Thumbs Up for Equities, Down for Energy

Today's Commitments of Traders has generally bullish news for equity markets, if the three renewed bullish signals I've gotten are any indication.

But there were more bearish tidings for energy, with several renewed bearish signals in this sector. No new signals to report this week.

Below is my first series of signals using my new list of trading setups based solely on the COTs reports. I have greater confidence in these setups because I was able to statistically validate almost all of them at a high level of confidence, both in terms of profitability and against the underlying markets I'm trying to beat.

In many cases, the new setups are more profitable than the old ones. In a few cases, I had to make small sacrifices in terms of profitability to get a setup in which I can have more confidence about the future results matching past profits. The problem with some of the old setups was that the small number of trades made it impossible to say with confidence whether the profitability was due to excessive curve-fitting. Now, I've managed to find setups with enough trades to be statistically validated.

Most of the existing signals remain the same, but there are a few notable changes. All of my gold-related setups are now in the bullish column, having just flipped from bearish. As well, you'll notice that my new setups for the NASDAQ Composite, Semiconductor Index (SOX) and the Nikkei are now in the bearish column.

The changes come as I've switched which group of traders I follow for these markets. In the Nikkei, for example, my old setup followed the commercials, who have been highly bullish the Nikkei, but the new one fades the small traders, who've also been highly bullish. Go figure! It's a bit of surprise for me because I've got a profitable position in the Japan iShares ETF (EWJ) as a result of the earlier signals. I'm going to find a good technical spot to unload it.

Note, however, that my setup for the NASDAQ-100 is still bullish, so I'm holding on to my Ultra QQQ ProShares ETF (QLD), which tracks that index.

New Signals*
BULLISH
None

BEARISH
None

Renewed Signals**
BULLISH
-Dow Jones Industrial Average
-NASDAQ 100
-Russell 2000

BEARISH
-Soybean Oil
-Natural Gas***
-Crude Oil***
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO
-Oil Service Holders, OIH
-Semiconductor Index, SOX

Existing signals (date of original signal in parentheses)****
BULLISH
-30-Year Treasury Yield (3-Jan-07)
-10-Year Treasury Yield (17-Apr-07)
-S&P 500 (20-Mar-07)
-S&P/TSX Composite (15-Aug-06)
-NASDAQ 100 (27-Mar-07)
-Dow Jones Industrial Average (20-Mar-07)
-Russell 2000 (1-Aug-06)
-Gold (29-May-07)
-US Global Investors Funds US Gold Fund, USERX (12-Jun-07)
-S&P/TSE Canadian Gold iUnits ETF, XGD.TO (22-May-07)
-Gold Bugs Index, HUI (29-May-07)

BEARISH
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO (3-Apr-07)
-Oil Service Holders, OIH (3-Apr-07)
-NASDAQ Composite (26-Dec-06)
-Semiconductor Index, SOX (20-Mar-07)
-S&P 400 Mid Cap (3-Jan-07)
-Nikkei Average (19-Dec-06)
-Soybean Oil (11-Nov-06)
-Silver (1-May-07)
-Copper (10-Apr-07)
-Canadian Dollar (10-Apr-07)
-U.S. Dollar Index (3-Oct-06)

NEUTRAL
-Crude Oil, Light Sweet (3-Apr-07)***
-Natural Gas (27-Mar-07)***

Notes
* For an explanation of what I do after a new signal, click “How It Works” to the right.
** A “renewed” signal is when a market is already on a bullish or bearish signal, and traders again register an extreme net trading position in the same direction. I normally ignore renewed signals unless I don't already have a trade on in this market. I haven't studied the profitability of trading on renewed signals.
*** See my special caveats for my Crude Oil and Natural Gas setups (click “Profit/Loss Results” to the right and check the footnotes).
**** The date in parentheses is the date of the COTs report that gave this signal - not the date I would have executed the trade (which can be up to four weeks later). For details on how I trade this system, including trade delays and portfolio allocations, click on "How It Works" and “Profit/Loss Results” to the right. These "existing signals," which are mostly several months old, are listed here as a reference, not a trading recommendation.