Friday 24 August 2012

Bearish Downturn in COT Data Accelerates

Now it's the turn of the metals to confirm the broad downturn in trader positioning in the weekly Commitments of Traders data from the CFTC. Friday afternoon's COT report had more bad news for bulls.

It pushed my setup for copper out of cash into the bearish column, as you'll see on my latest signals table. It also ended my silver setup's long-time bullish signal and put it in cash. That setup would have gone short if the commercial hedgers had gotten just a little more bearish in their net position as a percentage of the total open interest.

In gold, the wrong-way small traders got heavily bullish - another bearish development. But their signal has a two-week trade delay, so gold remains bullish for the time being. 

And natural gas is also seeing heavily bearish positioning, though it remains in cash next week.

My S&P 500 and Nasdaq-100 setups remain bearish as before, while my 30-year Treasury bond signal is bullish again next week (meaning the yield would fall - which is generally bearish for equities). Have a good weekend, and good luck next week.

Friday 17 August 2012

Bond Data Turns Bullish in CFTC's Commitments of Traders Report

One signal takes effect on next week's open of trading based on the latest Commitments of Traders data from the CFTC: bullish for my setup for the 30-year Treasury bond (meaning the yield would fall).

The latest trader positioning (you can see details on my latest signals table) shows the "smart money" commercial hedgers remaining heavily bearish in their derivatives positioning in the S&P 500 as a percentage of the total open interest. That setup is bearish, despite the recent rally.

My NASDAQ-100 setup is also bearish.

In fact, the bullish bond signal suggests mounting overall bearish positioning in the COT data, with the only other bullish signals being gold and silver. That contrasts strongly with the bullish positioning in my discretionary positions based on chart price action.

What could it mean?

Have a good weekend pondering that, and good luck next week!

Sunday 12 August 2012

Natural Gas: Another Win for Commitments of Traders Data

I don't want to jinx myself, but it looks like tomorrow's open of trading will bring another profitable trade for my natural gas setup based on the weekly Commitments of Traders reports. (See my latest signals table for more details on my signals this week.)

This setup is without doubt the star of my COT setups. Anyone who doubts whether this free data from the CFTC has any value can just take a look at the results from trading the natural gas data with my signal. Since June 2009, it's returned 93 percent (not including my current short position, which closes on tomorrow's open), while natural gas itself has fallen 28 percent.

That's based on a good sample of 31 trades, 24 of which were profitable (a 77-percent batting average). The average trade has lasted 2.4 weeks, which means I was in the market about 70 percent of the time.

I'm always curious to see how natural gas moves during my positions. Using technicals, I would have almost never placed trades at the same spot as the COT data tells me to. In fact, the price sometimes moves strongly against the position at first.

The latest trade is another example. My short position started on July 23, and the first week saw the signal lose money as gas pumped higher as part of its rally since mid-June. It even broke out on the daily chart through a couple of Tom DeMark Setup Trendlines, meaning I might have gone long.

But the last two weeks have seen a serious selloff, and the trade is now up 12 percent in three weeks using the 200-percent leveraged HND fund in Toronto. (The UNG fund in New York is down 8.6 percent.)

Hopefully my other recently revised setups will do as well! The jury's still out right now, and it took me about two years or more of trading with my gas setup for me to see a consistent pattern in the returns.

Gas goes to cash on Monday's open, and there are no other trades taking effect next week based on my COTs Timer system. Good luck this week!

Monday morning update: After today's open, my HND trade ended with a 12.6-percent gain, making my total return for this setup in the past three years 105 percent with 25 profitable trades out of 32 (a 78-percent win record) - knock on wood!

It's not to gloat. I know the setup could stop working tomorrow, and my other setups don't do nearly as well. But it gives me inspiration to think I could replicate these results in other markets using the COT data, and that's what I tried to do when I revised my other setups recently. Good luck again this week.

Saturday 4 August 2012

Smart Money Commercial Hedgers Dump S&P 500, Signal Flips to Bearish

It's been a long climb back to my entry price for my S&P 500 signal, which has been bullish since March 26.

For most of that time, the signal was in the red -- but just this last week, it's scraped and clawed its way back to just a hair below the entry level of 1,397.11.

And now, after all that, my setup for the S&P 500 goes to bearish as of the coming week's open of trading!

This is based on a sudden collapse in the "smart money" commercial hedgers' futures and options positioning as a portion of the total open interest, according to Friday's Commitments of Traders report from the U.S. Commodity Futures Trading Commission.

My gold setup also switches out of cash (where it's been two weeks) back to bullish as of Monday's open.

And my 30-year Treasury bond signal goes from bearish to cash. Ironically, I notice that my position hit its stop level when the bond briefly sold off Thursday. Alas, the bond bounced right back, and the signal would have been in the money if I hadn't been stopped out.

But I'm not too upset. I think it's 100 750 billion times more important to follow my signals religiosamente than to ignore a stop on the off-chance that the position will come back. That kind of second-guessing can screw you up big-time.

See more details on these and the other markets I trade using the COT data on my latest signals table. Good luck next week.