Saturday, 24 April 2010

Banks, Gold in Cash; S&P 500, Nikkei Bullish; Gas, Bonds Bearish

It's the bull that never dies! The Commitments of Traders data released Friday by the CFTC suggests the rally that started in March 2009 still has strong legs... for now. I've just updated my latest signals table with the details and several new signals. Some highlights:
- U.S. banks: My trading setup for the BKX Bank Index is in cash for the second straight week. It came very close to turning bullish again this week, as you can see from the data on my signals table - but not quite.

- S&P 500: My S&P 500 setup is bullish for the 10th consecutive week. The "smart money" commercial hedgers actually got more bullish compared to recent data, while the wrong-way small traders are more bearish.

- Gold: My gold setup goes to cash after five weeks being bullish.

- Natural gas: My gas setup goes bearish on Monday's open of trading and will remain so for two weeks.

- Nikkei: My Nikkei setup goes bullish on Monday's open.

- 30-year Treasury bond: My bond setup goes bearish on Monday's open.

Good luck this week, and please check in at my portfolio page for an update early this week. Sorry I couldn't get to the portfolio update last week.


11 comments:

Jase said...

Does your Crude Oil outlook equal your Nat Gas outlook?

.: moogle fishy :. said...

Do you consider commerical to be the dominant factor or large specs?

Thanks.

Trendie said...

Alex, I've been studying your system for a while. This week the first Nikkei rule (Fade Large Speculators Net% using -0.6/-0.95) triggered a "Bullish" signal. My understanding is that it went from -1.37 (below -0.95) the week before all the way to -0.15 (above -0.6). If we want to fade this move, it should have been a "Bearish" signal. Do I misunderstand something here? Thank you.

Alex Roslin said...

Hi Trendie,

Thanks for your interest and message. The reason it went bullish is because of the various trade delays for the two component signals. This week the data might have done one thing, but the setup looks back so far it could be trading in the opposite direction of the current COT data.

Best regards,
Alex

Alex Roslin said...

Hi Jase,

Thanks for your question. Crude oil and natural gas have very different profiles if you look at a chart. Their COT data also acts very differently. Crude and gas prices correlate at about 80 percent between 1995 and 2007, but they actually have a zero correlation for years on end during that timeframe.

Regards,
Alex

Alex Roslin said...

Hi Moggle Fishy,

I like your name. If you mean for the S&P 500, I don't follow the large specs. I do in some other markets, but each one is different. In some, the commercial COT data doesn't give the best signal either, or even a good one. Please read my FAQs page for more info on this.

Best regards,
Alex

Trendie said...

Alex, thanks for your reply clarifying the "delay" setup concept here for Nikkei. What still confused me was the "Bullish" signal in the "unadjusted for trade delay" column that should have been "Bearish" if we want to "Fade" Large Speculators Net% using -0.6/-0.95, even this signal should have no effect to the current week's setup.

Guava said...

The stand you took here is worth a praise. Gold rose in London on speculation debts in Europe will lead to more demand for the metal as a haven from possible losses in other assets.

Grant said...

Alex, I'm new to your site but find the underlying principles sound and sensible. As for my newbie question, I'm confused as to why the allocations add up to more than 100% (127.16% to be exact). I'm sure I'm missing something obvious. Thanks.

Alex Roslin said...

Hi Trendie,

Yes, you're right. My signal actually follows the large spec net % position. Thanks for pointing this out. I've now corrected it on the table.

Best regards,
Alex

Alex Roslin said...

Hi Grant,

The total allocations of all the setups could be more than 100% because I'm not necessarily investing in all of the setups at any one time. Many are often in cash. See the backtesting results table to see what percentage of the time each setup is in cash. As well, if all the setups had a position at the same time, I don't necessarily have to invest the full allocation. Those are just the maximum allocations for risk-control purposes. Finally, I may be able to be fully invested in every setup using leveraged positions if I chose so.

Best regards,
Alex