Monday, 4 January 2010

Setups Still Bearish for Financials, Gold and Crude

Mixed news this week from the holiday-delayed Commitments of Traders report, which was just released Monday afternoon. I've updated my latest signals table with the new data and market calls for my seven trading setups based on the COT reports. Here are some highlights:
- S&P 500: This setup remains bearish for a 10th consecutive week. However, as noted previously, my short position was stopped out on Dec. 23 after the index went against that signal in a way that indicated a powerful trend that went against historic norms. In the latest report, the "smart money" commercial hedgers have gotten more net short for the second week in a row, while ironically the "dumb money" small traders have also gotten more bearish. A bit of a mixed bag I guess.

- U.S. financials: My setup for the BKX U.S. Bank Index, based on the COT data for the three-month Eurodollar contract, is now bearish for a second week. The latest data is again somewhat mixed, however, with the large spec total open interest falling a smidgen while the small trader total open interest has risen. Both are strongly correlated with next week's BKX price.

- Gold: Also a second week of being bearish for my gold trading setup. As the latest signals table shows, the data is looking slightly gloomier this week for gold.

- Natural gas: My only new signal this week comes for natural gas: bearish, with a one-week delay. To be executed on the open Monday, Jan. 11.

- Crude oil: This setup is entering its 12th week being bearish. It will stay bearish this week and next and then go to cash on the open Monday, Jan. 18. The commercial hedgers still have a bearish tilt in this market, but the small traders, whom I also trade alongside in crude oil, got decisively bullish as of the Nov. 17 COT report, which pushed their signal into the long column. Unless both signals agree, the setup will remain in cash.

I hope you had a great holiday and New Year's celebration. Best wishes to all readers for a healthy and happy 2010. For those who follow the old calendar, Merry Christmas on Jan. 7, and Happy New Year on Jan. 14.


Anonymous said...

Hi Alex,

The US financials have been on a tear since your entry last week. Did your stop apply?


Alex Roslin said...

Hi Pete,

No, not yet! In fact, my Canadian financials bearish position is about even before today's open.


In Debt We Trust said...

Shorting energy (oil) is a BAD idea during a very cold winter.

N. America has faced very cold
weather in recent weeks. You can also see this most clearly w/orange
juice (but also oil and nat gas) which hit highs on Florida frost fears at the end of December.

If temperatures heat up then the demand can drop and so will prices.
The only problem is timing the trade. It looks like the cold will
continue for a while more.

6 to 10 Day Outlooks
Valid: January 13 2010 to January 17 2010
Updated: 07 Jan 2010

1 Month Outlook

Alex Roslin said...

Hi In Debt...,

If I was just following seasonality, I might consider a long trade sometime in the next month or two. But you should be aware that seasonal trades often don't work and are usually best put on in combination with other factors. In my case, the trade is based purely on the COT data, so the seasonality issues don't come into play. Seasonality could be a filter to use to further test this system, but that's not something I've tried yet.

Best regards,