Saturday, 8 August 2009
Taking Profits in Banks, Going Long Crude
What a difference a week makes. The latest data from Friday's Commitments of Traders report shows some pretty massive changes in trader positioning. That has triggered a bunch of signals for my trading setups based around this free weekly government data reporting trillions of dollars in derivatives positioning in major markets.
The best way to see what really happened is to check out my latest signals table, which I've just updated with the new numbers. Now, I know from the traffic data that many readers don't actually take a look at that table week to week. I encourage you to spend a little time figuring out how it works. The raw numbers give a better picture than anything I can write. So I think it's well worth the trouble. Some highlights:
- S&P 500: Commercial hedgers are still highly bullish, small traders still quite negative. These are perfect good conditions for the bullish signal my S&P 500 trading setup has given for the open of trading Monday, Aug. 24. Due to the three-week trade delay in this setup, that signal will now last two weeks at least.
- Financials: My trading setup for the BKX U.S. Bank Index goes to cash for Monday's open after four weeks being long. What a sweet run, but time for me to get out. Large speculator net positioning and total open interest have suddenly collapsed, according to Friday's data. The only thing keeping this setup from going short is small trader total open interest, which remains defiantly buoyant, though it too has dropped considerably since the prior week.
- Crude oil: Commercial net positioning has suddenly taken a sharp downturn this past week. With the four-week trade delay for the commercial signal, the change will cap off my bullish signal for crude oil that starts on Monday's open. The signal will now run four weeks until Friday's commercial bearishness impacts. Since small traders remain bullish, the signal won't go over to short, but rather will go to cash on Sept. 7. Until then, let the black gold flow!
- Gold: Speaking of gold, my setup for the yellow metal has more bad news for gold bugs. This week could have put the setup in the long column after seven weeks in cash. But alas, no. Large speculators, whom I fade in this setup, have gone bearish based on Friday's data. This, after a year being long. Wow. Their net position as a percentage of the total open interest hasn't been this excessively bullish compared to recent data since April 2004, when a similar bullish spike foretold a selloff and half-year sideways move for bullion. Friday's move put the large spec signal firmly in the bearish column. I had thought the setup could actually finally go bullish this week, based on the large spec total open interest, which had gotten super-bearish in mid-June, setting up for a long signal around now. Oh well.
- Nikkei: My setup for Japan's Nikkei Average goes to cash next week for a single week, then returns to bullish.
Tune back in early next week for a portfolio update. Have a good weekend, and best of luck next week. Looks like we might really need it.