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