Friday, 4 June 2010

Data Down on Banks, Good for Gold, Natural Gas

Holy moly, would you look at this Commitments of Traders data. A perfectly miserable end to a miserable week in the markets. Friday's COT report from the Commodity Futures Trading Commission warns of yet another rough week ahead for markets, as you can see from my newly updated latest signals table. When will the carnage end? I dunno.
But I can say that the three-month Eurodollar data has dropped yet again - the sixth week in a row for the large speculator total open interest. As astute readers know, that data has a 63-percent correlation with next week's BKX U.S. Bank Index. And it signaled fairly well the beginning of this market rout. My BKX setup is in cash again next week, but the Eurodollar numbers suggest we're not out of the woods yet. Note that while my table shows the small trader total open interest getting less relatively bearish, the absolute number of contracts declined again in the latest COT report. It's the absolute number that correlates well with BKX.

Some other highlights:

- S&P 500: This data is all over the place. Two weeks ago, you'll recall, the "smart money" commercials got super-bearish, then last week they flipped to bullish, and now this week they're back in the bearish camp. That will have my setup flip-flopping around between bullish and cash through most of June.

- Gold: My setup for bullion remains in cash, but the data again is a little more bullish. It correlates fairly decently with gold prices. I've got a small discretionary long position. (Not a recommendation! And I could sell at any moment based on price action.)

- Natural gas: Same comments as for gold above, including the discretionary long position.

Good luck next week, and be sure to tune back in for an update of my portfolio page. Have a great weekend!

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