Friday, 8 April 2011

Flip-Floppy Traders Give Bearish Signal for Early May

Oh-oh. Some dark clouds for equity markets coming out of the latest Commitments of Traders report issued this afternoon. The CFTC's COT report has given me a bearish signal in my trading setup for the S&P 500.

That's based on the "smart money" commercial hedgers getting suddenly a fair bit more bearish in their net futures and options positioning as a percentage of the total open interest. Meanwhile, the wrong-way small traders - whom I fade in this setup - have been at extremes of bullish net positioning for the past three weeks.

See my latest signals table for more details on this and my six other market signals based on the COT data.

My bearish signal takes effect with a three-week delay - meaning on the open the week of May 2. That's about in line with the end of the S&P 500's favourable seasonal period.

In fact, my S&P 500 setup is going to see a lot of action in the coming weeks. Earlier data had given it a bullish signal for this coming Monday's open of trading. Then, the signal was going to flip to cash on the following Monday's open (i.e. on April 18). The data sure seems volatile.

In other news, my gold setup goes from bullish to cash on Monday's open. And my natural gas setup goes bearish with a one-week delay - i.e. on the open April 18. My 30-year Treasury bond signal remains bearish for a fifth straight week. And my other signals are in cash (crude oil, the BKX U.S. Bank Index and the Nikkei). Have a good weekend, and best of luck next week!


Reza said...

Thanks for posting early


In Debt We Trust said...

If you look at the volatility skew for vix options its paradoxical. Near term futures and options on futures remain cheap but options further out are expensive. I am not an expert on the vix but it looks like many traders are selling vix call spreads (verticals and/or diagonals), effectively shorting volatility. But this has the potential to blow up in their faces in a market correction.