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