Saturday, 20 October 2012

Banks, Copper to Cash This Week; Natural Gas Flips to Bullish Oct. 29

Two signals take effect on next week's open of trading based on the latest trader positioning as revealed in Friday's weekly Commitments of Traders report:

- BKX U.S. Bank Index: Goes from bullish to cash.
- Copper: Goes from bearish to cash.

Also, natural gas, now bearish, goes bullish on the open of trading the week of Oct. 29.

Check my latest signals table for more details on positioning in these and the other markets I follow using the Commodity Future Trading Commission's free weekly COT data. Good luck this week.


jeff said...

When you have S&P bearish and Nasdaq bullish, do you follow each signal?
The contradiction seems hard to rationalize.

Also I think you should add VIX, the USD and an agriculture commodity for more diversification.

Alex Roslin said...

Hi Jeff,

Thanks for your comment. The COT data often contradicts itself. In fact, it is far more often contradictory than not. My solution is to choose the trader groups for each market that have given the most robust signals in backtesting and follow those religiously. If at times signals contradict each other, I still follow them.

First, you can't pick and choose signals to follow in a mechanical system. One may be right, while the other is wrong. How can I know which one is which?

Second, the signals have different timeframes, so they could both be right.

Third, a system could be designed that follows signals in one market only when a signal agrees in a highly correlated market, but that's adding another parameter to the system. That brings with it a lot of other complications and doesn't ultimately lead to a more robust system - meaning it wouldn't necessarily perform better in real trading. It would likely be in the market only a fraction of the time. And for statistical reasons, each additional parameter introduced reduces the robustness of a mechanical trading system.