Bullish Shoots Appear for Banks

Trader data has recovered slightly in the past week for U.S. banks, with the three-month Eurodollar large speculator total open interest shooting up from last week's depressed levels, according to the latest COT report from the Commodity Futures Trading Commission. That's good news as this data correlates nicely with U.S. financials. On the other hand, the CFTC reports that the small trader total open interest took a haircut this past week, as you can see from my latest signals table, which I've just updated. That data also correlates with financials, so the data is a bit mixed.

My trading setup for the BKX U.S. Bank Index goes to cash this week after a single week being bearish. With two of the three components that make it up now bullish and the third just a mite away from flipping to bullish, this correction may not last too much longer. (This report contains a correction to my original post regarding the signal for the BKX Bank Index. Apologies for the error.)

Also interesting, positioning in S&P 500 futures and options suggests the bull market rally is still going strong. The "smart money" commercial hedgers remain solidly behind the rally, while wrong-way small traders are still as hopelessly bearish as ever. In fact, this past week saw them grow a tad more bearish in their relative positioning. They've been tilting against the rally since early January. Doh!

In other news, natural gas, which has been bullish for four weeks, goes to cash on Monday's open of trading. It then goes bearish a week later, on the open of April 26. The large speculators have drawn down their total open interest enough to push their signal into the bearish column, where they join the small traders, who've been bearish for three weeks. The large spec data has a 58-percent correlation with next week's gas prices, so there could already be trouble this coming week. Except the small trader total open interest, which also correlates moderately with gas prices, has bounced up a tad, so those could cancel each other out.

As well, my gold setup remains bullish for its fifth straight week. The data shows a third consecutive week of rallying large speculator net positioning and total open interest - both of which correlate strongly with gold prices the following week.

Also, my setup for the 30-year Treasury bond goes bullish, meaning yields would fall.

But not all is bullish across the land. My trading setup for crude oil goes bearish on Monday's open.

Good luck this week, and be sure to check back in Monday or Tuesday for an update to 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