Monday, 21 March 2011

Disaster Finds Nikkei, S&P 500 Smart Money Super-Bullish

Boy did that Nikkei bullish signal seem bad at the beginning of the week. Now, however, it seems spookily prescient. After a huge gap down in the wake of the tsunami disaster, then more turmoil as the nuclear catastrophe unfolded, my position in the Japan iShares (EWJ) is now actually in the money. Who knows how it will turn out, but this past Friday's new Commitments of Traders data is even more bullish for the Nikkei. I've updated my latest signals table based on the new numbers from the Commodity Futures Trading Commission.
The data for the Nikkei shows the "smart money" large speculators and small traders - the two groups of traders I follow for this market - ramping up their net futures and options positioning as of Tuesday. Yes, that was just as the gravity of the disaster was really sinking in and its nuke implications were sowing panic.

On the same day, the COT data also show the "smart money" commercial hedgers in S&P 500 futures and options got suddenly much more net bullish. Meanwhile, the wrong-way S&P 500 small traders - whom I fade - freaked out and got highly bearish. So much so, in fact, that their signal flipped to bullish. That has given me a new bullish signal for the S&P 500, which takes effect with a three-week trade delay.

See more details on these and my other signals on my table. Good luck this week!


Reza said...

Thanks for posting. I thought u will be out this week.

In Debt We Trust said...

I stand corrected. You were brave to make that call.

I found this interesting article on the Nikkei's volatility spikes from 2008. Readers may find it educational:

Buying at the highest volatility points will generally work. But the trickiest part is knowing in real time when to make that call.

Who could've predicted the BOJ would pump almost $200 billion in 3days into their market and call on a coordinated central banker currency intervention on the 4th day? No one. Well, at least not outsiders like us.

But technicians believe such news are merely catalysts for a scheduled momentum reversal. Analysis over emotion. Good luck in your future calls and I look forward to reading more articles.

In Debt We Trust said...

Here's another interesting link:

An examination of the Nikkei "vix" by options writers and EWJ in particular.

Alex Roslin said...

Thanks for your comments, In Debt...