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