Friday, 13 November 2009
No End for Market Grind
The market sausage grinder kept churning this week. Hope you kept yourself intact. Unfortunately, the Commitments of Traders report this Friday doesn't really help to clarify which way things will break from this long trading range we're stuck in. I've just updated my latest signals table with some new numbers based on that COT report. Two new signals: bearish for natural gas with a week's delay (for the open of trading on Nov. 23) and cash for my 30-year Treasury bond setup on Monday's open (Nov. 16). Some other highlights:
- S&P 500: Not much to report here. This trading setup is in its third week of being bearish and shows no signs of changing course. The wrong-way small traders are still highly bullish in their net positioning as a percentage of the total open interest, while the "smart money" commercial hedgers are still seriously gothic.
- U.S. banks: My setup for the BKX U.S. Bank Index enters its second week of being bullish. The total open interest for the large speculators and small traders - both of which correlate well with BKX prices the following week - is down somewhat this week. But the change is small enough it's hard to know what to read into it. I haven't studied the correlation data enough to know how trade-worthy small or large changes week-to-week changes are. (It's on my massive to-do list!) What I do know is the trading setup - which does have robust backtested results - remains bullish, so that's the real key for me.
- Gold: My trading setup for gold goes into its third week of being bearish. As I mentioned in a post Wednesday, I got stopped out of this position that morning and was looking for a possible chance to put on a discretionary long trade. I didn't see anything worth jumping at. Gold stocks and silver aren't making new highs like bullion is, which is probably a cautionary sign. The gold data this week is also giving mixed signals. The large spec net position, which has a 62-percent correlation with gold prices, has dropped a fair bit, as you can see on my latest signals table. Meanwhile, the large spec total open interest, which has a 77-percent correlation with next week's gold price, has shot up. What does it mean? A good chance of more trading grind next week.
Have a good weekend, and be sure to check back in early next week for an update of my portfolio page. Apologies for missing my update this week. Bad cold. Oink. Anybody got some truffles?
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