education" web pages.)

Regards,
Alex

DavidDT said...

with all due respect Vita absolutely missed March bottom

Alex Roslin said...

Hi DavidDT,

With due respect, I think you've missed the point. He did lots of trading at, before and after the March bottom. He was rightly skeptical that that was the bottom, as there were many signs it wasn't a true bottom. It still isn't clear that it was the bottom or that it wouldn't be retested at some point. But he trades on a very short-term basis, and that longer-term skepticism - which has kept him afloat and doing very well in bad times and good for 20-odd years - doesn't necessarily influence his shorter-term trading from day to day.

On the longer term, Vita often speaks about being agnostic and not knowing whether to be bullish or bearish. So your comment is off-base for that reason too. I think he's got exactly the right approach. I think either you haven't been reading his stuff very long or you're really misunderstanding the value of what he's saying.

Regards,
Alex

market folly said...

hey congrats on the mention, exciting stuff isn't it? I was unaware of your blog and wanted to check it out. Looks like it fills an interesting niche. Pleased to make the acquaintance by the way, I'm Jay and I blog as well over @ Market Folly where I track hedge fund movements. I look forward to reading more of your stuff!

Jay