The data on trader positioning in various markets shows the wrong-way small traders in S&P 500 futures and options have just tumbled off a cliff in their positioning, getting supremely more bearish. I've just updated my latest signals table with the data for this and other markets.
The COT data may be bad news for the little guy, but good news for the rally, as historically markets have tended to go up when the small traders hit extremes in their bearish positioning relative to recent data. The small trader net long position hasn't been this paltry in a year and a half. Meanwhile, the "smart money" commercial hedgers, while a little less bullish this week again - their seventh consecutive week of reduced bullishness compared to recent data - still have a solidly bullish tilt in their positioning.
The data from the three-month Eurodollar contract, which gives me signals for the BKX U.S. Bank Index, is fairly ambivalent this week, although it's turned up slightly since last week, when it had really soured. The large speculator total open interest, which has a 63-percent correlation with BKX the following week, has bounced back a little after two weeks of declines. On the other hand, the small trader total open interest, with a 42-percent correlation to BKX, has declined slightly. My trading setup for BKX remains in cash for a seventh straight week because its three signals don't agree again.
In gold, my trading setup remains bullish for the second straight week. But the data shows the large specs are running for cover. That's good news for my signal, which fades the large specs in their net position and total open interest. On the other hand, those datasets correlate strongly with next-week gold prices, so the COT report could be suggesting more trouble for bullion this coming week.
Similar situation for natural gas. The setup is bullish, but the trader positioning, which also correlates very nicely with gas prices, has suddenly plummeted. This setup, in particular, sees lots of volatility, like gas itself, which broke down big-time this week after looking like it might want to finally bounce. I'm holding onto my hat.
Finally, my setup for the 30-year Treasury bond has turned bearish for this coming week's open of trading (meaning the yield would go up). That's based on fading the small trader and large spec total open interest, which both hit extremes of excessive bullishness. The setup will remain bearish for two weeks, then go to cash or bullish. So this may not be the big bond break some people have been calling for. That said, the yield is back at the old highs of 2008 and 2009 - so who knows.
Hope you did well last week and that you have a good weekend. I'll be on the road this week, so I won't have a chance to do a portfolio update and may be a little late in my next post. Apologies. I'll do my best to get it up before next Monday's open of trading. Good luck this week!
9 comments:
Are there small trader percentage extremes where the data becomes useless because the only small traders in the market are the perma-bears?
I appreciate your site and the work you put into it. However, your S&P COTS data conflicts with the data I have obtained. The large specs for the E-Mini have gone majority bearish and the small specs are now majority bullish. Check out http://snalaska.net/cot/current/charts/ES.png
Your data seems way off. Any comments?
Your interpretation of the S&P data is not correct. The commercials and large speculators have both gone bearish this week and the small speculators are slightly bullish on S&P and very bullish on E-mini (ES). You can check it out online at:
http://www.cotpricecharts.com/commitmentscurrent/
Big change in positioning this week and you can also tell that there was major distribution going on this past week on the S&P from the price and volume action.
As mentioned a few weeks ago by another poster, it is better to look at the E-mini data for a better picture of what is going on. Commercials have been somewhat bearish during this most recent rally but the large speculators poured money in. As the E-mini data shows this week, the large specs are now majority short and the small specs are majority long. That is a major reversal from last week. Please do not take any of this as a criticism, but please look into how you interpret the S&P data.
No one did well because the markets have gone nowhere the past two weeks, including your SPX long set up, based on erroneous futures data. You keep referring to the full contract, which no retail traders even comes close to, at $22,500 per contract. It's a hedging contract, mostly for ETF funds etc...You need to spend more time with the e-minis, or use options data..
To elaborate (one more time, since you are leading many readers astray), the SPX full contract has a total of 129 traders, trading 300k contracts at $22.500 margin a piece. Where do you extrapolate a "small" wrong way retail trader there?
nat gas /NG contracts from Mar 22nd open price to today's (Apr 1st) low lost 50%.
You don't trade UNG, don't you?
Hi,
Regarding the posters who talk about the e-mini data, I respectfully disagree. Please read the sections of my FAQ page devoted to the mini data where I address this in greater detail.
Regards,
Alex
Hi DavidDT,
I am trading this natural gas signal with HNU in Toronto, a 200% leveraged ETF. It is now up 0.8%. But even if it wasn't, not every trade makes money. Please read my FAQ page where I address the issue of losing trades in more detail.
Regards,
Alex
Oh, forgot about HNU in Canada...and health care too :)
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