Yikes. Another nutso week. Same old, same old. Doncha love it? Some really interesting movement in the trader positioning to report this week, too. I've just updated my Latest Signals table with this week's calls from my trading setups based on the Commitments of Traders data from this afternoon. Here are some highlights:
- First, the question of the day. Will the Fed pause, raise or lower? Trader positioning in the 30-day Fed Funds futures contract is quite stunning on this score. Contrary to recent expectations of a harder line from Bernanke & Co., the data strongly points to a lower Fed Funds rate. The large speculators, who have accurately called past turns in this market with remarkable consistently, are now more net long as a percentage of the total interest than at any time since the dog days of Nov. 2003. (Being long means they think rates will fall.) In fact, their positioning hasn't been as bullish as today since the dot-com bust-up back in Jan. 2001, when compared to to the moving average I use for my Fed Funds setup. Back then, they hit a peak of 3.7 standard deviations above my moving average. Today, they have gotten steadily more bullish since the end of April and now sit 2.8 standard deviations above the average. That's down from 2.9 standard deviations away last Friday, but still pretty close to the seven-year high. I'd say that means interest-rate expectations have completely overshot.
- Equities saw some grim news this week, but there's an interesting development in positioning in the Dow Jones industrial average futures and options. The large speculators, whom I fade in this market, haven't been this bearish relative to my moving average line since early Sept. 2006, as markets shrugged off a four-month selloff and broke out into a huge advance. My NASDAQ 100 setup is signaling caution (it just went to cash for next Monday's open), but perhaps the Dow data is telling us this breakdown below the March lows is overdone.
- Similar news from the data for the Russell 2000. The "smart money" commercial traders in this market suddenly did a massive about-face and have flipped to their most bullish position since Nov. 2004 relative to their recent positioning.
Have a good weekend, and be sure to tune in next week for my portfolio update based on my new signals for Monday's open (including my Nikkei bearish signal). Good luck next week!
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, Russell 2000, Nikkei, Federal Funds, Fed Funds, Commodity Futures Trading Commission, CFTC, Bernanke
Friday, 27 June 2008
Monday, 23 June 2008
Filled! Long NASDAQ 100, Russell 2000 and Natural Gas
I've just updated my COTs Timer portfolio page with trades from this morning's open of trading based on my setups built around the weekly Commitments of Traders data. I went long the NASDAQ 100, Russell 2000 and natural gas and sold my short positions in the latter two markets. See Friday's post for more details on these and my other recent signals. Good luck this week.
TAGS: Commitments of Traders, COT, NASDAQ 100, NDX, Russell 2000, natural gas
TAGS: Commitments of Traders, COT, NASDAQ 100, NDX, Russell 2000, natural gas
Friday, 20 June 2008
Data Bullish Equities, Commodities... and Probably Treasuries
Tough times in the markets this week. Overall it looks like I was up more than I gave back. But don't breathe easy. Next week promises more turmoil, if this afternoon's Commitments of Traders release is any indication. Enthusiasts of this data will recall it exposes trillions of dollars in trader positioning in 100-plus markets, as reported weekly by the U.S. Commodity Futures Trading Commission. My COTs Timer trading system buys and sells markets when this trader positioning hits specific extremes that have historically led to high-probability returns. I've just updated my table on the Latest Signals page with the results from today's COTs update. Overall, the data is generally bullish across the board for equities and commodities. Here are some highlights:
- My trading setups for the NASDAQ 100 and Russell 2000 have both flipped to bullish. These two setups have no trade delay, so I will be executing both trades for the open of Monday's trading, June 23. In the case of the Russell, the signal comes from the fact that the commercial traders, whom I follow in this setup, have started to reduce their extreme net short position in Russell 2000 futures and options.
- While the data is generally bullish for equities, that's not so much the case for banks and Japan's Nikkei Average. My BKX setup remains in bearish mode, and in fact the large speculators in three-month Eurodollar contract futures and options haven't been this bearish since mid-June 2007 in terms of their net percentage-of-open-interest position. And we all know what hit the fan soon after that. As well, perhaps owing to upward pressure on the yen reflected in my yen setup turning bullish not long ago, the small traders in Nikkei futures and options, whom I follow for this setup, haven't been this bearish since April 2007 in relative terms compared to recent positioning.
- Natural gas: After a single week being short, this setup is back to long, with execution on Monday's open.
- Copper: This setup went to bullish from the April 22 COTs report, and with the eight-week trade delay, execution is for Monday as well. Note that my setup for heating oil calls for a short trade for Monday's open, but I will be sitting that one out. That's because the majority of my highly correlated setups to this market will be in the bullish column on Monday: crude, gold, silver, platinum and copper. My risk-control rule is to accept trades only if most of my setups in highly correlated markets are pointed in the same direction.
- 10-Year Treasuries: There's a big debate on where Treasuries are headed and where they should be given inflation trends. My 10-year note setup says to stay bullish. The commercial traders, whom this setup follows, have bumped up their net long position steadily for four weeks as a percentage of the total open interest. They're not at any extreme of bullishness, mind you, but they're fairly solidly bullish. I'd say that means a higher probability of yields falling than rising at this point.
Have a great weekend and join me back here early next week for an update on my portfolio page with trades from today's report. Good luck next week!
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, Russell 2000, natural gas, copper, 10-year Treasury, Commodity Futures Trading Commission, CFTC, Nikkei
- My trading setups for the NASDAQ 100 and Russell 2000 have both flipped to bullish. These two setups have no trade delay, so I will be executing both trades for the open of Monday's trading, June 23. In the case of the Russell, the signal comes from the fact that the commercial traders, whom I follow in this setup, have started to reduce their extreme net short position in Russell 2000 futures and options.
- While the data is generally bullish for equities, that's not so much the case for banks and Japan's Nikkei Average. My BKX setup remains in bearish mode, and in fact the large speculators in three-month Eurodollar contract futures and options haven't been this bearish since mid-June 2007 in terms of their net percentage-of-open-interest position. And we all know what hit the fan soon after that. As well, perhaps owing to upward pressure on the yen reflected in my yen setup turning bullish not long ago, the small traders in Nikkei futures and options, whom I follow for this setup, haven't been this bearish since April 2007 in relative terms compared to recent positioning.
- Natural gas: After a single week being short, this setup is back to long, with execution on Monday's open.
- Copper: This setup went to bullish from the April 22 COTs report, and with the eight-week trade delay, execution is for Monday as well. Note that my setup for heating oil calls for a short trade for Monday's open, but I will be sitting that one out. That's because the majority of my highly correlated setups to this market will be in the bullish column on Monday: crude, gold, silver, platinum and copper. My risk-control rule is to accept trades only if most of my setups in highly correlated markets are pointed in the same direction.
- 10-Year Treasuries: There's a big debate on where Treasuries are headed and where they should be given inflation trends. My 10-year note setup says to stay bullish. The commercial traders, whom this setup follows, have bumped up their net long position steadily for four weeks as a percentage of the total open interest. They're not at any extreme of bullishness, mind you, but they're fairly solidly bullish. I'd say that means a higher probability of yields falling than rising at this point.
Have a great weekend and join me back here early next week for an update on my portfolio page with trades from today's report. Good luck next week!
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, Russell 2000, natural gas, copper, 10-year Treasury, Commodity Futures Trading Commission, CFTC, Nikkei
Monday, 16 June 2008
Filled! Long Silver, Short Natgas, Financials, RUT, Sold NDX
Just updated my portfolio page with trades based on my latest signals. See Friday's post below for all the details. Good luck this week!
Friday, 13 June 2008
What a Week. Buy for Silver, Sells for Natgas, Russell and Banks, Cash for NASDAQ 100
A crazy Commitments of Traders report this week suited to a crazy market. I can't recall when I had so many new signals. Really, truly interesting stuff from this afternoon's report on trader positioning in the major markets, as released by the kind souls at the U.S. Commodity Futures Trading Commission. Thanks, fellas. Check out my newly revamped signals table linked on this page for all the weird and wonderful details. Here are some highlights:
- Natural gas is a sell! Wow. We had some good times, natgas, didn't we? Up a whole bunch (see how much here) since the buy signal in February. The bearish signal takes effect with no trade delay for this setup, meaning I go short for Monday's open, June 16.
- Silver is a buy! Wow again. One of my favourite metals to trade is back in the bullish column after a six-week stint on the short side. Again, no trade delay means going long Monday. But wait... What does my risk-control rule for highly correlated markets say? (This rule says I don't enter a trade unless a majority of highly correlated markets are signaling in the same direction. Read more about it here.) As of Monday, four of the six correlated commodities markets I follow will be bullish (silver, gold, heating oil and crude oil) while two will be bearish (copper and platinum). That means I can take the silver signal. This, incidentally, also means I will take my copper bullish signal that takes effect Monday, June 23, and ignore the bearish signal for heating oil that takes effect also on that day.
- Lots of action in the equities. My trading setup for the Russell 2000 just flipped to bearish. The "smart money" commercial traders, whom I follow for my Russell setup, haven't been this net short as a percentage of the total open interest since Dec. 2003. Mind you, they're nowhere at any record extreme in comparison with the moving average and standard deviation values I use for this setup. Still, they're short enough to put me in the bearish column. This setup has no trade delay, so execution is for Monday, June 16.
- Also note that my BKX Bank Index setup, based on the three-month Eurodollars contract action, flipped to bearish last Friday. That setup uses a one-week delay, so the trade takes effect Monday, too. Looking at my table of highly correlated markets, I see BKX is closely tied to the Russell 2000 and Dow Jones industrials. Since two of those three markets will be bearish as of Monday, I'll take both the BKX and RUT trades.
- Finally, my NASDAQ 100 setup has gone to cash. This is because one of my signals for this setup (the one based on the commercial traders) went to sell, while my small trader signal remains on buy. When the two signals don't agree, I cash in.
Thanks for tuning in and hope you have a great weekend, Happy Father's Day and lots of luck next week. As if it hasn't been wild enough already, it promises to be a nutso week.
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, Russell 2000, natural gas, copper, 10-year Treasury, silver, heating oil, Commodity Futures Trading Commission, CFTC, banks, BKX
- Natural gas is a sell! Wow. We had some good times, natgas, didn't we? Up a whole bunch (see how much here) since the buy signal in February. The bearish signal takes effect with no trade delay for this setup, meaning I go short for Monday's open, June 16.
- Silver is a buy! Wow again. One of my favourite metals to trade is back in the bullish column after a six-week stint on the short side. Again, no trade delay means going long Monday. But wait... What does my risk-control rule for highly correlated markets say? (This rule says I don't enter a trade unless a majority of highly correlated markets are signaling in the same direction. Read more about it here.) As of Monday, four of the six correlated commodities markets I follow will be bullish (silver, gold, heating oil and crude oil) while two will be bearish (copper and platinum). That means I can take the silver signal. This, incidentally, also means I will take my copper bullish signal that takes effect Monday, June 23, and ignore the bearish signal for heating oil that takes effect also on that day.
- Lots of action in the equities. My trading setup for the Russell 2000 just flipped to bearish. The "smart money" commercial traders, whom I follow for my Russell setup, haven't been this net short as a percentage of the total open interest since Dec. 2003. Mind you, they're nowhere at any record extreme in comparison with the moving average and standard deviation values I use for this setup. Still, they're short enough to put me in the bearish column. This setup has no trade delay, so execution is for Monday, June 16.
- Also note that my BKX Bank Index setup, based on the three-month Eurodollars contract action, flipped to bearish last Friday. That setup uses a one-week delay, so the trade takes effect Monday, too. Looking at my table of highly correlated markets, I see BKX is closely tied to the Russell 2000 and Dow Jones industrials. Since two of those three markets will be bearish as of Monday, I'll take both the BKX and RUT trades.
- Finally, my NASDAQ 100 setup has gone to cash. This is because one of my signals for this setup (the one based on the commercial traders) went to sell, while my small trader signal remains on buy. When the two signals don't agree, I cash in.
Thanks for tuning in and hope you have a great weekend, Happy Father's Day and lots of luck next week. As if it hasn't been wild enough already, it promises to be a nutso week.
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, Russell 2000, natural gas, copper, 10-year Treasury, silver, heating oil, Commodity Futures Trading Commission, CFTC, banks, BKX
Tuesday, 10 June 2008
New S&P 500 Setup Outperformed Market by 2.4 Times Since '03; Currently On a Buy
Is the Commitments of Traders data becoming less relevant? Are too many people following it and arbitraging away the edge it once provided? Some have suggested that's the case. I disagree. The data, which tells us how major traders are positioned in 100-odd markets like gold, crude oil, the NASDAQ 100 and frozen orange juice, is still far too little-known for it to have much impact on trading volume. Also, few people have actually done any testing to see how best to trade with it. The data in its raw form as published by the Commodity Futures Trading Commission is pretty much useless for trading purposes. It's easy to test this for yourself. Plug the data into an Excel spreadsheet and you'll see that the week-to-week changes in trader positioning correlate poorly with market fluctuations.
That's why I'm pretty excited to report the specs for my new trading setup for the S&P 500 based on this data. My research found dozens of setups for the S&P 500 that outperformed the market by large margins since both 1995 (the start of the data) and 2003. Note that outperformance since 2003 is especially noteworthy because most of that period has seen a clear uptrend for the S&P 500.
The S&P 500 setup I finally settled on draws on a new approach I hadn't tested for before - using the total open interest (i.e., the total number of long futures and options contracts plus the total number of short contracts). The setup combines the signals of two setups - one in which I fade, or trade opposite to, the small trader total open interest; and a second in which I trade on the same side as the "smart money" commercial trader net number of contracts as a percentage of the total open interest. The idea is to trade alongside the commercial traders, who in this market and the specific timeframe I chose, have the best information on market dynamics, while doing the opposite of the "dumb money" crowd (that's, unfortunately, the little guy in this case!) If the two signals don't agree, as happened half the time, I stay in cash.
Amazingly, the setup's compound annual growth outperformed the S&P 500 by 46 percent since 2003 while being out of the market 51 percent of the time. That's including a 0.2-percent charge per trade to account for commissions and slippage. Take a look at the newly revamped main table linked on my Latest Signals page for all the details on this new setup and a bunch of new measures I'm using to check all my setups. Btw, the new setup has been on a "buy" signal since the April 15 COTs report (with the entry on the open of April 21).
Note that I've created a new measure to evaluate setups called the Walk-Around Test, which tests each of the setup parameter values in order to see how stable or spiky the setup is in relation to "neighbouring" setups and help reduce the risk of data-mining. That table is still a work in progress, and I plan to fill in many of those blank cells soon. As well, I've temporarily removed some of my older, less robust setups that I haven't had a chance to update - particularly the agriculturals. When I get around to revising those, I'll stick them back in, and eventually I plan to add a few new ones too, including some other currencies.
If you're especially adventurous, see my S&P 500 Sample Spreadsheet and DIY Page to download your own copy of the new setup in Excel or Google Docs. Have fun!
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, data mining, Commodity Futures Trading Commission, CFTC, S&P 500
That's why I'm pretty excited to report the specs for my new trading setup for the S&P 500 based on this data. My research found dozens of setups for the S&P 500 that outperformed the market by large margins since both 1995 (the start of the data) and 2003. Note that outperformance since 2003 is especially noteworthy because most of that period has seen a clear uptrend for the S&P 500.
The S&P 500 setup I finally settled on draws on a new approach I hadn't tested for before - using the total open interest (i.e., the total number of long futures and options contracts plus the total number of short contracts). The setup combines the signals of two setups - one in which I fade, or trade opposite to, the small trader total open interest; and a second in which I trade on the same side as the "smart money" commercial trader net number of contracts as a percentage of the total open interest. The idea is to trade alongside the commercial traders, who in this market and the specific timeframe I chose, have the best information on market dynamics, while doing the opposite of the "dumb money" crowd (that's, unfortunately, the little guy in this case!) If the two signals don't agree, as happened half the time, I stay in cash.
Amazingly, the setup's compound annual growth outperformed the S&P 500 by 46 percent since 2003 while being out of the market 51 percent of the time. That's including a 0.2-percent charge per trade to account for commissions and slippage. Take a look at the newly revamped main table linked on my Latest Signals page for all the details on this new setup and a bunch of new measures I'm using to check all my setups. Btw, the new setup has been on a "buy" signal since the April 15 COTs report (with the entry on the open of April 21).
Note that I've created a new measure to evaluate setups called the Walk-Around Test, which tests each of the setup parameter values in order to see how stable or spiky the setup is in relation to "neighbouring" setups and help reduce the risk of data-mining. That table is still a work in progress, and I plan to fill in many of those blank cells soon. As well, I've temporarily removed some of my older, less robust setups that I haven't had a chance to update - particularly the agriculturals. When I get around to revising those, I'll stick them back in, and eventually I plan to add a few new ones too, including some other currencies.
If you're especially adventurous, see my S&P 500 Sample Spreadsheet and DIY Page to download your own copy of the new setup in Excel or Google Docs. Have fun!
TAGS: Commitments of Traders, COT, Dow Jones industrial average, NASDAQ 100, NDX, data mining, Commodity Futures Trading Commission, CFTC, S&P 500
Monday, 9 June 2008
Filled! Long NDX
Just updated my COTs Timer Portfolio page with this morning's trade - I went long some NASDAQ 100 through a 200-percent leveraged ETF - and updated results for each of my current trades based on the Commitments of Traders reports. Good luck this week!
Friday, 6 June 2008
NASDAQ 100 Flips to Long, Banks to Short
Well, wasn't that just insane? Crude up 8 percent in one day? How does that even happen? I'm happy as a raccoon in a compost heap (I'm getting a trap tomorrow, you bastard!) with my 200-percent leveraged crude ETF (HOU trading in T.O.) and of course my leveraged natgas ETF (HNU) did well this week, as usual, as did gold bullion. But it was a mixed bag as my long bank position tanked today. Yikes. What did we do before all this volatility? Are you getting PTSD yet?
So turning to the nifty ol' Commitments of Traders data, whaddya know? My trading setup for the BKX Bank Index gives me a bearish signal from this afternoon's data. That's based on a seven-week selloff by the large speculators in the three-month Eurodollars contract (not Euros the currency, but the interest rates, which function as a global liquidity measure). This setup works with a one-week trade delay, so I'm selling my long position and going short on the open of trading of Monday, June 16. What else? Check my Latest Signals page (see the table at the first link) for all the fascinating details from my 40-odd setups based on this fascinating government data. Yes, the government is good for something. Here are some more highlights:
- Not all is gloomy. My NASDAQ 100 trading setup has just flipped to bullish. This one was in cash last week. Today's data shows the commercial traders in NASDAQ 100 futures and options getting less bearish relative to the recent data, so the setup is going long for the open of next Monday, June 9. (No trade delay for this setup.)
- Are commodities going higher? Is the greenback headed further down? The "smart money" commercial traders in U.S. dollar index futures seem to think so. They just went massively short. Compared to recent data, they're now more bearish than any time since late Dec. 2007. It wasn't long after that that the dollar broke down from a four-month trading range amid the latest installment of the subprime horror show.
- My platinum setup flipped to bearish with the April 8 COTs report, with an eight-week delay for the execution of the trade. Which brings us to next Monday, June 9. However, as faithful readers will recall, I've got a rule for highly correlated markets, which requires the majority of setups in such markets to be lined up in the same direction for me to take a trade. In the case of platinum, it is highly correlated with five other markets: gold, silver, copper, heating oil and crude. As of Monday, three of this group will be bearish (including platinum) and three bullish. This means I will ignore the platinum signal. For more on how this rule works, check my, you guessed it, "How It Works" page. Have a great weekend, and tune in next Monday for my latest portfolio adjustments and updated trade results. Good luck next week!
TAGS: Commitments of Traders, COT, NASDAQ 100, NDX, heating oil, crude oil, U.S. dollar, platinum, banks, Commodity Futures Trading Commission, CFTC, BKX
So turning to the nifty ol' Commitments of Traders data, whaddya know? My trading setup for the BKX Bank Index gives me a bearish signal from this afternoon's data. That's based on a seven-week selloff by the large speculators in the three-month Eurodollars contract (not Euros the currency, but the interest rates, which function as a global liquidity measure). This setup works with a one-week trade delay, so I'm selling my long position and going short on the open of trading of Monday, June 16. What else? Check my Latest Signals page (see the table at the first link) for all the fascinating details from my 40-odd setups based on this fascinating government data. Yes, the government is good for something. Here are some more highlights:
- Not all is gloomy. My NASDAQ 100 trading setup has just flipped to bullish. This one was in cash last week. Today's data shows the commercial traders in NASDAQ 100 futures and options getting less bearish relative to the recent data, so the setup is going long for the open of next Monday, June 9. (No trade delay for this setup.)
- Are commodities going higher? Is the greenback headed further down? The "smart money" commercial traders in U.S. dollar index futures seem to think so. They just went massively short. Compared to recent data, they're now more bearish than any time since late Dec. 2007. It wasn't long after that that the dollar broke down from a four-month trading range amid the latest installment of the subprime horror show.
- My platinum setup flipped to bearish with the April 8 COTs report, with an eight-week delay for the execution of the trade. Which brings us to next Monday, June 9. However, as faithful readers will recall, I've got a rule for highly correlated markets, which requires the majority of setups in such markets to be lined up in the same direction for me to take a trade. In the case of platinum, it is highly correlated with five other markets: gold, silver, copper, heating oil and crude. As of Monday, three of this group will be bearish (including platinum) and three bullish. This means I will ignore the platinum signal. For more on how this rule works, check my, you guessed it, "How It Works" page. Have a great weekend, and tune in next Monday for my latest portfolio adjustments and updated trade results. Good luck next week!
TAGS: Commitments of Traders, COT, NASDAQ 100, NDX, heating oil, crude oil, U.S. dollar, platinum, banks, Commodity Futures Trading Commission, CFTC, BKX
Monday, 2 June 2008
Filled! Long Gold, Sold NASDAQ 100
I've just updated my Portfolio page with trades as of this morning's open based on my setups built around the weekly Commitments of Traders reports. I went long gold bullion and sold my NASDAQ 100 position. See Friday's post for details about those signals. Good luck this week!
TAGS: gold, bullion, NASDAQ 100, NDX, Commitments of Traders, COT, Commodity Futures Trading Commission, CFTC
TAGS: gold, bullion, NASDAQ 100, NDX, Commitments of Traders, COT, Commodity Futures Trading Commission, CFTC
Subscribe to:
Posts (Atom)