Banks, Gas, S&P 500 to Cash

New signals taking effect on the coming week's open of trading: My trading setup for the benchmark BKX U.S. Bank Index goes from bullish to cash, and my signal for natural gas goes from bearish to cash. I just updated my latest signals table with these signals and other new details based on Friday's Commitments of Traders report issued by the U.S. Commodity Futures Trading Commission.

Here's something interesting: The "smart money" commercial hedgers in S&P 500 futures and options have gotten substantially more bullish in their positioning in the latest COT report. Their signal has gone from bearish to bullish. Meanwhile, the wrong-way small traders are slowly unwinding their excessively bullish positioning, but they've yet to come anywhere close to a bearish extreme.

In my trading setup for this market, both groups of traders must give the same signal for me to take a trade. In backtesting, this gave the most statistically robust and profitable trades. The result? My setup, which uses a three-week trade delay, will go to cash in three weeks' time because the two signals don't agree.

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