Smart Money Rolls Dice on Rally

I've now updated my latest signals table based on Friday's Commitments of Traders data. More zigzagging in the COT data for the S&P 500.

The "smart money" commercial hedgers have gotten fired up the past week, raising their net futures and options position to a higher level as a percentage of the total open interest than any time in the past two and a half years.

Also, their relative position compared to recent data is higher than any time since Feb. 2010, which marked the start of the rally we saw early this year. At the same time, the wrong-way small trader crowd has suddenly gotten massively bearish. This is of course another positive sign. The setup works with a three-week delay for signals to take effect, so it's still flopping around based on how the data was bouncing around in recent weeks. The setup goes to cash this coming week, then goes back to bullish the week after.

U.S. financials: The COT data I use for signals for the benchmark BKX U.S. Bank Index is doing better again this week, with the total open interest for both the large speculators and small traders both moving up in the latest COT report. The setup remains in cash this week, though.

Natural gas: My setup for gas goes bearish for this coming week's open of trading.

Thanks for tuning in, and I hope you survived another week. Check back early this week for an update to my portfolio page. Good luck this week!

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

Trader Data Turns Up

Looks like the worst of the market selloff might be over, but who knows. My charts show a lot of the stock indexes in a long trading range since last September. I've just updated my latest signals table with the new information from today's Commitments of Traders report issued by the nice people at the U.S. Commodity Futures Trading Commission. No time for a lengthy report this week, so here is the executive summary version:

My S&P 500 setup is bullish for one week starting on next week's open of trading. Then back to cash. My setup for the BKX U.S. Bank Index is in cash next week after a single, not-so-good week being bearish. The large speculator total open interest has shot up sharply. This is a good sign for BKX, marking two consecutive weeks of rising data. The gold large spec data is looking good too this week (though the setup remains in cash). And natural gas got a bearish signal with a one-week delay (meaning execution on the open the week of June 28).

I hope you did okay this week, have a great weekend and do excellently next week. I won't be available to do a portfolio update, but I'll be back with a post next weekend.

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

Going Short U.S. Banks Next Week

Hope you did okay this week. The market found some legs and enjoyed a nice little bounce. But there's more bad news for next week from the Commitments of Traders data issued Friday by the CFTC. I've just updated my latest signals table based on the new COT report. Some highlights:

- U.S. banks: My trading setup for the benchmark BKX U.S. Bank Index goes bearish on next week's open of trading.

- S&P 500: This setup goes to cash next week after being bullish since late February, then returns to bullish for a week.

- Crude oil: My setup for black gold goes to cash after a nice eight-week run in the bearish column.

- Gold: My setup for gold gold remains in cash. The COT data is mixed this week. Large speculator total open interest, which has a 77-percent correlation with bullion prices the following week, has rebounded in today's data after declining for the previous three weeks. That is mitigated somewhat, however, by a decline in the large spec net position as a percentage of the total open interest, which has a 62-percent correlation with the gold price.

- Natural gas: The data for gas has deteriorated somewhat and almost gave me a bearish signal, but not quite. The setup remains in cash.

Have a good weekend, and be sure to tune back in early next week 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

Data Down on Banks, Good for Gold, Natural Gas

Holy moly, would you look at this Commitments of Traders data. A perfectly miserable end to a miserable week in the markets. Friday's COT report from the Commodity Futures Trading Commission warns of yet another rough week ahead for markets, as you can see from my newly updated latest signals table. When will the carnage end? I dunno.

But I can say that the three-month Eurodollar data has dropped yet again - the sixth week in a row for the large speculator total open interest. As astute readers know, that data has a 63-percent correlation with next week's BKX U.S. Bank Index. And it signaled fairly well the beginning of this market rout. My BKX setup is in cash again next week, but the Eurodollar numbers suggest we're not out of the woods yet. Note that while my table shows the small trader total open interest getting less relatively bearish, the absolute number of contracts declined again in the latest COT report. It's the absolute number that correlates well with BKX.

Some other highlights:

- S&P 500: This data is all over the place. Two weeks ago, you'll recall, the "smart money" commercials got super-bearish, then last week they flipped to bullish, and now this week they're back in the bearish camp. That will have my setup flip-flopping around between bullish and cash through most of June.

- Gold: My setup for bullion remains in cash, but the data again is a little more bullish. It correlates fairly decently with gold prices. I've got a small discretionary long position. (Not a recommendation! And I could sell at any moment based on price action.)

- Natural gas: Same comments as for gold above, including the discretionary long position.

Good luck next week, and be sure to tune back in for an update of my portfolio page. Have a great weekend!

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