Data Frowns on Banks and Bullion

Two new signals this week on my latest signals table, which I've just updated with the data based on the holiday-delayed Commitments of Traders report released Monday afternoon. My trading setups for the BKX U.S. Bank Index and gold bullion have just gone bearish for this week's open of trading. I'll execute the trades as of Tuesday's open. Check the signals table to see the new data for those and the other markets I'm following. Some other highlights:

- Banks: The data for this market is looking positively unholiday-like. The large spec and small trader open interest in three-month Eurodollars, which give me signals for U.S. financials, has fallen into the eggnog, as you can see from my signals table. The open interest data is highly correlated with next week's BKX price, so this could spell post-holiday trouble for the markets.

- Gold: My gold setup has gone bearish again, potentially for up to five weeks depending on how the two signals align that make up the setup. The large spec net position has really stumbled in the latest COT report; that positioning correlates strongly with bullion prices the next week.

- S&P 500: Commercial hedgers are still stubbornly bearish in S&P 500 futures and options. However, as I noted Wednesday, my bearish signal for the S&P 500 got stopped out last week. At the same time, small traders, the usually wrong-way money who have been actually correct in their bullish positioning recently in this market, have started to get more antsy, as witnessed by their sharply reduced net long position this week. What can it mean? The setup remains officially bearish, despite me being stopped out, and it shows no signs of going bullish any time soon.

I hope you're having a great holiday. Check in tomorrow for an update of my portfolio page. Apologies for the missed updates during my time off this month. Please note that the next COT report will again be delayed and is due out Jan. 4. Good luck this week, and best wishes in 2010!

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Bond Setup to Cash

I'm going to cash on this morning's open of trading in my 30-year Treasury bond setup, which has been bearish for the past week. As I noted in my last weekly signals update, this bearish trade was to last just a week. The latest Commitments of Traders report is delayed until this afternoon, so check back in here later for an update of my setups based on the new data. Hope you had a restful holiday, and good luck today.

Short S&P 500 Trade Stopped Out

My two-month-old short position in the S&P 500 was stopped out today. As usual when this kind of things happens, I take this as a sign that the market is moving so strongly it is going against historic norms. So I'll look for opportunities to go long based on the charts.

Also, please note that due to the holidays, this week's Commitments of Traders report will be delayed to Monday. I'll update this site before the open on Tuesday. Hope you're doing well this week, and best wishes for the holidays.

Gold, Natural Gas to Cash, Data Bearish on 30-Yr Bond

A few new signals on my just-updated latest signals table based on the new Commitments of Traders data released Friday. Natural gas and gold go from bearish to cash as of the open of trading on Monday. In the case of gold, this is likely just a one-week hiatus; that setup looks like it will go back to bearish a week from Monday. Meanwhile, my 30-Year Treasury setup goes to bearish for a single week on Monday. Sorry for the abbreviated report. I am back in my office later this coming week and will resume my normal, more fulsome reporting. Until then, check out my latest signals table to see how the data is shaping up. It is fairly self-explanatory: Still far from any all-clear for an equities rally, while crude oil remains firmly in the bearish column. Good luck this week - and Happy Holidays!!

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Traders Sour on Financials

Wow - lots of interesting new developments from the latest Commitments of Traders report released Friday afternoon. The data that shows trader positioning in major markets has given me a signal to go to cash in my trading setup for the BKX U.S. Bank Index, after a five-week bullish signal. The data for that setup has suddenly gone seriously bearish, but the trade delays for that setup are such that the setup hasn't gone bearish yet. Also, the new weekly data has given my other setups a whole bunch of other potential new signals. Check out the changes on my newly updated latest signals table. I'm still on vacation so I haven't had a chance to write a more detailed analysis. Sorry about that! But the new numbers - and all that red and green - on the latest signals table speaks for itself in many ways. Good luck this week! I'll be back in my office in a week with my usual, more detailed reports.

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Market Standoff

The market's two- or three-month trading range seems no closer to resolution this week. Meanwhile, my short gold position, which looked depressingly silly at the beginning of the week, could actually be a surprise winner. Same for my short crude oil trade. The Commitments of Traders data sure works in funny ways. That's one of the reasons I like it so much. It's often completely contrarian in ways you could never imagine from just looking at the charts. I've just updated my latest signals table based on the data from Friday afternoon's COT update. Please check out that table. I'm on vacation right now, so no time for a full post. But here's a short highlights reel:

- U.S. banks: My trading setup for the BKX U.S. Bank Index, a basket of major financials, will enter its its fifth week of being bullish Monday. That's its longest stretch being long or short since July and Aug. 1998 when BKX crashed over 40 percent in the space of a few weeks. The data from Friday looks a good deal more bearish that it did the previous week, as you can see from my signals table. Does that mean the market's feeble attempts at a breakout aren't going to work? It's hard to say while the setup remains in bullish mode. But this coming week could see more lack of resolution.

- S&P 500: Meanwhile, the commercial hedgers - the so-called smart money in this market - are even more bearish this week, while the small traders - the not-so-smart folks - are still more bullish. It doesn't mean a hell of a lot because the week-to-week COT fluctuations in S&P 500 futures and options COT positioning correlates very poorly with subsequent index values. But what's important for me is the broader picture in this market remains far from changing to a bullish configuration, which would see the opposite positioning by both groups of traders. The setup goes into its sixth week of being bearish, and it will remain bearish for at least the next month.

- Natural gas: This is always an interesting market. My setup, short for two weeks, will remain short two more weeks, then go either to cash or bullish.

Good luck this week, and tune back in early in the week for an update of my portfolio page.

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Small Traders Jump Into Market

Small traders seem to be shrugging off this long, painful grind that continues unabated in the markets. In S&P 500 futures and options, the wrong-way small traders have increased their bullish positioning this past week, probably hoping to get in on the year-end seasonal play, according to today's Commitments of Traders report. Meanwhile, the "smart money" commercial hedgers are slightly more bearish than last week - and maintain the pessimistic stance they've had since early October.

Check my latest signals table, updated with the holiday-delayed data this afternoon, to see how my trading setups see the new data.

- U.S. banks: The data I use to get signals for U.S. financials is also looking a little more sad-sack this week, as you'll see from that table. Mind you, my setup remains bullish.

- Nikkei: My punishing bullish signal for the Nikkei Average has finally given up the ghost and gone to cash.

- Natural gas: My setup for natural gas is in its second week of being bearish. The data has turned down as well in the latest COT release, signaling that the setup will remain bearish for at least three weeks in total.

- Gold: Here's we go again! My last gold bearish signal didn't quite work out, and now the setup's back in the bearish column again. Large speculator total open interest and net positioning are both in excessive territory, which historically has meant a decline in the price of gold by the time the large specs get bullish. As usual, I will use a stop and proper positioning sizes to control my risk in case the signal is wrong. See my FAQs and How It Works pages for more details.

Good luck this week, and check back shortly for an update of my portfolio page.

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Holiday Delay

Happy Thanksgiving to American readers! This week's Commitments of Traders report will be released on Monday, instead of today. Should be an interesting one, given this week's market madness, so tune back in here that afternoon for an update. Have a good weekend!

Still Long Banks, Selling Natural Gas

Wasn't that fun? What a miserable market this is. Stephen Vita today called it the "strangest of all markets that I've experienced going back to 1987. It acts funky, scaring you half to death one day, then rights itself, and all those stocks that are making fresh breakouts look like they should be owned in massive quantity." That sounds about right.

The new Commitments of Traders numbers are now out, and I've just updated my latest signals table. Two new signals to report: My trading setup for natural gas goes bearish on the open of trading this coming Monday, Nov. 23. It will remain bearish for at least two weeks.

Also, my setup for gold goes to cash on Monday after three weeks bearish. As I mentioned in this post, I was stopped out of this position on Nov. 11 and have been looking to possibly go long. Didn't see anything yet I wanted to throw money at, especially with silver and gold stocks not yet matching gold in making new highs.

In other news:

- U.S. banks: My setup for the banks goes into its third week being bullish. This week's data is pretty close to last week's, except for the small trader total open interest in three-month Eurodollar futures and options, which has jumped up. It has moderate correlation of 42 percent with next week's BKX U.S. Bank Index.

- Crude oil: The small traders have really bumped up their net position as a percentage of the total open interest over the past three weeks. I trade on the same side as the small traders in this market (they're not always the dumb money!) - so that's just flipped their signal from bearish to bullish this week. I trade this signal with an eight-week delay. As well, the commercial traders remain bearish, and that has to change for the setup to go long. For now, the setup remains bearish.

- 30-year U.S. Treasury bond: The large speculators and small traders - both the wrong-way money in this market - have gone heavily long the bond (meaning they think interest rates will fall). Historically, they've tended to be wrong. My setup remains in cash because of the varying trade delays of the two signals, but if both are still aligned this way in coming weeks the setup will go bearish.

Hope you did okay this week, and be sure to tune back in early next week for an update of my portfolio page.

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

No End for Market Grind

The market sausage grinder kept churning this week. Hope you kept yourself intact. Unfortunately, the Commitments of Traders report this Friday doesn't really help to clarify which way things will break from this long trading range we're stuck in. I've just updated my latest signals table with some new numbers based on that COT report. Two new signals: bearish for natural gas with a week's delay (for the open of trading on Nov. 23) and cash for my 30-year Treasury bond setup on Monday's open (Nov. 16). Some other highlights:

- S&P 500: Not much to report here. This trading setup is in its third week of being bearish and shows no signs of changing course. The wrong-way small traders are still highly bullish in their net positioning as a percentage of the total open interest, while the "smart money" commercial hedgers are still seriously gothic.

- U.S. banks: My setup for the BKX U.S. Bank Index enters its second week of being bullish. The total open interest for the large speculators and small traders - both of which correlate well with BKX prices the following week - is down somewhat this week. But the change is small enough it's hard to know what to read into it. I haven't studied the correlation data enough to know how trade-worthy small or large changes week-to-week changes are. (It's on my massive to-do list!) What I do know is the trading setup - which does have robust backtested results - remains bullish, so that's the real key for me.

- Gold: My trading setup for gold goes into its third week of being bearish. As I mentioned in a post Wednesday, I got stopped out of this position that morning and was looking for a possible chance to put on a discretionary long trade. I didn't see anything worth jumping at. Gold stocks and silver aren't making new highs like bullion is, which is probably a cautionary sign. The gold data this week is also giving mixed signals. The large spec net position, which has a 62-percent correlation with gold prices, has dropped a fair bit, as you can see on my latest signals table. Meanwhile, the large spec total open interest, which has a 77-percent correlation with next week's gold price, has shot up. What does it mean? A good chance of more trading grind next week.

Have a good weekend, and be sure to check back in early next week for an update of my portfolio page. Apologies for missing my update this week. Bad cold. Oink. Anybody got some truffles?

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing

Commitments Data Delayed

Appears to be some kind of problem at the CFTC site this afternoon. None of the Commitments of Traders data is available. I've written the CFTC to find out what's going on and will try again later or over the weekend. Apologies for the delay in my post. Hope you fared well this week.

Short Gold No More

I got stopped out of my short gold bullion position this morning. Seeing as how the market moved against historic patterns, this kind of development can sometimes suggest an unusually strong trend. I might look at opportunities to go long with a discretionary trade. Mind you, gold stocks and silver aren't making new highs like bullion is. That kind of divergence is not a good sign for the sector. Hope you're doing well this week.

Data Bullish for Banks, Bearish for 30-Year Bond

What a wacky week! Sorry about my delayed post about my trading signals from Friday's Commitments of Traders report. I've just updated my latest signals table based on the COT data. Two new signals for this coming week's open of trading: bullish for the U.S. BKX Bank Index and bearish for the 30-year Treasury bond (meaning the yield would rise).

As you can see from my table, the new data is tilting to the bullish for the coming week - particularly the latest numbers from my BKX setup. That setup is based on the three-month Eurodollar contract. The large speculator total open interest, which has a 61-percent correlation with next week's BKX value, has done a major about-face after three weeks getting steadily more bearish. In fact, in absolute terms, the total open interest is higher than it's been since Feb. 2008. Mind you, that correlation isn't a perfect one and isn't always correct - as happened this past week. But there is also some confirmation from the small trader total open interest, which has a 41-percent correlation with next week's BKX and also shot up in relative terms.

Sorry I don't have time for a fuller post this weekend, but be sure to check back in early this coming week for an update of my portfolio page. Good luck this week!

TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing