Friday, 11 June 2010

Going Short U.S. Banks Next Week

Hope you did okay this week. The market found some legs and enjoyed a nice little bounce. But there's more bad news for next week from the Commitments of Traders data issued Friday by the CFTC. I've just updated my latest signals table based on the new COT report. Some highlights:
- U.S. banks: My trading setup for the benchmark BKX U.S. Bank Index goes bearish on next week's open of trading.

- S&P 500: This setup goes to cash next week after being bullish since late February, then returns to bullish for a week.

- Crude oil: My setup for black gold goes to cash after a nice eight-week run in the bearish column.

- Gold: My setup for gold gold remains in cash. The COT data is mixed this week. Large speculator total open interest, which has a 77-percent correlation with bullion prices the following week, has rebounded in today's data after declining for the previous three weeks. That is mitigated somewhat, however, by a decline in the large spec net position as a percentage of the total open interest, which has a 62-percent correlation with the gold price.

- Natural gas: The data for gas has deteriorated somewhat and almost gave me a bearish signal, but not quite. The setup remains in cash.

Have a good weekend, and be sure to tune back in early next week for an update to my portfolio page.


Pi said...


I wanted to understand how the COT positioning in Eurodollar futures have a bearing on the banking sector. As in I want to understand the logical connection. Now obviously banks are the major players in this market, but fundamentally how is positioning in that market a determinant of share prices. I actually trade eurodollar futures & would be really helpful to understand d connection. And from your studies, what does COT positioning in eurodollars have to say about movements in the eurodollar market itself.

Many thanks,

Alex Roslin said...

Hi Piyush,

Thanks for your message. I can only guess how Eurodollars would affect bank shares. The fact that they are both influenced by liquidity is one possibility. The COT data does not reveal any reasons behind the relationship. It simply attests to the fact that there is one historically, according to my testing numbers. I believe that I did study the COT Eurodollar data against the T-Bill rate at some point, but I didn't find anything very useful. Sorry I don't have more information to share with you.

Best regards,