Friday, 30 October 2009
Sell! Sell! Sell! Everything Must Go
Yikes! Not a good week. Not at all. At least not if you're a bull. And what say the Commitments of Traders numbers? Holy guacamole. Not good either. Check out the mess of red on my latest signals table, which I've just updated. Here's the lowdown:
- S&P 500: This trading setup goes short on the open of Monday, Nov. 2, as announced here three weeks ago. This afternoon's COT numbers are, if anything, even more bearish: the commercial hedgers still more bearish, the wrong-way small traders again bumping up their bullish derivatives positioning. Amazing. Amid all the carnage this week, these poor folks have been knife-catching! "Losers average losers," was how Paul Tudor Jones put it.
- U.S. financials: This setup just gave a new signal: bearish, also for Monday's open. So ends its 12 weeks in cash. Also worthy of note, the COT data suggests next week is going to be especially grim. That's based on the data from the three-month Eurodollar contract, which you can see on my latest signals table. In particular, the large speculator total open interest, which has a 61-percent correlation with next week's BKX U.S. Bank Index, has taken another massive tumble this week - its third in a row. Note that my bearish signal for BKX will last only one week.
- Gold: Also noteworthy, my gold setup has gone bearish too for Monday's open. The gold large spec total open interest is especially interesting in that it has a very high 77-percent correlation with next week's gold price. This week, the open interest continued its second week of crashing. That's probably bad news for any reflation stocks out there. The open interest declined so much, in fact, that my signal based on fading it has now flipped to bullish. But that signal operates with a seven-week trade delay - meaning that historically, such moves didn't typically reflect themselves in prices until seven weeks later. So for now, the setup is bearish.
Have a great Hallowe'en weekend, and see you back here early next week with an update of my portfolio page.
TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing
Crude small traders most negative since April 2008.