COTs Timer

Ever wonder what the smart money is doing in the markets? You don’t need to pay big bucks to find out. Just read the Commodity Futures Trading Commission’s free weekly Commitments of Traders report. The CFTC’s COT data is a Holy Grail of market info, listing trillions of dollars in positions in 200+ markets – gold, crude oil, natural gas, silver, forex, equity indexes and lots more. My trading system, which I posted about here for seven years, gave weekly trading signals based on the COT data.

Monday, 18 August 2008

Markets Lean Bullish for Commodities, Indecisive for Equities

Are commodities finally done? Are equities back for good? Not so far, says regulatory data issued Friday. The latest Commitments of Traders report, which highlights trillions in dollars of positioning in over 100 markets, suggests the U.S. dollar is still in trouble, that commodities may have bottomed (at least temporarily) and that equities face more headwinds. You can check out my signals from my trading setups based on this data at the table linked here. Also see my newly updated portfolio page for my latest positions. Some highlights:

- Still no sign of better times from my trading setup for the S&P 500. The commercial traders remain decisively negatory with their net position as a percentage of the total open interest. My commercials signal is in bearish mode. The other signal in this setup - based on fading the small trader total open interest - is in bullish mode. Since these two signals don't agree, this setup remains in cash.

- My Russell 2000 setup has gone bearish for this week. But I should note this is a short-term trade that will last only one week. This is another combined setup that follows the signals of two groups of traders, when they agree. Based on the trade delays for the two signals, the overall setup will either go to cash or bullish as of the open, Aug. 25.

- My setup for silver is in bullish mode and is showing the second-most bullish reading in relation to historic positioning since the data started in 1995. The commercial traders are now 2.7 standard deviations above the moving average I use for this setup in their net position as a percentage of the total open interest in silver futures and options. This, coupled with the fact that commercial traders in the U.S. dollar index are at a historic extreme in their bearish positioning, suggests the recent rally in the greenback is done (at least for now).

Good luck this week!

TAGS: S&P 500, Russell 2000, silver, U.S. dollar, COT, Commitments of Traders, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer

8 comments:

Anonymous said...: Hi Alex,

I was hoping that the Nat.Gas signal continues to be bullish for this week :( It's been brutal! Aren't we nearing the seasonal bounce of last year ;)? Oh well.. I guess only the cold weather or a hurricane can turn this around.
How's this article for more bearish momentum:
http://seekingalpha.com/article/90882-natural-gas-clean-fuel-with-a-dirty-little-secret

BTW: The signals chart needs to be updated today, since it's still showing last weeks info.

Rgds.
Pete; 18 August 2008 at 13:40
Alex Roslin said...: Hi Pete,

Thanks very much for noticing that. I had updated all the signals, except the natural gas "cash" signal. Appreciated.

Regards,
Alex; 18 August 2008 at 13:50
Bora Kizilirmak said...: Natural Gas cash position

It was not clear to me either it is still bulish and you got stop loss OR you got bearish signal.

Can you please clarify?; 18 August 2008 at 14:56
Alex Roslin said...: Hi Bora,

The natural gas setup is in "cash." That's because the two signals that make up this setup don't agree with each other. I didn't get stopped out. You'll always see that and the other new, current and pending signals on the latest signals page table. If I was stopped out, I'd indicate that as well.

Regards,
Alex; 18 August 2008 at 15:02
Anonymous said...: sure silver is bullish because silver price dropped by 10% and silver is now greatly oversold and therefore undervalued. it looks like the COTs data are no longer driving the market, they are following it. therefore the predictive value of these data is now in doubt. and what about the bearish signal for gold next week? something seems not right.; 19 August 2008 at 06:46
Alex Roslin said...: Hi Anonymous,

Thanks for your insights. Your comment includes both factual and logical errors. Firstly, silver went on a bullish signal because of how the groups of traders lined up the week of July 29, before the price had entered its recent correction.

Secondly, price has yet to reverse, so the growth in bullish positioning last week would hardly be following the market, as you put it. The positioning is clearly anticipating a rally. I don't know if one will occur, but clearly the data isn't following the price decline because in that case we'd see a larger net short position.

Regarding the gold signal, you should be sure to check the latest signals page table, where you'll see that a number of commodities have new signals for the open of next week.

That, in addition to any new signals from this coming Friday's data, means next week is a completely new situation that I can't say much about at this point.

Finally, I'm not sure how you conclude that a couple of weeks' interaction between price and COT data tells us anything about the COT data's predictive value. Perhaps you can explain the foundation of such a claim?

Regards,
Alex; 19 August 2008 at 09:29
Anonymous said...: Hi Alex,

How are you invest in CAD?
Options, forex?; 22 August 2008 at 11:38
Alex Roslin said...: I don't currently have a specific position for the Canadian dollar setup. However, much of my portfolio is in C$ simply because I'm based in Canada.

Regards,
Alex; 22 August 2008 at 11:54

About This Site

I am an active trader and award-winning investigative journalist based in Lac Brome in Quebec's Eastern Townships, just outside Montreal. I have written about investing and business for The Montreal Gazette, Investor's Digest of Canada, Technical Analysis of Stocks & Commodities, Futures & Options Trader, The Financial Post and others. I am not a certified financial advisor and am still refining my COTs Timer system. Please see more disclaimer information below. See my complete profile at the "Intro to COT" link above.

DISCLAIMER

I created this blog to record my personal, subjective observations about the markets, solely for my entertainment and that of interested readers and to foster research. Nothing on this blog should be construed as financial advice or an offer or recommendation to purchase or sell any security. I encourage anyone interested in the markets to do your own homework and/or consult a professional advisor. I am not a certified financial advisor and am still refining my trading system. I reserve the right to modify or stop publishing aspects of my system at any time or to delay updating my tables for whatever reason, or I may not do so in a timely manner. My system has resulted in very large drawdowns in some trades. Past backtested and real-time results are no guarantee of future performance. I will not be liable for any losses or damages of any kind that result from the content of this site. Although I consider the data, calculations and information on this blog to be reliable, I can't make any guarantees and won't be held liable or responsible for anything erroneous on this website. You are solely responsible for implementing safeguards of your data and system when you use this site and its content and links. It is up to the user of this site and content to protect yourself from worms, trojan horses, viruses and the like. I may hold positions in some of the securities mentioned in this blog.