COTs Timer: Going for Gold, Financials Data in Toilet Again

Friday, 14 May 2010

Going for Gold, Financials Data in Toilet Again

Holy moly, what a ridiculous week! Hope you survived okay. It feels like it could be the top - trader Terry Laundry even says his indicators suggest a 1987-like peak - but who knows! The latest Commitments of Traders data today suggest we're not out of the woods. See my latest signals table for my take on the Commodity Futures Trading Commission's COT report. Some highlights:

- U.S. financials: My trading setup remains in cash, but the data shows a third straight week of declining total open interest for the large speculators in three-month Eurodollar futures and options - which has a 63-percent correlation with next week's BKX U.S. Bank Index. Not good.

- Gold: This trading setup is giving a long signal to take effect on Monday's open of trading. The setup will be long two weeks, then go back to cash.

- S&P 500: This setup is still long. In fact, the "smart money" commercial hedgers have gotten more bullish in the latest COT report, while the wrong-way small traders have gotten substantially more bearish. That should actually be a bullish development - where it not for the fact that week-to-week fluctuations in the S&P 500 COT data have virtually no correlation with market prices.

- Crude oil: My crude setup remains short - nice trade - but the commercial hedgers have suddenly boosted their net position as a percentage of the total open interest. That will impact on the signal with a four-week delay. So this setup will remain short for the next four weeks.

- Natural gas: My gas setup remains in cash, but the COT data suggests more downward pressure is possible on gas prices. The large spec total open interest has plummeted, according to the latest COT report - and that data has a 58-percent correlation with next week's gas prices. On the other hand, this could be mitigated by the fact that small trader total open interest - which has a 60-percent correlation with next week's gas prices - has moved up slightly.

- Nikkei: When will this market mess end? My setup for the Nikkei suggests in early June. It's just gone bullish for the open of the week of June 7, to be precise.

Have a great weekend, and good luck next week. Sorry I missed my portfolio update this week, but please do check back in early next week when I should have my latest numbers up.

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

2 comments:

Ray said...: Alex,

Thanks for the update.

You mention that week to week fluctuations of the COT data do not correlate well for the S&P 500 ... so why track the data at all? Is there a longer time-frame that you are focussing on?

Thanks!; 14 May 2010 at 18:39
Alex Roslin said...: Hi Ray,

My trading system doesn't give signals based on the week-to-week COT data fluctuations. It gives signals based on when the data hits certain extremes of positioning that in backtesting gave highly profitable, market-beating and robust results.

Please read the FAQs and "How It Works" sections for more details.

Best regards,
Alex; 17 May 2010 at 05:53

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About This Site

I am an active trader and award-winning investigative journalist based in Lac Brome in Quebec's Eastern Townships, just outside Montreal. I have written about investing and business for The Montreal Gazette, Investor's Digest of Canada, Technical Analysis of Stocks & Commodities, Futures & Options Trader, The Financial Post and others. I am not a certified financial advisor and am still refining my COTs Timer system. Please see more disclaimer information below. See my complete profile at the "Intro to COT" link above.

DISCLAIMER

I created this blog to record my personal, subjective observations about the markets, solely for my entertainment and that of interested readers and to foster research. Nothing on this blog should be construed as financial advice or an offer or recommendation to purchase or sell any security. I encourage anyone interested in the markets to do your own homework and/or consult a professional advisor. I am not a certified financial advisor and am still refining my trading system. I reserve the right to modify or stop publishing aspects of my system at any time or to delay updating my tables for whatever reason, or I may not do so in a timely manner. My system has resulted in very large drawdowns in some trades. Past backtested and real-time results are no guarantee of future performance. I will not be liable for any losses or damages of any kind that result from the content of this site. Although I consider the data, calculations and information on this blog to be reliable, I can't make any guarantees and won't be held liable or responsible for anything erroneous on this website. You are solely responsible for implementing safeguards of your data and system when you use this site and its content and links. It is up to the user of this site and content to protect yourself from worms, trojan horses, viruses and the like. I may hold positions in some of the securities mentioned in this blog.