Sunday, 20 September 2009

Wrong-Way Traders More Depressed, Signal More Possible Upside

No new signals for my trading setups based on Friday's Commitments of Traders report. All is quiet. See my newly updated latest signals table for details on how the setups see the data now. Also, no signals pending for Monday's open.
The S&P 500 setup is still bullish, and the latest weekly data looks more bullish than last week, with the wrong-way small traders getting much more bearish again, while the "smart money" commercial hedgers are a mite more bullish.

Natural gas, however, is looking decidedly more bearish; while the setup remains in cash, both signals that make up that setup have now clicked back into the bearish column. That could line up for a bearish trade taking effect in early October. Crazy times for that market, as usual!

Meanwhile, please take a look at my post below asking readers to write the CFTC to preserve this invaluable, free government data in its current form. (Read the comments exchange for some extra details on what's at stake.) Sorry I didn't have time for a more detailed update this week. But be sure to check out my portfolio page Monday for my updated results. And good luck this week!

Addendum on Monday morning: I just got this letter in my inbox that a reader sent to the CFTC about its proposed changes to the COT report. I had to share (with permission). Thanks to Carl and the many other readers who have written in!

To: The CFTC

We are a Netherlands-based group producing scientific research in conjuncture with the VU (the leading university in Amsterdam), doing ongoing statistical, mathematical research into correlations between traders' behaviour and market prices and other financial data. The weekly COT report is at the centre of that. When we started our research into the COT data we assumed that it would be published forever into the future.

Changing the values of the report would make our research obsolete. That means that many man-hours and computer hours would be lost. It would take a great effort to newly analyze the value of the new format and its correlation to other financial-related data. Because the greater amount of data in the new format and the fear of again changing values in the new-style report would probably keep us from committing us again to such intensive research. The new format, due to the nature of statistics, would take years to produce meaningful data.

There are many other reasons to think of why we would like the COT report to continue, such as the fact that in Europe, Asia, etc., such data are not available. The strength of the COT report lies in the continuation and accessibility of information about the biggest markets in the world. Of course, we do not oppose new data being published. We would just like to keep the old style, and we hope that it could be published simultaneously.

We feel that maybe we should have told you before about our research, so that you would have known the importance of the report to us and the institution it is around the world.

I hope to have provided some input for the discussion of the future of the report. Please feel free to contact me.

Greetings, Carl Borgen

10 comments:

White Powder said...

I'm also bearish on natural gas. Steve Schork says we'll see a bearish reversal within a couple weeks: http://pragcap.com/why-natural-gas-is-set-to-reverse-the-massive-rally

The jist of his argument is that producers "cut off the spigot" when prices dropped so low, storing all the inventory, but now storage capacity is maxed-out and soon a new wave of supply will enter the market.

Joseph said...

Hi Alex, the SnP has a great deal of exposure to the BKX index and OIL. If the SNP is more bullish then last week as you mention then this must mean that the Banks and OIL Energy stocks may fair well.
Any feedback would be appreciated.

Thanks
Joseph

Alex Roslin said...

Hi Joseph,

It's certainly possible, but we can't read too much into the inter-week data because it doesn't correlate very strongly with price moves. The main point is that the SPX data still seems far from reversing course and giving a cash or bearish signal, which would take effect only in three weeks. But BKX and crude don't always trade in the same direction, even if they usually might.

Regards,
Alex

Joseph said...

http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow-20090922.html?mod=mdc_pastcalendar

Check this link out that I got from http://oahutrading.blogspot.com/ today. Its in line with my post a few days ago. Just a FYI to think about. Alex, is your SnP setup go to cash on OCT 9th

Thanks
Joe

Alex Roslin said...

Hi Joseph,

Thanks for your message. No sign of the SPX setup going to cash at this point. If anything, the small traders are still far too bearish for that.

Regards,
Alex

In Debt We Trust said...

Any thoughts on the dollar?

Alex Roslin said...

Hi In Debt...,

I don't have a COT setup for it, but I do for gold bullion, and that one is bearish. Technically speaking I think the US dollar needs to break out a little more before we can say there's anything going on here. There does appear to be a move-to-safety trend happening in the past few weeks when you look at the weekly chart of USD vs. IRX, for example.

Gold stocks are breaking down below a TDST support line on the daily chart, but not yet decisively so in my opinion. The GDX:GLD ratio has really broken down below a TDST support line - which is not very bullish for bullion and should be good news for the dollar.

Regards,
Alex

In Debt We Trust said...

Regarding the CFTC report, I came across this 2008 testimony. There are some interesting formulas he includes for reference against COT comparison.

Masters breaks it down easily for his audience:

http://hsgac.senate.gov/public/_files/052008Masters.pdf

Alex Roslin said...

Thanks, In Debt... That's an interesting report.

Regards,
Alex

goldcoins said...

Thanks for the great reading, we buy gold Market Analyst bullion in a

recession. I will pass this on to our ira clients to read