It's Gonna be Okay, Say COTs

Lovely. A crappy close to a crappy week. I hope you fared okay and managed to stay out of too much trouble.

In my case, my DUG UltraShort Oil & Gas and SDS UltraShort S&P 500 positions - based on signals from my trading system built upon the Commitments of Traders reports issued by the Commodity Futures Trading Commission - managed to offset the carnage in my precious metals and other long equities holdings. Plus, the caved-in Canadian dollar boosted the value of my U.S. dollar assets, in C$ terms.

I'm sure you're wondering what gems of wisdom we can glean about all this turmoil from the magical COTs reports. As an aside, here's one of the reasons I find them so interesting, believe it or not: I see them as a calming influence that gives me the longer perspective and helps me catch the big moves, instead of worrying about less significant market yo-yoing.

Why, take this week for example. There aren't any new signals. Y'ad think they'd have something to say at a time like this. But nah, yawn, wake me up next week, seems to be their message. And for that, I thank them. They've helped me lighten up on a certain innate bearishness I've had, well, I guess ever since the dot-com cock-up, which I think still influences much of market sentiment. The doomsday fears of the Robert Prechter types.

Not that I'm saying we won't be crashing down some sort of precipice very soon. Who knows? But we're not there right now - at least not according to my reading of the COTs reports, such as it is.

No new signals this week in Friday's report, based on data as of last Tuesday. A renewed bearish call for the S&P 500. My composite U.S. equity indicator is at -0.18, a drop from last week's -0.1. But still far from the end of the world. Plus or minus 1 means a historic sell or buy signal. A "-1," for example, would mean that on average all of my U.S. equity setups just gave a sell signal.

More trouble to be expected from the renewed bearish signals in energy, the loonie and U.S. dollar. But precious metals appear solid enough. Good luck next week!

New Signals*
BULLISH
None

BEARISH
None

Renewed Signals**
BULLISH
-NASDAQ 100

BEARISH
-Soybean Oil
-Natural Gas***
-13-Week Treasury Bill Yield
-S&P 500
-Crude Oil, Light Sweet***
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO
-Oil Service Holders, OIH

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/TSX Composite (15-Aug-06)
-NASDAQ 100 (27-Mar-07)
-Dow Jones Industrial Average (20-Mar-07)
-Russell 2000 (1-Aug-06)
-Silver (3-Jul-07)
-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
-13-Week Treasury Bill Yield (27-Feb-07)
-S&P/TSE Canadian Energy iUnits ETF, XEG.TO (3-Apr-07)
-Oil Service Holders, OIH (3-Apr-07)
-S&P 500 (26-Jun-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)
-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” above.
** 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 “The Trading Setups” above and check the table 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 five weeks later). The existing signals are often several months old and are listed here as references, not trading recommendations.