Wrong-Way S&P 500 Traders Now Excessively Bullish

Wow - just when we've maybe started to forget last year's psycho volatility, here we are into it again. What's more, talk of a fall fall is winding up as we get into the traditionally wacky autumn months, plus a bitter U.S. congressional election campaign making things even more haywire. For at least one more week, the Commitments of Traders data released Friday seems to be saying some bullish things, but into September, it's looking a fair bit rougher overall - or at least that's my take. See my latest signals table for the actual signals and details on the numbers. A few highlights:

- S&P 500: As could be expected, just as markets head into their historically dodgiest period of the year, the wrong-way small traders have suddenly gotten uber-bullish in their net futures and options positioning, according to the CFTC's latest COT numbers. They're at such an extreme that their signal has gone bearish in my trading setup, with an execution date in three weeks' time. The "smart money" commercial hedgers are still fairly bullish too, however. So since the two signals won't be in alignment, my setup will go to cash in three weeks - i.e. on the open the week of Sept. 20.

- Nikkei: The new S&P 500 signal coincides with a bearish signal I got recently for the Nikkei that is to take effect Sept. 13.

- Crude oil: My setup for crude goes bearish on Monday's open of trading and will remain bearish for at least the next four weeks.

- BKX U.S. Bank Index: My setup for the benchmark BKX index (based on the three-month Eurodollar COT data) remains bullish for one more week, then goes either to cash or bearish. The latest COT data seems to actually be quite bullish for financials, with the large spec and small trader total open interest both moving up nicely.

- Gold: My gold setup goes bullish on Monday's open of trading.

- Natural gas: My signal for gas remains bullish for at least the next two weeks.

Hope you had a good weekend. Check back in early this 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