New Crude Oil Setup Loves the Black Stuff

I've just updated my "Latest Signals" table with the results from my newly revised trading setup for crude oil based on the Commitments of Traders data. Instead of trading opposite to the "dumb money" large speculators, like my old setup did, the new signals come from fading the small traders. Turns out they're even dumber! Sad but true. The little guy like you and me is hamburger in the markets. Which is where the COTs reports come in. This great government data helps us figure out what the smart money - and the dumb - is doing in the markets, so we can, with luck, steer clear of trouble.

My new crude setup boasts significantly better profitability and statistical robustness. As well, it was profitable on both the long and short sides in historic testing, unlike the old setup, which was in cash during bearish signals. What's the setup saying right now? It's been on a bullish signal since the Feb. 20 COTs report, near the beginning of crude's incredible 12-month run-up from just over $50 to around $100 today. The small traders have just flipped to a net long futures and options position after seven weeks of being net short and now have a slight bullish tilt. But they're still nowhere near any kind of irrational exuberance that would trigger a bearish signal.

Thanks again to reader Dave for his invaluable help with refining this new setup!