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