Crude Times for Crude

Quite a bunch of meltdowns and meltups this week. U.S. banks and bonds got clobbered, while the S&P 500 and gold were flying. Here's how the Commitments of Traders numbers see things (check my latest signals table for more details):

- S&P 500: Third week bearish for my S&P 500 trading setup based on the weekly COT data issued by the Commodity Futures Trading Commission. As you can see on my newly updated latest signals table, the "smart money" commercial hedgers are still uber-bearish. Their net position as a portion of the total open interest is now in its fifth straight week of being one standard deviation below average or lower. The wrong-way small traders are also still fairly bullishly set.

My position is down about three percent (discounting leverage), but hey, that's trading. Could still close out with a gain. And even if not, you can't expect to win 100 percent of the time - or anywhere near that - in this business. See my FAQs page for more on how I feel about losing trades.

- Crude oil: My trading setup for crude goes to bearish on next week's open of trading. With the trade delays involved in the signals, this setup will remain bearish for at least the next four weeks. As Stephen Vita noted today on his excellent Alchemy of Trading site (see free version here), crude has just entered its seasonally weak period between mid-October and mid-December. (As an aside, readers sometimes ask me about the best books to read about trading. I always tell them to check out Stephen's site. I've learned more from him than any other source.)

- Natural gas: When will the misery ever end for this sad-sack market? Now, according to the large specs and small traders. Both groups are piling into gas futures and options. My setup has gone bullish with a one-week trade delay, meaning execution on the open of Oct. 25. Caveat: This doesn't mean the COT data says gas has probably bottomed! The signal could last as little as one week, then be back in cash or, a week after that, even bearish. That's just how gas is. Jumpy!

- U.S. financials: Fifth week in the cash column for this market.

- Gold: Large specs are over-exuberant, and my signal is in cash a second week in a row.

Hope you did well this week and that you have a great weekend. I'm sure looking forward to it. Saturday is Mexican night! Hasta la proxima vez - and be sure to check back in early next week for my portfolio update.

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

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