Mixed News

Hope you're having a nice holiday. Mixed signals for equities from the latest Commitments of Traders data issued this Friday afternoon by the U.S. Commodity Futures Trading Commission. See my updated table on my "Latest Signals" page for all the details. I'll be back early next week with some analysis of the new data.

Also, I'm going through a year-end process of refining some of my trading setups based on the COTs reports. I'll update you on that soon. Some rather exciting news on that front. Have a great weekend!

Mess of New & Renewed Signals

Wow! A whole mess of interesting new and renewed signals from last Friday's Commitments of Traders report. Take a look at the table on my "Latest Signals" page (see link in the Navigation bar on the right), which I updated yesterday with all the gory details. I'll be back to my regular posting schedule later this week. Hope you have a great holiday, and best wishes for the New Year!

COTs Predict Santa Coming, Dollar to Sink

Is Santa coming this year, kids? Sure looks like it. My COTs U.S. Equity Index is giving its fourth straight renewed bullish signal, based on the latest Commitments of Traders data issued Friday. This index is based on my trading setups for the S&P 500, NASDAQ 100, Dow Jones industrials and Russell 2000 - all built around the COTs reports, which report how major traders are positioned in the markets.

My U.S. equity index has been on a bullish signal since last March. It now stands at a super-bullish 0.97, up from last week's reading of 0.88. Regular readers will recall that a "1" reading means all four setups are effectively giving a bullish signal on average, for execution on next week's open of trading. So I'd say this is happy news for equity bulls. (See the table on my "Latest Signals" page for all the signals from my setups based on the COTs reports.)

In other developments, the latest data portends still more horrors for the greenback. The commercials are dumping their U.S. dollars faster than you can say "Gisela Bundchen." It's been 12 straight weeks of steadily lower net long futures positions for the "smart money" crowd. My U.S. dollar index setup is now giving its third straight renewed bearish signal. Oh-oh.

The other interesting developments are taking place in the ag sector. My COTs Agriculture Index, based on my setups for wheat, corn, soybeans and sugar, has fallen to -0.44, down substantially from last week's 0.12. This setup provides me signals for the DBA Agriculture ETF. The index now stands not far from flipping to bearish for DBA.

Looking at some of the specific sectors, corn small traders have lowered their net short position in futures and options to a bullish extreme, flipping my setup for corn to bearish. The small traders are now 180 percent above the signal line I use for this setup. (See the explanatory links in the navigation bar to learn more about how my COTs Timer trading system works.) Note that the trade delay for this setup is three weeks.

As well, the sugar commercial traders have suddenly put on a huge net short position. After only a two-week bullish signal, this setup has now flipped back to bearish. Note that my setup for sugar is a little special. It works by going long on the bullish signals and going to cash on bearish signals (not going short).

I'm still on vacation this coming week, but I'll be back next week with more regular posts. Good luck.

"Commercials Jettison Greenback"

Just posted my weekly report for Kitco.com on my "financial stories" page, titled "Commercials Jettison Greenback." I'm in vacation mode, so that's it for me for this week. I'll be back next weekend with my latest signals from this Friday's Commitments of Traders report. Good luck this week!

Sunny Outlook for Equities, Loonie - Not So Hot for Greenback, Treasuries

Sorry about the delay in my weekly update. I'm traveling and kind of groggy from this beautiful warm weather here in sunny Florida, especially since we just had about 850 feet of snow back home in Quebec. Mohito cheers!

Some interesting new developments from the latest Commitments of Traders report issued last Friday by the U.S. Commodity Futures Trading Commission. To you newbies out there, these are the free weekly reports that list trillions in futures and options holdings in 100-odd markets like gold, crude oil and the S&P 500.

My trading system based on these reports has given two new signals based on last Friday's data:

- Bullish for the Canadian dollar. After an incredible rally, the loonie has corrected smartly since the beginning of November. My trading setup for the C$ is based on trading opposite to the "dumb money" large speculators when they hit specific extremes in their net futures position as a percentage of the total open interest. They've dramatically cut their net long position since it peaked in mid-October. The latest COTs report gives me a bullish signal. This setup has a four-week trade delay. (Click my "Latest Signals" page for more details and other signals from the latest COTs report. Also, click "How It Works" and "Intro to COTs" on the right to learn how my trading system works.)

- Cash for the 5-year Treasury. This setup flipped to bullish in July, but it's now back to bearish (meaning the setup thinks the 5-year yield will go up). This setup has a trade delay of zero, meaning execution for this Monday's open. The signal is based on trading with the large specs and fading the commercials when both groups of traders concur. The large specs have just built a historically extreme net short position, but the commercials haven't yet concurred by going super-long. So this setup is now in cash.

Incidentally, this new signal for the 5-year Treasury follows a new bearish signal in my 10-week Treasury setup that came in the Nov. 20 COTs report. Another sign that hitherto falling Treasury yields have found a bottom.

And a few interesting renewed signals:

- More woes for the greenback. In my setup for the U.S. dollar index, based on trading on the same side as the commercials, I've gotten a second renewed bearish signal. The commercials haven't been this bearish relative to the historic data since Oct. 2006, when this setup first flipped to bearish.

- Good news for equity bulls. My setup for the Dow Jones industrials has given its second straight renewed bullish signal, based on extreme optimism by the commercial traders. Also, my COTs U.S. Equity Composite Index has given its third straight renewed bullish signal, after rising to a reading of 0.88, up from last week's 0.62. (A "1" means the four setups that make up this index - the SP500, NASDAQ 100, Dow Jones industrials and Russell 2000 - have all just given a bullish signal on average, for execution on next week's open of trading.)

- My COTs Composite Agriculture Index, which is based on my setups for wheat, corn, soybeans and sugar, has fallen to a sad-sack 0.12, down from last week's 0.37. The setup, which gives signals for the DBA Agriculture ETF, is still on a bullish signal, but the latest data warns of possible weakness ahead.

Sweet!

Hi all. Here are some additional highlights from the latest Commitments of Traders report issued last Friday, Nov. 30:

- Overall, a happy picture for the seasonal equities trade seems to be forming from around here into the New Year. Happily, COTs Timer appears to have managed to convince "Helicopter" Ben to lower the Fed Funds rate, after some initial noises that he didn't want to play helicopter any more. You're welcome, world.

- As I mentioned Friday, my COTs U.S. Equity Composite Index is giving a second renewed bullish signal. And the "smart money" commercial traders in Dow Jones industrials futures and options are now also supremely bullish, giving my setup for this market a renewed bullish signal. Their net position is 50 percent above the signal line I use for this setup. Meaning: they're looking positively Christmasy.

- At the same time, the "dumb money" large speculators are really quite gloomy about the Russell 2000, judging by their rapidly growing net short position as a percentage of the total open interest. Their net position has fallen to 2.1 standard deviations below its 23-week moving average, triggering a renewed bullish signal for this setup.

- Could the high-flying Canadian dollar soon be due for a bounce? Even before it started correcting at the beginning of November, the "dumb money" large speculators were already cutting back on their all-time-high net long futures position (which peaked in early October). They've steadily reduced their net long position until it now stands just a hair above a new bullish signal.

- Similar situation for copper. Here, the large specs are building a large net short position, just as copper prices have collapsed. How do these guys stay in business? Not quite enough to flip this setup to bullish, but getting steadily closer.

- My COTs Agriculture Composite Index has fallen back to a less-than-stellar 0.37 reading, down from last week's 0.90, which had triggered a renewed bullish signal for this setup (which gives me signals for the DBA PowerShares Agriculture Fund).

- Sugar is looking sweet. (Yeah, I know, that's lame.) The commercial traders have suddenly shortened their net short position to a historically low figure, flipping my sugar setup to bullish.

Good luck this week. I'll be traveling for the next two weeks, so my next COTs update won't come Friday afternoon as usual, but more likely sometime over the weekend. But since this COTs stuff is so low-maintenance (see "How It Works: My 10-Minute Workweek" in the Navigation bar), my reports should continue more or less on schedule while I'm visiting with Mickey Mouse.

New Story: "Data Grim for U.S. Buck"

Could barely open the front door today after a month of near-continuous snow up here in Quebec's Appalachians. Where are my skiis! Just posted a new report I did on bullion site Kitco.com about what the Commitments of Traders reports have to say about gold and the other metals (also the buck). It's titled "Data Grim for U.S. Buck," so you may be able to guess the gist. See it here.

COTs Look Sunny for Equities, Grim for Buck

Interesting week. Was that a sucker rally in the major indices or the start of a Christmas melt-up? Did this week mark the bottom for Treasuries yields? What's going on with commodities?

Did this cover (see right) in the wrong-way Economist contrarily mark the U.S. dollar bottom, as Stephen Vita suggested today on his Alchemy of Trading site? And why did a dozen wild turkeys just walk in front of my office window here in Quebec's Appalachians?

Lots of questions and plenty of interesting insights into it all, except the one about the turkeys, from this afternoon's Commitments of Traders report (based on data as of last Tuesday). I've just updated my "Latest Signals" page with the data from my trading setups based on these fascinating government reports, which are issued free each week by the U.S. Commodity Futures Trading Commission and detail trillions of dollars in futures and options holdings in nearly every market under the sun.

My overall take: the news is good for equity bulls. My COTs U.S. Composite Equity Index, based on my setups for the SP500, Dow Jones industrials, NASDAQ 100 and Russell 2000, remains unchanged from last week at 0.62. The index also gave a second renewed bullish signal this week. Renewed bullish signals for my Russell 2000 and Dow Jones industrials setups also lend more weight to the overall sunny picture here.

Also interesting: My 30-year Treasury setup hasn't followed suit with my 10-year Treasury setup, which you might recall turned bearish last week. In contrast, my 30-year bond setup has given its sixth straight renewed bullish signal. So I think it may still be an open question as to whether Treasury yields have really bottomed. This week's rebound may be but a pause. As I've noted this week, all my other Treasuries setups remain in bullish mode.

My odd-man-out 10-year setup is based on trading with the small traders when their net position hits historic extremes of bullishness or bearishness. The latest report shows this group of traders suddenly reducing their net position as a percentage of the total open interest. They've actually flipped back up to a decidedly bullish tilt in comparison with historic data, although not anywhere close enough to reverse this signal back to bullish, I should note.

As for the U.S. buck, the commercial futures traders have again slashed their net long position and now give me a renewed bearish signal. This is actually the first signal of any kind in this setup in over a year, since the original bearish signal back in Oct. 2006. It follows a steady 10-week reduction in the commercial net long position, which peaked with the Sept. 18 COTs report. How did Gisele Bundchen know!

I hope you had a good week and wish you a relaxing weekend. Check back here early next week to see more of my thoughts on the latest COTs data. Now, if only I could find my axe next time those turkeys show up.

New Story: "Stocks May Revive as Funds Exit Bonds"

Safe-haven Treasuries have shot up, up and away since last summer's subprime panic, as money has flowed from stocks into government bonds. Some analysts say Treasuries are topping and that yields are bottoming. See my take for SeekingAlpha.com inspired by the Commitments of Traders reports here.

New Story: "Was Gisele Bundchen Right to Sell the Buck?"

How smart is Gisele Bundchen? See my latest take on the metals and U.S. dollar - just posted at Kitco.com and on my "Alex Roslin's Financial Stories" page - to find out if this hottie supermodel has the smarts to go with her looks.

Happy Days Here Again for Equity, Agriculture Setups

Good news for equity bulls: My U.S. Composite Equity Index has shot back up to an optimistic height. The latest Commitments of Traders report has pushed this index, based on my trading setups for the SP500, Dow Jones industrials, Russell 2000 and NASDAQ 100, to a sunny reading of 0.62, up from last week's dismal 0.04. In fact, the reading gives me a renewed bullish signal for this index. Readers may recall the index took a decidedly worrisome turn starting in early October, sliding for nearly two months until its low of last week. The index remained on a bullish signal throughout (as it's been since March 27), but its downturn may have presaged the selloff we just endured. The recent upturn in the index suggests the worst may now be over for the markets.

My Agriculture Composite Index has also shot up to 0.90 from last week's 0.52. (A reading of "1" in both indices means its component setups are all giving a bullish signal, adjusted for execution on the open of next week's trading.) My ag index is based on wheat, soybeans, corn and sugar and gives signals for the DBA PowerShares Agriculture Fund. The latest COTs report gives me a renewed bullish signal for DBA.

New Signals: 10-Year Treasury Bearish, Heating Oil Bullish

Some interesting new signals for my trading setups based on the Commitments of Traders report issued by the U.S. Commodity Futures Trading Commission. Here are a few highlights:

- Stunning move today in the long bonds. Is the amazing run near an end? Maybe, according to the latest COTs report. My setup for the 10-year Treasury Note has flipped to bearish after a nice run since the bullish signal that started with the July 31 COTs report. The 10-year setup is based on trading on the same side as the small traders in the note's futures and options. They've just hit the brakes and suddenly ramped up their net short position. This setup has a trade delay of one week, meaning execution on the open Dec. 3. (See the main table on my "Latest Signals" page for more details on this setup, including the important risk information that's there, and my other signals from today's COTs report. Also, see "How It Works" to learn, er, how all this works.)

- My 30-year Treasury Bond setup remains in bullish mode, despite the new 10-year signal. In fact, this setup, based on fading the "dumb money" commercial traders and following the "smart money" large specs, has just given another renewed bullish signal. Go figure. So a bit of a mixed picture from the COTs Treasuries data. All my other Treasuries setups, incidentally, also remain on their bullish signals.

- The other new signal is for heating oil, which has flipped to bullish in the latest COTs report. Here's a real odd one. The setup, which is based on some fairly decent, statistically robust results, has been on a real dog of a loser bearish signal since March. Yet, now, with the price of heating oil having gone parabolic, the setup suddenly goes bullish. This, based on fading the small traders in heating oil futures and options. The "dumb money" has reduced its net long position as a percentage of the total open interest to a low extreme in comparison with historic data. Just checked SeasonalCharts.com to see if there's some kind of seasonality reason for the sudden bullishness, and there does appear to be a small seasonal sweet spot in December. Perhaps this is what the signal is tapping into.

On the other hand, there's also a lesson here: like any trading system, mine isn't about winning 100 percent of the time. It's about good-probability trades that try to catch the long moves. For those trades that don't work - and there will always be some - it's important to have risk-management tools (see my "Glossary" page for more details) and use them with discipline.

Holiday Delay

This week's Commitments of Traders report will be released Monday instead of this afternoon due to Thanksgiving. Hope American readers had a good turkey, and best wishes for a relaxing weekend. Still snowing up here in Canada. By the looks of it, it'll be not only a white Christmas, but also a white June.

Video: Brits Explain Subprime Mess

Got a chuckle this morning watching this video on the subprime mess. Happy Thanksgiving to American readers!

New Article: "Fed and Yields Headed Down"

Just posted a new story I did today for SeekingAlpha.com titled "Fed and Yields Headed Down." You can read it here. It resumes what my Treasuries trading setups based on the Commitments of Traders reports are saying about bonds and the broader markets.

T-Bill Most Bullish in Four Years; Plus: Bullion Bull no Bull? And Wheat Drives Ag Rebound

When was the last time the COTs data was this bullish for the 13-week Treasury Bill? The answer: way back in July 2003. Remember those days? That was precisely the bottom for the T-Bill yield, as it hit below the amazing how-low-can-you-go level of 0.8 percent amid the post-dot-com deflation panic and the Iraq war.

That was also the last time the "smart money" small traders in the 3-month Eurodollar contract had a net position above zero as a percentage of the total open interest. My trading setup for the T-Bill trades on the same side as the small Eurodollar traders. They've been on a bullish signal since Feb. 2007 (meaning they're betting the T-Bill yield will fall). Hey, ain't that when the yield peaked? Nice. You might have read some nonsense about how the Fed is reluctant to lower rates at its next meeting. Well, the latest COTs report issued last Friday gave me a renewed bullish signal, meaning still more downward pressure for the yield. We'll see.

Now, I'd never pretend the COTs data gets it right all the time. Just look at the win/loss results on the table linked to my "Latest Signals" page. In fact, no trading system is right all the time. If you know of one, I'd love to see it. The goal of my system is high-probability trades that catch the long moves. As Jesse Livermore said in the classic Reminiscences of a Stock Operator: “The big money was not in the individual fluctuations but in the main movements… I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!” It was true in the '20s, and I think it's still true now. In fact, I'm going to put that quote up here somewhere. I always find it fascinating how this free government data can often help us foresee market moves.

Other Treasuries data confirms the tendency toward lower rates across the yield curve. All my Treasuries setups - from the 30-day Fed Funds contract out to the 30-year bond - are bullish. (See the table on the "Latest Signals" page for the exact dates these signals started and the results for these setups.) My 10-year Treasury setup has given its second straight renewed bullish signal, while my 30-year bond setup has now given its fourth consecutive renewed bullish signal. See my note from last week for more on the bullishness of my 10- and 30-year setups. My guess is all this is bullish for equities and the reflationary trade - e.g., precious metals - but I think it also portends major economic troubles ahead. Will reflation crash on the shores of recession? Your guess is as good as mine.

Other highlights from the latest COTs report:

- My COTs Agriculture Composite Index has rebounded smartly after last week's big dip. It now stands at 0.52, up from the previous week's 0.25. One reason: the commercial traders in wheat futures and options, already on a bullish signal, have again bumped up their net long position as a percentage of the total open interest. They've also given a 10th straight bullish signal.

- The latest COTs report suggests the recent explosive rise in precious metals prices may not yet be at an end. The small traders in gold and silver continue to be resolutely gloomy about bullion despite the ramp-up in prices, as they've been since the summer. The latest COTs report shows the gold small traders have reduced their net long position to the smallest it’s been since late June. That was just before the price of gold exploded from below $640 an ounce to peak above $830 in early November. Bullion prices have since retreated, but my guess right now is the COTs data may be trying to tell us this is a temporary spot of weakness, not a new downtrend for precious metals.

I use a setup based on the gold small traders to trade the Canadian Gold iUnits ETF (symbol XGD, trading in Toronto). This setup works by trading opposite to the small traders when their net position hits specific bullish or bearish extremes. This setup flipped to bullish back in May, and the latest COTs report gave me a renewed bullish signal for XGD.

My setup for silver works by trading opposite to the silver small traders. It’s been long since July, when the silver traders hit a bearish extreme in their net position. (Disclosure: I’m long both XGD and iShares Silver Trust, SLV.)

The COTs data for the U.S. dollar index supports this generally bullish view for the precious metals. The latest COTs report shows the “smart money” commercial traders—the folks with the best market information in most, though not all, markets—again reducing their net long position as a percentage of the total open interest, their seventh such decrease in a row. Their positioning is now decidedly bearish in comparison with the recent historic data.

However, I should point out that my trading setups for gold itself, the HUI Gold Bugs Index and USERX Gold Fund all flipped to bearish in late September, and they remain on that bearish signal as of the latest COTs report. These three setups are based on trading on the same side as the commercials. The latest COTs report shows them again reducing their net long position, and now they stand at an entirely neutral level in comparison with past data.

So they remain far from flipping back to a bullish signal. Sorry, gold bugs! These bearish signals did presage the current bout of weakness for the sector, but perhaps the overall COTs gold data is telling us the recent selloff is but a pause, not an end to the precious-metals bull.

COTs Call for Lower Rates, Still Love XGD, But Mixed on Equities

Lots of strident world-coming-to-an-end talk out there as the markets melted down and up and back down this week. Meanwhile, we're up to our arses in white fluffy snow up here in the Eastern Townships of Quebec. Some of you out there might think that's frightening, but what I see when I look out the window is nature's purest beauty. A couple of deer passed outside earlier to complete the picture.

Right, so what of those amazing little Commitments of Traders reports? What wisdom did they impart this afternoon? Overall picture: looks like the bull is still quite alive, though the current weakness may continue. On the bullish side of the ledger: A renewed bullish signal for my Russell 2000 setup. Plus: lots of bullishness from the Treasuries data, suggesting further interest rate declines to come. Hear that, Bernanke? Also very interesting: a renewed bullish signal for my XGD Canadian Gold iUnits setup. Nice.

But a couple of surprising developments from my two composite indexes for equities and agriculture. My COTs U.S. Composite Equity Index, for one, remains on a bullish signal, but it has dropped to a barely positive 0.04 from last week's 0.19. Oh-oh. Check "Latest Signals" on the right for the complete list of renewed signals. And stop in early next week for more highlights from today's COTs.

Subscription service: Lots of people have asked whether I was going to start a paid newsletter. I hadn't really planned to do so when I created this site, but recently I've been thinking about the future of COTs Timer and am contemplating putting many of the signals in a paid subscriber-only section. I still intend to keep a large number of the setups here for free because that's just the kind of guy I am and I believe in spreading the word about this valuable government data. But I'm not a charitable institution, so continuing to offer all the data for free just doesn't make sense any more. My apologies. I'll give more details soon. The change should come early next year. Your support and input have been very appreciated and educational. Hope you did okay this week and best wishes for a relaxing weekend.

Updates: Russell 2000 Chart & Seeking Alpha Story

Want to see how the Commitments of Traders help me determine market direction? I've just posted a chart showing my Russell 2000 setup in action at my Latest Signals page. Also, check out my COTs-inspired ramblings on the agriculture sector at Seeking Alpha. Good luck today.

Blog Update: Spreadsheet and DIY Guide Posted

Want to crunch your own Commitments of Traders numbers? It's simple - and free. I've just linked a new page in the Navigation bar to help do-it-yourselfers. You'll find my S&P 500 spreadsheet updated as of the COTs report issued last Friday. (My Russell 2000 spreadsheet wouldn't upload into Google Docs for some reason, but it's still available for downloading at FuturesAndOptionsTrader.com. Thanks guys!) I've also included a bunch of info to walk you through what to do and some important risk information. Please read the instructions and information carefully, and if you've got questions, write a comment. Q-&-As on that page might just answer someone else's questions, too. Have fun!

Who's Smarter—Bernanke or the COTs? Plus: Lots to Say on the Buck, Silver and Gold, the Treasuries, Equities and Agriculture

Some highlights from last Friday's Commitments of Traders report:

- In the 30-year Treasury, commercial traders flipped from a net long to a net short position as a percentage of the total open interest. They haven't been this bearish on the bond since early 2005 (meaning they think the bond's yield will rise). Since the commercial traders are the "dumb money" when it comes to guessing the direction of Treasury yields, this is actually a bullish sign for the bond.

So who is the smart money for the bond then? The large speculators. And in bond futures and options, they've just gotten super-bullish, flipping to a net long position for the first time in nearly two years. The combination of these two moves gives my trading setup for the 30-year Treasury a renewed bullish signal—the third such signal in a row in this setup (meaning the data is saying the yield is likely to fall). Get smart, Bernanke. You can't fight the COTs. Rates look like they're still headed down, as this note today from Montreal's BCA Research says, too.

- The "smart money" small traders in the 10-year Treasury have also suddenly gotten majorly bullish, sharply taking in their net short position and giving me a renewed bullish signal.

- In equities, the COTs are still leaning bullish. The wrong-way S&P 500 small traders, whom I fade in my setup for this market, hit a 12-year extreme of bearishness with their huge net short position in mid-October. They've reduced that position a tad in the latest COTs report, but only slightly so, leading me to think the market won't fall much further.

- In the precious metals, I think "yikes!" sums things up nicely. What carnage! As I mention in my report on Kitco, sharp selloffs like Monday's are one of the reasons it’s so hard to trade many commodities—the “ulcer factor” is just too high. Here’s a typical scenario: After weeks of happy upside drawing in lots of latecomer small investors to the party, a spot of bad news sparks a vicious run, and the little guy jumps ship, feeling burned. Then, the market recovers and rises again! In fact, losing money in precious metals early in my trading life was one of the best tuition fees I've paid for learning how to trade. (Here's a free tip for you: don't trade off oscillators!) So what does the latest COTs report say about the metals?

The data issued by the Commodity Futures Trading Commission on Nov. 9 shows the small traders in silver futures and options hitting a historically bearish extreme in their net position as a percentage of the total open interest. The “dumb money” little guys have suddenly reduced their net long position to the lowest it’s been since Nov. 2005. Back then, silver responded by exploding out of an 18-month trading range, nearly doubling in price over the ensuing half-year.

The latest positioning of the wrong-way crowd, whom I trade opposite to in my setup for silver, has given me a renewed bullish signal for silver. This means I’m staying long iShares Silver (SLV).

In my gold setups, I didn’t get any new or renewed signals from last Friday’s data. This means all my existing signals still hold: bearish for gold itself, the HUI Gold Bugs Index and the USERX Gold Fund; and bullish for XGD Canadian Gold iUnits. (Personal disclosure: I am long XGD.) In fact, the small traders in gold futures and options are so bearish right now that they are a hair away from giving a bullish renewed signal for my XGD setup. So this suggests Monday's selloff may just have been a temporary pause. (I should point out, however, that trading off the COTs involves lots of volatility, especially in riskier markets like commodities. So there’s no way to know for sure what the markets will really do, and my setups could very well be wrong!)

My setups for platinum (bullish), copper (bearish) and the U.S. dollar index (bearish) are also unchanged. In fact, the futures data for the U.S. dollar index seems to indicate the greenback may face continued downward pressure, as the “smart money” commercial traders continue to reduce their net long position as a percentage of the total open interest—their seventh straight such reduction since their position peaked in the Sept. 18 COTs report. Now, the commercials have a decidedly bearish tilt when compared to recent data—although I should note they’re still nowhere near registering a renewed bearish signal in my setup for the U.S. dollar index.

- My setup for wheat shows the commercials again giving a renewed bullish signal—the ninth signal in a row. Their extreme net positioning started in mid-September, late in the recent run-up in wheat prices, and has continued through the recent wheat selloff, suggesting they believe there are higher prices to come.

- On a slightly sour note, however, my COTs Agriculture Composite Index—which gives signals for the DBA PowerShares Agriculture Fund and is based on my setups for wheat, soybeans, corn and sugar—has turned down to 0.25 from last week's 0.57. The dropoff is due almost entirely to an increase in bullish sentiment among the "dumb money" large spec crowd in soybean futures and options. The index's fall could suggest there may be a spot of trouble for DBA, but it is still on a bullish signal and maintains a slightly bullish tilt (it's above 0)—so not really a reason for panic. Good luck this week, and see you back here Friday.

Blog Updates: Stories on Banks, Markets

Just posted a column I wrote in today's Montreal Gazette on the banks titled "Don't Bank on These Shares for Awhile," on my financial stories page. (Click Investigate This! My Media Blog in the Navigation bar on the right.) You can also read my ruminations on the markets at Seeking Alpha, which has just posted my take on the latest COTs report. Check back here tomorrow (or latest Wednesday) for a more detailed report about Friday's numbers.

Was That the Market Bottom?

Was today's midday reversal the bottom? Or was the selloff into the close a bad sign of more carnage to come? I just updated my table on the "Latest Signals & Results" page with the word from my trading setups based on this afternoon's Commitments of Traders reports. Apart from a couple of renewed bullish signals for the long Treasuries (meaning still lower interest rates are likely, no matter what Bernanke & Co. say), my COTs U.S. Composite Index has bounced back up a little from last week's 0.17 to 0.19 this week. Also noteworthy: my beloved silver setup gives a renewed bullish signal, based on the ramped-up ultra-bearishness of the wrong-way small trader crowd. Nice.

I'll be back early next week with more details on all this, including the drop in my Composite Agri Index. Hope you did okay amid this week's turmoil and have a great weekend.

Updates: Gold & Composite Equity Tables

Just posted updated info on my tables on the "Latest Signals" page for my gold and U.S. Composite Equity setups. Good luck this week, and see you back here Friday afternoon.

Woes May Linger, But Equities Maintain Overall Bullish Tilt

Are we going to have a fall fall? Is the market’s incredible five-year bull run over? Ever since the summer’s subprime smash-up, analysts and traders have been super-jittery. Some experts on market seasonality warn that the autumn is typically the most turbulent time for stocks. So is this week's weakness just a prelude to the great bear market, or should we expect the usual bounce into the Christmas season? Does the data in the latest Commitments of Traders report released last Friday help us find answers? Why, yes, I think it does, thanks for asking.

The COTs reports, which detail trillions in futures and options holdings in 100-odd markets, have warned for a few weeks to expect some market turmoil, but they’re still almost uniformly bullish for equities and Treasuries, suggesting even lower interest rates are likely. All my trading setups for equities are in bullish mode, with the solitary exception of the NASDAQ 100. That one flipped to bearish as of the Oct. 9 COTs report, due to excessive bullishness on the part of the “dumb money” large speculator crowd. These folks are the big investment firms and hedge funds, which the data shows tend to be wrongly positioned at market turns. In mid-October, they suddenly hit a historically extreme net long position, which my system tells me is a warning sign that a market trend has a high chance of changing.

On the other hand, my setup for the S&P 500—based on trading opposite to the “dumb money” small traders—flipped to bullish with the Sept. 25 COTs report. The wrong-way crowd put on its largest net short position in 12 years as a percentage of the total open interest. The small traders have since slightly reduced their net long position, but remain highly bearish nonetheless, signaling more market gains are likely.

I’ve also developed a COTs U.S. Equity Composite Index based on four of my equity setups. This indicator has been in bullish mode since March. Interestingly, it remained bullish even during last summer’s correction, rightly suggesting that the selloff would be short-lived. Since hitting a high of 1.22 in late September (a reading of “1” or higher means all four setups have just given a bullish signal on average), this indicator has fallen steadily to 0.17 as of last Friday’s COTs report. I take this as a warning that the market’s weakness may not yet be quite over. Nonetheless, the indicator remains above 0, so I still see the data as showing a slight bullish tilt.

As for the Treasuries, all of my setups in this area are now bullish (meaning they’re calling for rates to fall). Falling rates should in turn be positive for equities in some measure—although they could also signal the bond market’s expectations for economic weakness. That, ultimately, may not be so bullish after all in the longer run.

COTs Still Bullish Silver, Some Gold Stocks... But Not All

Is the U.S. dollar oversold? Is gold topping out? Check my latest meanderings on the metals markets and U.S. dollar index inspired by Friday's Commitments of Traders report at the website of bullion dealer Kitco.

COTs Their Usual Sanguine Selves, But Equity Woes May Linger

Another week, another piece of toilet paper, er, I mean dollar. I mean dollar lost. So much craziness. Where do we start? Ah yes, this is where the Commitments of Traders reports come in. Such wise little numbers. I love them so. I've just posted the take from my setups based on this free government data at the main table on the "Latest Signals" page (see Navigation bar).

Looks like another super-quiet week. The COTs are their usual sanguine selves, sticking with all existing signals. My COTs U.S. Composite Equity Index has declined a smidgen to 0.17 from last week's 0.20. Not too good. But not too bad either, though. It's still above zero, which I'd describe as a bullish tilt, and most importantly, it's still on a bullish signal. Might mean the market's still not quite out of the haunted woods yet. As for my COTs Composite Agriculture Index, it's also declined a wee bit to 0.56 from last week's 0.62. But still on a bullish signal, too. For other deep thoughts about today's COTs report, check in back here early next week as per usual. Hope you had a good week and have a happy weekend.

New Setups Say... Bullish for 5-Yr Treasury and Platinum

Isn't it funny how life sometimes puts something special in front of you just when you're despairing? Here I was pulling my hair out trying to work out a decent trading setup for platinum based on the Commitments of Traders reports. After going over the data for a couple of days, I worked out a just barely passable setup based on following the commercial platinum traders.

It scores at the 94-percent confidence level for profitability, and at a sad-sack 73-percent confidence level for beating the underlying market (meaning the average trade would be expected to beat the underlying 73 percent of the time). One consolation is that the setup was in cash 34 percent of the time, but nonetheless, I hesitated to include it in my list. I finally decided to do so with the caveat that I see it as one of several possible indicators for platinum prices, rather than a stand-alone tradable setup (like some of the other less statistically robust setups in my list; see the "Latest Signals" page for the full results). The setup flipped to bullish in the Aug. 14 COTs report, with an eight-week trading delay (meaning executed for the open of Oct. 15).

So I turned my attention to the 5-year Treasury. Holy Mother of God, now that's some fine-looking numbers. A 99.9-percent confidence level for profits, and 99 percent for beating the underlying. That beats even my 13-week T-bill and silver setups, which score next highest. It's based on a combination of my best setups for the large speculators (the "smart money" in this market; yes, you read right) and trading opposite to the "dumb money" commercials—and going to cash when the two groups of traders don't concur.

Yet again, the Treasuries COTs data turns popular notions on their ear. For newbies, the common thinking out there is that the commercials are the ones to follow while the large specs should be faded. My research has found that, while this is true in most markets, it's not in all. My 5-year Treasury setup turned bullish as of the July 31 COTs report (meaning bearish for the yield). This is definitely one I'll be watching with interest.

Easening in the Offening, Say COTs

The world waits as Bernanke & Co. deliberate. I did a quick check back through my Treasuries data from the Commitments of Traders reports to see what I could glean about what might happen at 2 p.m. today. As you may recall, my Fed Funds and 13-week T-Bill trading setups based on the COTs data are on bullish signals, signaling lower short-term interest rates.

The Fed Funds signal, which came with the Sept. 25 COTs report, is especially interesting because it ended a two-year bearish call that coincided nicely with the Fed tightening campaign. In the case of the T-Bill, my setup is based on trading on the same side as the small traders in the 3-month Eurodollar contract. These guys haven't been this bullish since the July 29, 2003, COTs report, near the bottom of the bear market, just before T-Bill rates started to rise. In the very next COTs report, they suddenly flipped to a highly bearish net short position. The change caused my setup for the T-Bill to go from bullish to bearish, and it stayed that way for the most part for the next two years, until Oct. 2005. This is one of my most statistically robust trading setups (see the "Latest Signals" page for more details), so I really enjoy seeing what it has to say. Starting in the July 24 COTs report, it gave a series of 11 bullish signals, and it just gave another one in last Friday's data. I think that means some strong easing measures are in the offing...

So do you think gold and silver are topping? How high can they take it? Is it going to $5,000, as one reader informed me the other day? Is the U.S. dollar kaput? Read my take on the precious metals, copper and U.S. dollar at Kitco.com.

It's Quiet - Too Quiet

Few renewed signals out of today's Commitments of Traders report issued by the Commodity Futures Trading Commission, and no new signals. My existing (mostly) bullish equities signals all still hold, but my COTs U.S. Equities Composite Index has taken another dive. It's fallen to 0.20 from last week's 0.46, the fourth straight drop. It's now well below where it stood during last summer's meltdown, when it bottomed at 0.40. On the other hand, it's still got a bullish tilt (since it's above 0), and most importantly, it remains solidly on its bullish signal. (A -0.8 reading is needed to flip it to bearish.) So the index might just be signaling that the market indigestion we're seeing isn't quite over yet.

Also interesting: my new COTs Agriculture Composite Index, based on my setups for wheat, sugar, corn and soybeans, has risen to a fairly bullish 0.62 from last week's 0.36. (Like with my equities composite index, a "1" here means all four setups just gave a bullish signal for execution on next week's open.) As well, my setup for the 30-year Treasury has given a renewed bullish signal, as has the setup for the 13-week T-Bill, hinting at lower interest rates to come. Listen up, Helicopter Ben. I'm busy working on my Hallowe'en costume during your meeting next week so I'm not available to brief you guys, but you're welcome to visit my "Latest Signals" page for the full details and to check in early next week with more thoughts on Friday's COTs data.

Portfolio Update: Dumped Energy Short

Just updated my portfolio page (see Navigation bar) to reflect my sale of the 200-percent leveraged DUG UltraShort Oil & Gas ProShares ETF just before the close yesterday. DUG has recovered somewhat in recent days, helping to offset losses in my long equity holdings as the market digests its new subprime woes, but I needed to raise some cash for another project. Technically, energy stocks look weak, as this chart of OIH vs. USO shows. But as Stephen Vita often points out at his great AlchemyOfTrading.com blog, citing Paul Tudor Jones: "Losers average losers." So DUG was the one to go.

New Composite Agriculture Setup Bullish

Just posted the results of a new composite indicator I've created for the Goldman Sachs Agricultural Sub-index, based on the Commitments of Traders reports. (See table on "Latest Signals" page.) My COTs Composite Agriculture Index combines my trading setups for corn, soybeans, wheat and sugar. It's got a 16-2 win-loss ratio and scored at a 99-percent confidence level for profitability, which is pretty good, if I say so myself. The setup gave a timely bullish call with the Aug. 14 COTs report and proceeded to yield six straight bullish signals. I'll create a table with all the historic data and post it some time soon. The setup goes long when my Comp Ag Index hits 0.9 or more standard deviations above its 104-week moving average and goes short when it falls to 0.9 standard deviations or more below the average.

One possibility for trading it would be the DBA PowerShares Agriculture ETF, which has pretty good volume even though it's been around less than a year. DBA has a 0.75 correlation with the GSCI Ag Sub-index, has been about half as volatile, but alas has risen only about half as much since the beginning of 2007.

COTs Signal Lower Fed Funds Rate

Some highlights from the latest Commitments of Traders report issued last Friday by the Commodity Futures Trading Commission:

- What will the Fed do at its next meeting on Oct. 30 and 31? Large speculators are signaling a lower Federal Funds rate at some point in the future, according to my trading setup based on the COTs data. The large specs are the large investment firms and hedge funds. Amusingly enough, these geniuses are normally considered the "dumb money" because they're often wrongly positioned at market turns. However, my research has found that's not true in every market. In fact, in the Treasuries, they and the small traders are actually the "smart money," while the commercial traders are the dummkopfs. In the Fed Funds futures and options, the large specs flipped my setup to a bullish signal with the Sept. 25 COTs report and have now given four consecutive bullish signals. This is based on their fast-growing net long position as a percentage of the total open interest, which has now hit a level not seen since Jan. 2006.

- If you can't quite wrap your mind around the fact that the large specs can be the smart money, rest assured: in my S&P 500 setup, the small traders are back to their usual moronic ways as the "dumb money." And they're still super-bearish as of the latest COTs report, with their net short position falling 1.29 standard deviations below its 17-week moving average. This is bearish enough to give me another bullish signal - the fourth in a row for this setup. Which suggests the COTs see the current market difficulties as a mere hiccup.

- But here's another twist for you: In my setup for the SOX Semiconductors, the large specs are back to being the smart money. Don't shoot the messenger: the funny little COTs numbers work in mysterious ways; no doubt this is why so few have been able to make much headway with them after all these decades. What say the NASDAQ 100 large specs? They're mega-bullish. And that means a fourth renewed bullish signal for my SOX setup, which is based on the NASDAQ 100 COTs data.

- Similarly, in my natural gas setup, the large specs also turn out to be the smart money. And they're still highly bearish, giving a renewed bearish signal in the last report. Sorry, gas bulls.

- For my read on the metals, check out my report this week at Kitco.com. Good luck this week, and see you back here Friday.

Energy Traders Avoid Scrutiny: GAO

Who oversees the post-Enron energy derivatives market? Who knows! Debate is heating up again about the Commodity Futures Trading Commission's role in overseeing energy trading in the wake of the Amaranth hedge-fund blow-up. The latest to weigh in is the Government Accounting Office, with a report calling for changes in how CFTC operates and expanded powers for the agency. See the "Futures & Options News" page to read the report and several news stories about the debate.

Portfolio Update: Reduced Long Equity Position A Tad

Just updated my portfolio page to reflect my sale of a tech fund based on my recent bearish signal for the NASDAQ 100. This new signal, based on fading the large speculators when their futures and options net position hits extremes of bullishness and bearishness, was based on the Commitments of Traders report issued Oct. 12. My NASDAQ 100 setup works best with a one-week trade delay, so I executed the signal this past Monday. Check the "Latest Signals" page for more details on this setup, and "How It Works" to learn more about all this COTs stuff and my system based on these interesting government reports.

COTs Timer in SFO Mag

Check out the current issue of Stocks, Futures and Options Magazine for a story I did on the Commitments of Traders reports and various ways of using them in your trading and investing. Also in SFO's November issue: this interview with Sharon Brown-Hruska, former chair of the U.S. Commodity Futures Trading Commission, which publishes the weekly COTs reports. Her topics include the CFTC's recent jurisdictional battles with FERC, which I've also chronicled on my COTs news page.

New Setup Down on Pound

Just posted results and the latest signal for my newest trading setup based on the Commitments of Traders reports for the British pound. The setup has been on a bearish signal since May 2006. It's based on trading with the commercial traders when their net futures and options position hits certain extremes of bullishness and bearishness as reported by the U.S. Commodity Futures Trading Commission in its free weekly reports. Read all the juicy details in the table on the "Latest Signals & Results" page (see Navigation bar).

COTs Still Bullish, Mostly

What a miserable day in the markets. Ghosts of '87 seem to have folks spooked. What say the wise little numbers of the Commitments of Traders report issued today at 3:30 EST by the U.S. Commodity Futures Trading Commission? Ah, yes. Calm and soothing, as usual.

The latest report strikes a fairly reassuring tone for bulls, with renewed bullish signals for the S&P 500 and Semiconductors and nary a bearish signal in sight for equities. Last week's new bearish signal for the NASDAQ Composite Index is the only downer note among my equity setups. (That setup works best with a trade delay of one-week, meaning execution on next week's open of trading.) But somewhat troubling: My COTs U.S. Equity Composite Indicator, based on four of my equity setups, has declined again to 0.46 from last week's 0.58, the third straight decline. That's just a hair above where it stood as of the Sept. 11 COTs report (0.42) and the July 24 report (0.40) during the "Crash of '07." However, this indicator is still on a bullish signal. It's also far from the "-1" reading that would mean a bearish signal was just given on average by all four setups, for execution on next week's open.

See my "Latest Signals" page in the Navigation bar for more of my latest signals, and click "How It Works" for, you guessed it, how all this COTs stuff works. Check you back here early next week for a more detailed report on today's COTs data. Hope you fared well this week and have a relaxing weekend.

Blog Updates, New Setup for Heating Oil Bearish

Just updated the three tables on my "Latest Signals & Results" page (see Navigation bar). The main table will now include signals for my latest setup: heating oil. This one is based on trading opposite to the small traders in heating oil futures and options when they hit extremes of bullishess and bearishness. It's based exclusively on the fascinating free government data provided in the weekly Commitments of Traders reports by the U.S. Commodity Futures Trading Commission. The setup, which boasts some pretty good past results and statistical confidence levels, has been bearish since last March, a bit of a dog of a call, unfortunately, but the setup nonetheless looks pretty interesting.

I've also updated my tables for my COTs U.S. Composite Equity Indicator - based on four of my equity setups, also derived from the COTs data - and my gold setup's signals and running results. See you back here later with this afternoon's COTs numbers.

Drop in Clicks Signalled Market Woes?

Happy Birthday to us, COTs Timer. Last Saturday marked five months in full operation mode for this blog. I've had over 17,000 absolute unique visitors and 75,000 page views from 112 countries (top five: the U.S., Canada, Australia, the UK and Italy) and 2,796 cities (top five: Vancouver, Toronto, Montreal, New York and LA). Thanks for all your support and input!

What's interesting about all this is a curious phenomenon I've heard about from other financial bloggers: visits (and Google Ad clicks) seem to be correlated with market ups and downs. This was especially notable during the summer's market correction. (I've also noticed a drop-off in messages posted to a market list I'm on when things go sour.) I've just done a study of this, and sure enough, there's quite a fascinating correlation. Page impressions have a 0.49 correlation with the S&P 500 (same day open price), while Ad earnings have a 0.24 correlation. So it would appear people are not only less willing to investigate the resources represented by the ads when the market goes down; they also tend to explore less financially online, period. People are simply cocooning.

But what's far more interesting is the click data also seems to have some predictive value. Page impressions have a 0.52 correlation with the S&P 500 open price one trading day later, and the correlation keeps rising to peak at 0.63 for eight trading days out. Not bad! In other words, ups and downs in click numbers are often reflected in market prices eight days later on average.

Word of warning: My number of page impressions has slowly dropped since an interim peak on Oct. 9, falling by 60 percent as of yesterday. This has of course roughly coincided with the recent market selloff. I'll keep you posted about significant changes in this rather interesting indicator, including when (or if!) it starts heading back up.

Small Traders Mega-Bearish on S&P 500

I'm back with some highlights from the latest Commitments of Traders report issued Oct. 12 by the U.S. Commodity Futures Trading Commission:

- The "dumb money" small traders seem to be expecting some kind of crash again. What else is new. In S&P 500 futures and options, they now have a larger net short position as a percentage of the open interest than at any time since Aug. 1995. With their position now standing at two standard deviations below its 17-week moving average, I get another bullish signal - the third in a row - for my S&P 500 setup, which relies on fading these unfortunately not very market-savvy individuals. Smarten up, folks. You're getting ripped off.

- Meanwhile, the "dumb money" large speculators are going mental in NASDAQ 100 futures and options, flipping to a large net long position and, this week, hitting that magic point that switches my setup from bullish to bearish. Just a few weeks ago, in late August and early September, as markets were shooting up, these guys were super-gloomy. Now, they've suddenly become hugely pumped on the markets. Oh-oh.

- Generally, though, a fairly bullish tone emerges from the last COTs report, with renewed bullish signals in the Semiconductors, NASDAQ composite index, Dow Jones industrials and Nikkei. Likewise, as mentioned Friday, my COTs U.S. Composite Equity Indicator gives overall benediction to the markets with a fairly bullish 0.58 reading, though that's down a fair bit from last week's 0.98. (A "1" means the four equity setups that make up this indicator are all on average giving a bullish signal to be executed on next week's open.)

- Astute readers will notice that my setups for the Semiconductors and NASDAQ 100 seem to contradict each other; the former trades with the large specs while the latter fades them. Oddly enough, they both have proven historically profitable and statistically viable in my testing. That's because they work on very different horizons as reflected in the values I use for the moving averages and standard deviations.

- For my take on the precious metals, check my piece at Kitco.com. Good luck this week.

NASDAQ 100 Goes Bearish

My trading setup for the NASDAQ 100 has flipped to bearish. This is because the "dumb money" large speculators have suddenly gone from being heavily net short in their futures and options positions to a historically extreme net long position as a percentage of the total interest, according to today's data from the U.S. Commodity Futures Trading Commission.

The large specs, whom I fade in my setup for the NASDAQ 100, have hit a specific level of bullishness that has signaled a good chance of a market turn, according to past data. The new signal brings to an end this setup's bullish run since the March 27 COTs report (executed on April 9 with an opening price of 1,816.99; today's close was 2,177.99).

The new signal and much more are all updated on the table at my "Latest Signals & Results" page in the Navigation bar, which shows all my signals from this afternoon's Commitments of Traders report. This table also gives important details about the NASDAQ 100 setup, including risk data and the largest past drawdown. The setup works best with a one-week trade delay, meaning I will execute the trade for the open on Monday, Oct. 22. See my "How It Works" page to learn what I do after a new signal.

In other news, my U.S. Composite Indicator, which is based on four of my COTs-based equity trading setups, has declined again to a reading of 0.58 from last week's 0.98. (For newbies, a "1" means all four setups are on average giving a bullish signal for execution on the open of next week's trading, while a "-1" means a bearish signal across the board.) The falling number could signal some coming market volatility, although it still maintains a fairly bullish tilt. Hope you have a good weekend and fare well next week. Drop in again early next week to see other highlights and thoughts from today's COTs report.

New Trading Setup: COTs Frown on Sugar

Just updated my table on the "Latest Signals" page with results from my new trading setup for sugar. The setup has just flipped to cash as of the Sept. 25 COTs report. Sugar, alas, is a hard one to trade, it seems. No wonder, too. Prices have been all over the map, starting above $14 in 1995, dropping to $5, then careening back and forth like a drunk driver for a while to arrive at $12 by the start of 2007. My sugar setup works by trading on the same side as the commercial traders when their net futures and options position hits specific historic extremes of bullishness and bearishness. The setup worked best following only the bullish signals with a long position and going to cash on a bearish signal. While the bearish signals were cumulatively profitable since 1995, when the data starts, they produced super-volatile results, including one drawdown of 79 percent. The setup proved to be slightly more statistically robust using only the bullish signals (though still not highly so), while being invested only 57 percent of the time.

Like all my setups, the sugar setup is based solely on the Commitments of Traders reports issued for free weekly by the U.S. Commodity Futures Trading Commission. Some analysts said it couldn't be done, suggesting this valuable government data shouldn't be relied on for trading without the use of other indicators. Not true. Most markets I've looked at have yielded setups that historically beat the underlying markets and stood up well in terms of their profitability confidence intervals.

Falling Interest Rates to Lift Markets (Or Spell Trouble)?

Interesting stuff in the latest Commitments of Traders report issued by the U.S. Commodity Futures Trading Commission. Generally, a sunny forecast for you market bulls, including falling interest rates and rising equities. Here are some highlights from my trading setups based on this fascinating, free government data:

- Will the Fed lower interest rates and if so by how much? My setup for the 30-day Fed Funds contract has just flipped to bullish for the contract (meaning bearish for the rate), after over two years of being bearish. The COTs report issued last Friday, Oct. 5, gave me a second straight bullish signal. This setup is based on trading the same side as the large speculators, who have built a historically extreme bullish net long position in this market.

- Similar news from my setup for the 13-week Treasury Bill. This one, based on trading on the same side as the small traders, is now giving its 11th straight bullish signal (meaning it's calling for the T-Bill rate to fall). Falling interest rates should be good for equities, but they could also signal economic problems, which would ultimately be not so good.

- Large specs are super-bearish on natural gas. My setup for this market trades on the same side as the large speculators, and they've given a slew of 24 bearish signals in the past 28 weeks.

- A cohort of renewed bullish signals for equities - namely, the NASDAQ composite index, S&P 500, Semiconductors, Russell 2000, TSX, Nikkei and my U.S. Composite Equity Indicator, which is based on four of my U.S. equity setups.

Portfolio Update

Just updated my portfolio page (see link in Navigation bar) to reflect my trade today based on my Nikkei bullish signal from the Aug. 28 Commitments of Traders report. Devotees of this space will recall that trade setup has a five-week trade delay, so execution was for the open of trading this week. More details on that setup are available at my "Latest Signals" page. The setup fades the large speculators when they hit extremes in their net futures and options position as a percentage of the total open interest as reported by the U.S. Commodity Futures Trading Commission.

New Setup: COTs Like the Taste of Wheat

Just posted results and signals for my latest trading setup based on the Commitments of Traders reports. This one is for wheat. Check the "Latest Signals" page for the details. It's just flipped bullish with the Sept. 11, 2007, COTs report and, as of last Friday's data, has now given three straight renewed bullish signals. This is based on trading with the commercial traders - the smart money insiders in most markets, though not all! - when they hit specific extremes of bullishness and bearishness in their net futures and options positions as a percentage of the total open interest.

New Setup: Soybeans Bullish

Just posted results and the latest signal for my newest trading setup for soybeans. It's based on fading the small traders in soybeans futures and options, as reported in the Commitments of Traders reports issued weekly for free by the U.S. Commodity Futures Trading Commission. Check the "Latest Signals & Results" link.

COTs Content With Market Rise

Just updated my "Latest Signals" page with this afternoon's data from the lovely and talented Commitments of Traders reports. A nice array of renewed bullish signals for equities confirms the market's optimistic tilt of late. My U.S. Composite Equity Indicator, based on four of my trading setups built around the COTs reports, has given a second straight bullish signal, though it's fallen from a super-bullish 1.22 to a merely quite bullish 0.98. For those of you not in the know, a "1" reading or higher means all four setups have just given a bullish signal for execution on the open of next week's trading.

I'll be back here early next week with more details on this latest data from the Commodity Futures Trading Commission, which reports on trillions in futures and options holdings in 100-odd markets.

Note to Self: My Nikkei bullish signal from the Aug. 28 COTs report calls for being executed on the open of trading next week. (This is based on the setup's five-week trade delay. For more details on this setup and how all this works, check the "Latest Signals" and "How It Works" links.) Hope you did well this week and have a great weekend.

Corn: New Setup is Bullish

I've just posted details of a new trading setup for corn that I've developed based on the Commitments of Traders reports. See my "Latest Signals" page in the Navigation bar. The setup is based on fading - trading opposite to - the small traders in corn futures and options when they hit specific historic extremes in their net position as a percentage of the total open interest. The setup flipped to bullish in the COTs report dated June 26 and subsequently saw 12 straight bullish signals, matching the only other previous such bullish run back in 1998.

Federal Funds Setup Flips to Bullish: COTs Say Rate Will Fall After 2-Yr Bearish Signal

I've just posted details of a new trading setup I developed based on the Commitments of Traders report for the 30-day Federal Funds. The timing couldn't have been better. After a two-year bearish signal (meaning the setup called for the Fed Funds rate to rise), it has just flipped to bullish in the last COTs report.

(The signal is for the Fed Funds contract, so a bullish signal means the Fed Funds rate is expected to fall. NOTE: I posted incorrect information about this setup's latest signal here yesterday that wasn't quite up to date. I just realized my error and wanted to correct this post as soon as possible.)

I think the results for this new setup are quite interesting. You can check them out at the "Latest Signals & Results" page in the Navigation bar. The setup's bearish signal accurately called the rise in the Fed Funds rate from 3.01 percent in June 2005. In fact, watching this baby correctly call the rate's ups and downs amid the dot-com bust and market recovery is a thing of beauty. I hope to share it with you soon with a table showing all the signals.

The setup is based on trading on the same side as the large speculators when they hit specific historic extremes in their net futures and options position as a percentage of the total open interest. That's right, the same side. Ordinarily, we consider the large specs to be the "dumb money" of the markets, but I've found that's not always the case, especially not in any of the Treasury markets.

Also: Just updated the results table for my gold setup with the last trade completed this Monday. (Click "Latest Signals.")

Record Nikkei Position: Mega-Bullish

Some dramatic moves in the last Commitments of Traders report. Here are some highlights:

- The "dumb money" large speculators in Nikkei futures and options have dramatically increased their net short position, giving me a second straight bullish signal. In fact, they've never held such a large net short position as a percentage of the total interest since the data began in 1995. The extreme positioning coincides with my new bullish signal from the Aug. 28 COTs report. My Nikkei trading setup based on the COTs data has a five-week trade delay, and I will execute it for the open of trading next week. (Click "How It Works" and "Latest Signals" in the Navigation bar for more info.)

- S&P 500 small traders suddenly reversed course from a fairly bullish net long position to a near-record of bearishness - 3.24 standard deviations below the 17-week moving average. This flipped my signal for this setup from bearish to bullish. That's based on fading the small traders when they hit extremes in their net positioning.

- My setup for the 13-week T-Bill gave its 10th consecutive bullish signal. That's based on trading on the same side as the small traders in 3-Month Eurodollars. The run started with the July 24 COTs report, at the beginning of the Credit Crunch of 2007.

Blog Update: My Portfolio Page

Just updated my portfolio page to reflect trades this morning based on Friday's bullish signal for the S&P 500. Note that I haven't dumped my XGD Canadian Gold iUnits or SLV iShares Silver Trust positions, despite the new bearish signals for gold and gold stocks.

Those bearish signals were based on the extreme bearishness among commercial traders in gold futures and options. My setups for XGD and silver, on the other hand, are based on fading the small traders in gold and silver. The gold small traders are at a neutral level, while silver small traders are actually quite bearish. So my existing signals in those two setups still hold. Best of luck today.

Wow. New Signals Galore: Bullish S&P 500, SOX; Bearish Gold, HUI, USERX Gold Fund

Wow. It's just that crazy. The latest Commitments of Traders report has given an astonishing array of new signals for my trading system based on this fascinating government data:

1) After a summer from Hell for the markets, my trading setup for the S&P 500 has flipped to bullish.

2) After a wild ride to the stars, my setups for gold, the HUI Gold Bugs Index and USERX U.S. Gold Fund have gone bearish. Sorry, gold bugs and dollar-haters!

3) The SOX Semiconductor Index has also gone to bullish after six months in the bearish camp.

And that's not even including an armada of renewed signals in other setups: bullish for the Russell 2000, Nikkei and 13-week T-Bill; bearish for copper and natural gas. Doncha love this stuff?? There's also a renewed bullish signal for my COTs U.S. Composite Equity Indicator, which incidentally has gone ballistic slap-happy. It's shot up to a reading of 1.22 from last week's 0.53. As devotees of this space will know, a "1" means all four of my equity setups that make up this indicator have just registered a bullish signal, on average, for execution on the next open of trading. The reading is now higher than at any time since last April.

Check "Latest Signals & Results" in the Navigation bar for more details on these signals and the setups they go with. For more on my system, see "How It Works." See you early next week with some more thoughts on all this craziness. Hope your week went well, and best wishes for the weekend.

Updates: Gold, Composite Equity Results & More

Just updated my results tables with the most recent numbers for my gold and U.S. composite equity setups based on the Commitments of Traders reports. Both still doing swimmingly, thanks for asking. Check both tables on the "Latest Signals & Results" page.

I've also been continuing to reorganize and update the resources on my investigative journalism pages (see "Alex Roslin's Articles"), including a number of links for market research on company disclosures, SEC cases and more, plus other research tools for freedom of information searches, legislative matters, the worlds of intelligence and the military and other areas. Here are two especially interesting market-related websites I recently found:

1) The White Collar Fraud blog of convicted ex-Crazy Eddie stock swindler Sam Antar, now a convert to the light side and chronicler of corporate fraud, who has created a provocative blog full of great resources.

2) And for those dog days of autumn, HedgeFunnies.com, a satirical look at the markets and the cretins who inhabit them. Good times.

Energy Trade Update

I've been watching my DUG UltraShort Oil & Gas ETF drop with dismay in recent weeks and thought I should check where things stand vis-a-vis my stop for this setup. I'm using DUG to short energy stocks in accordance with my bearish signal for Canadian Energy iUnits (XEG).

I would have used the Horizons S&P/TSX Energy Bear Plus ETF (HED) instead, but it's only been on the market since June. (I got my bearish signal in the April 3 COTs report, for execution with a three-week delay on the open of trading April 30.) Average daily volume is still only 27,000, less than the 50,000 units needed for adequate liquidity to buy it, according to Don Vialoux.

DUG has yoyo'd up and down like crazy since April, especially during the Subprime Meltdown of 2007, when it shot up in a huge way. This morning, the ETF is down 28 percent since the April 30 open. Since DUG is a 200-percent leveraged ETF, this effectively means a 14-percent drawdown for purposes of my risk-management stop rule. The 14-percent loss exceeds my 8-percent stop for XEG, but not my 19-percent stop for Oil Services Holders (OIH). As I explain in "How It Works" (see Navigation bar), I set my stops in my trading system based on the largest intratrade drawdowns that my setups have seen in the historic data.

Sadly for me, XEG itself is only up 2.4 percent since the open April 30! So the signal wasn't so wrong when it came to XEG. The problem is that DUG clearly isn't very suited to fading XEG. Unfortunately, HED isn't yet an option due to the volume problem. So where does that leave me? I'm going to start using OIH for signals for this trade since DUG's fortunes are clearly more closely tied to those of OIH. I'm also on "stop watch" for dumping my holding if it exceeds the 19-percent loss.

New Article Post: U.S. Dollar Rout

Just posted my investing column from today's Montreal Gazette newspaper, "U.S. Dollar Feels Pain as Loonie Flies High." See "Alex Roslin's Articles" link in the Navigation bar.

Dumb Money Shuns the NASDAQ - Duh!

Large speculators remain ultra-gloomy about the NASDAQ 100, according to the latest Commitments of Traders report issued today at 3:30 Eastern time. Does that mean it's time for me to bail on tech stocks?

Uh, no. These guys aren't called the "dumb money" for nothing. My trading setup for the NASDAQ 100 is based on trading opposite to the large specs - yes, those hedge funds and investment firms to whom we pay the big bucks to manage our pensions and savings - when they hit specific extremes in their net positioning in NASDAQ 100 futures and options.

In the latest COTs report, the large specs maintained their highly bearish net short position in this index as a percentage of the total interest.

In fact, they've been so negative that my trading system based on the COTs reports has given me an unprecedented 17th straight bullish signal for the NASDAQ 100.

The next longest runs of bullish signals lasted 15 weeks and occurred over the winter of 2002-2003 and in early 2004. The trades that included those two periods gained 14 and 3 percent. (The setup was already on a bullish signal when those runs occurred. The gains would have been 54 and 5 percent respectively if the buys had taken place at the beginning of the 15-week bullish signal runs, with the usual one-week trade delay I have for this setup.)

Other Highlights

I've updated my signals table (click the "Latest Signals & Results" page in the Navigation bar) with this and other signals from today's COTs report. This handy weekly data, released by the U.S. Commodity Futures Trading Commission, details trillions of dollars in derivatives holdings of traders in 100-odd markets.

Other highlights from Friday's report:

- My U.S. Composite Equity Indicator, based on my setups for the S&P 500, NASDAQ 100, Dow Jones industrials and Russell 2000, rose to 0.53 from last week's 0.43. (A reading of "1" indicates a bullish signal across the board, for execution on next week's open.)

- A renewed bullish signal for the Nikkei. (My Nikkei setup flipped to bullish on Sept. 5, with a five-week trade delay, meaning execution on the open of trading Oct. 8.)

- More renewed bullish signals for the 30-year Treasury Bond and 13-week Treasury Bill, meaning traders are signaling lower interest rates ahead.

- After an absence of five weeks, when the number of traders reporting a position fell below 20, the S&P 400 Midcap index is back in the latest COTs report, showing virtually unchanged positioning since the last report, when astute readers may recall the setup flipped to a bullish signal.

Blog Update: Investigative Resources

I've been busy expanding my investigative media pages. Click "Alex Roslin's Articles" in the Navigation bar and head to "My Investigative Journalism Page."

The sites in this area include news and resources that might be of interest to journalist readers as well as others looking for investigative stories, resources or events. I'll be updating this area frequently, especially the "Investigative News & Resources" page. I'm still in the middle of expanding it, so I welcome your suggestions for news items and links and your comments.

Traders Hit Record Bullishness on NASDAQ 100

The markets have just come off a frightening tumble and are striding into their most historically turbulent period of the year. Only a few weeks ago, some analysts were advising us to sell most of our investments and go sailing until things settle down.

At times like these, many wiser heads turn for guidance to the Commitments of Traders reports issued weekly by the U.S. Commodity Futures Trading Commission. These are the fascinating free government reports that list futures and options holdings in 100 markets.

The latest COTs report has good news for equity bulls: My trading setups based on the COTs are on balance quite upbeat on stocks. In fact, they have given me another bullish signal for the NASDAQ 100 index—the 16^th in a row.

This is the first time my COTs-based setup for the NASDAQ 100 has given 16 straight bullish signals since the beginning of the data in 1995. There were two previous occasions with 15 consecutive bullish signals—from Dec. 2002 to March 2003 and Feb. to May 2004. Both of those periods presaged major rises in the index.

This setup is based on fading the large speculators in NASDAQ 100 futures and options when they hit specific extremes in their net positioning that in the past have led to high probabilities of profitable trades.

U.S. Equity Indicator Falls to 0.43, Still Bullish

I've just updated my table for my U.S. Composite Equity Indicator based on the Commitments of Traders reports. As of last Friday's COTs release, the indicator has fallen a little to 0.43 from last week's 0.66. (See the "Latest Signals" link in the Navigation bar.)

A "1" reading means all four of the equity trading setups that make up this indicator have just flashed a bullish signal, for execution on the next weekly open of trading.

Despite the slippage for this indicator, it still remains on a bullish signal first given with the March 27, 2007, COTs report. It is also still far from the "-1" reading that would indicate a bearish signal across the board.

If the huge ongoing market rally is any sign, the Composite Equity Indicator's bullish signal seems to confirm that the summer's nastiness was a relatively minor correction within the five-year bull run. No warnings from the COTs data that the bull market is over, despite the doomsday notions of some analysts out there. At least not yet.

Note, however, that at the worst of the summer's market rout, this indicator fell to 0.40, which isn't too far below where it stands right now. So that may be a warning sign of a little volatility ahead.

My composite indicator is based on four of my equity trading setups built around this government data. For more details see the main table at the "Latest Signals" link.

Oops: Scratch That Energy Bullish Signal

I was just going over my crude COTs data again and noticed I had made a downloading error for my data for the crude traders in the last report. There's no new signal for Oil Services Holders (OIH) and Canadian Energy iUnits (XEG) after all.

The mistake came from accidentally downloading into my spreadsheet the COTs data for West Texas intermediate crude instead of light sweet crude. Not the same thing at all.

My sincerest apologies to all readers. Fortunately, the signal wasn't for execution until three weeks from now, but it's still terribly embarrassing. I've just gone through all my other downloads to confirm they're all accurate, and they are. I've corrected previous posts on this subject below.

Gold Traders Not Extreme Enough

Gold is soaring, and so are gold stocks and silver. But have prices come too far? Is it time to take profits?

The latest Commitments of Traders report issued Friday and detailing holdings by traders in futures and options markets gives some enigmatic answers, depending on how you read them.

The “smart money” commercial traders have increased their net short position in gold for the third consecutive week. Meanwhile, the “dumb money” large specs and small traders have boosted their net long positions.

Surely, this means we should bail out, you say. I read one analysis this morning that suggested that very course. But my trading system based on the COTs reports says this might be premature. My setups for gold and gold stocks have yet to hit the extreme relative levels needed to trigger bearish signals.

In fact, the only signal in the metals I got from the latest COTs report was a renewed bullish signal in my silver setup. This setup is based on fading the small traders, who’ve hit an extreme bearish position in this market.

I think the fact that there’s no signal in the gold arena underlines the importance of evaluating the COTs data against historic trends, rather than focusing on week-to-week fluctuations, which show precious little correlation with subsequent market prices.

Renewed Bullish Signal for NASDAQ 100

Just updated my "Latest Signals & Results" page with results from today's Commitments of Traders report issued by the Commodity Futures Trading Commission. Most notable: a 16th consecutive bullish signal for the NASDAQ 100.

I'll be back here early next week with more thoughts about the latest COTs report. Hope you fared well this week, and have a good weekend.

In the News: Dollar Rout, Market Rot

Just put up some interesting new news posts at the "COTs & CFTC News Feed" page (see the Navigation bar). One is on how the U.S. dollar is trading near a record low against the Euro. In fact, the U.S. Dollar Index is now lower than at any time since Sept. 1992, when it fell to 78.43. Overnight, it fell below 79.15, before recovering this morning to 79.38. Also interesting is a website I hadn't heard of before, StockBrokerFraudBlog.com. It scrutinizes the woefully lax regulatory enforcement of the markets.

Signals Page Updates

Just reorganized my "Latest Signals" page a little. Included now are links to updated tables showing my U.S. Composite Equity Indicator and gold trading setups, both based on the Commitments of Traders reports - the great market leveler.

Is the Greenback Toast?

What a difference a few short weeks makes. Precious metals, which got chopped to pieces in July and August, are now firing on all cylinders. Gold seems to have broken out of a long triangle that started in mid-2006, while the U.S. Dollar Index is testing its lows around 80.

This very long-term support level for the greenback goes way back to the 1990s. The area around 80 has been a floor for the U.S. dollar four previous times since 1990. So any decisive break here would pretty much signal Armaggedon for the buck and of course big potential gains for some commodities like gold.

So what’s the prognosis from the latest Commitments of Traders report issued Sept. 7? Looks bad for the dollar. Last Friday’s COTs report issued by the U.S. Commodity Futures Trading Commission didn’t change my bearish signal for the U.S. Dollar Index.

While the latest COTs data shows the “smart money” commercial traders have been super-long the U.S. dollar since March, the commercial net position hasn’t been at any kind of historic extremes that would warrant a flip to a bullish signal, according to my studies of past futures data.

My trading system built around the COTs reports has been bearish the U.S. dollar since last Oct. 2006. That was when the dollar peaked around 87, and it’s been sliding ever since.

I think the data for the U.S. dollar underlines the importance of looking at the long picture when trying to analyze the COTs reports. Many analysts and stories in the financial media report on the week-to-week fluctuations of this fascinating, free government data. They suggest that just because derivatives traders slightly increased their net positions one way or another the underlying market will move accordingly.

I used to read such stories intently, but after looking closely at the COTs for myself I grew more skeptical. This was because I actually studied the COTs to see if I could find week-by-week correlations with subsequent prices in the following several weeks and months. I found nothing of any significance. To my knowledge, no one else has either.

The U.S. dollar is a prime example. Commercial traders have held highly bullish-seeming net percentage-of-open-interest positions for several months. Meanwhile, the greenback has all but fallen off a cliff. Does that mean the commercials are in fact the “dumb money”? Does it mean the COTs “don’t work any more,” as some folks suggest.

No. I think it just means the recent positioning has to be put into the correct longer-term perspective and matched against past extremes in the historic data that signaled high probabilities of coming changes in the markets. Good luck in your trading and investing.

COTs Sour on Natural Gas

Will crude oil go to $100? Or is the bull over? Is natural gas finally recovering from its 30-percent smash-up? Or is more bad news coming for "gassy" stocks? If it’s true that the energy markets reflect global economic strength, the latest Commitments of Traders report doesn’t look too sunny.

Friday’s report—based on futures and options holdings as of Sept. 4—has some sad news for energy bulls. My existing bearish signals for crude oil, energy stocks, natural gas and the Canadian dollar all still hold true. Same for my bearish signal for the U.S. Dollar Index.

This is because traders in these markets didn’t registered any new historically extreme positions that would have reversed my existing signals, according to my reading of past COTs data. (See the "Latest Signals" link in the Navigation bar for more details from the latest COTs report.)

As well, in natural gas, the COTs report issued Sept. 7 gave me a renewed bearish signal for this market. This signal is based on trading the same side as the large speculators using the combined futures and options COTs data.

Woah. Hold on a sec, Alex. Aren’t the large specs the “dumb money” folks who are normally wrong in the markets? Yes, they usually are. My studies of the COTs data show the large specs are indeed the wrong-way traders in most markets—and thus should be faded when they hit historic extremes in their net positions—but in some markets like natural gas they in fact have proved to be the “smart money.”

I think my trading setup for natural gas shows this fairly conclusively. The large specs have been on a bearish signal since the March 27 COTs report (which, with my three-week trade delay for this setup, meant the signal took effect on the open of trading on Monday, April 16).

Surprise, surprise—natural gas has given up nearly 30 percent since then. Were the large specs smart or dumb? I think the natural gas market shows the importance of actually studying the COTs data, rather than reporting fairly meaningless popular notions about it that we often see in the financial media.

COTs Loooove the NASDAQ

Might be strange to announce this on a day when the VIX is up 11 percent and NASDAQ's VXN volatility index has rocketed more than 10 percent, but hey, I'm perverse that way: Today's Commitments of Traders report has flipped to bullish for the NASDAQ Composite Index.

This is according to my trading system based solely on this valuable government data issued weekly for free by the U.S. Commodity Futures Trading Commission, which lists futures and options holdings worth trillions in 100-odd markets from gold to gasoline and everything in between, including the NASDAQ-100 index, upon which my setup for the NASDAQ Composite is built.

As well, my COTs U.S. Composite Equity Indicator remains at a super-bullish 0.66, down slightly from last week's 0.78, but still good enough for a fifth consecutive bullish signal.

See more details and other signals from the latest COTs report by clicking the "Latest Signals" link in the Navigation bar. Be sure to take a look at the full results for my NASDAQ setup (for example, this setup's trade delay is zero, which means to be executed for the open Monday, Sept. 10). The table also shows my risk factors such as the largest past drawdown, wins/losses and confidence levels for this setup. (You'll notice this setup's confidence intervals are somewhat inferior to some of my other setups.)

Also click the table's "Notes" link to see some important explanations and the "How It Works" link in the Navigation bar if you're not sure how all this works or what I'm going on about here.

I'll be back here early next week with some other highlights from this afternoon's COTs. Meanwhile, you can check my COTs-inspired take on the energy markets at 321energy.com, where I've started to contribute a regular column in addition to my weekly scribblings at Kitco.com.

"It's strange." Yup.

9:28 It's strange. We're in this period where nothing is happening on Daily TD Sequential/Combo after having over a year where all of those Sell signals were coming all the time as the market would get overbought....We also have an equity market where there are quite a few bulls -- including the Commercials -- yet the rally fails at the 50 Day ma above....and then we also have similarities to the 1998 Sucker Play.... so today's going to be important I think - Stephen Vita, AlchemyOfTrading.com, Friday