Wow. What an absolute disaster of a week. The Dow and S&P 500 are now well below their 2002 lows. The Nikkei has decisively broken below its 2003 low. The FTSE is now testing its lows of the last bear market. But Canada's TSX index is, oddly, well above its 2002 bottom. Does that mean there is still some hope for the market, with Canada's outperformance representing resilient commodity demand? Maybe the commodity bull really isn't over and is just seeing one hell of a huge correction? I don't know. What I can say is Friday's Commitments of Traders report doesn't give much hope for equity bulls. I've now updated my latest signals table. Some highlights from the latest weekly data:
- S&P 500:Â My trading setup for the S&P 500 has been bearish since November, but this coming week it goes briefly to cash. That's based on the commercial trader net futures and options positioning during the week of Feb. 10, when it abruptly rose to a bullish extreme. It quickly fell back into bearish territory the following week, so my setup goes back to bearish on the open of Monday, March 16, and will remain so for at least the ensuing three weeks. In the latest COT report, the commercial net position as a percentage of the total open interest dropped from 0.47 to 1.02 standard deviations below the moving average I use to evaluate their positioning. Meanwhile, the "dumb money" small traders - far from turning more bearish during the latest market cataclysms - have actually become even more bullish. Amazing! In Friday's data, their net percentage-of-open-interest position went from 1.48 to 1.60 standard deviations above the average. Not good at all if you happen to be a bull. They obviously are convinced the bottom is in. But their poor past record raises questions about whether that's the case.
- Gold: My trading setup for gold based on the COT data remains in cash again this week - the fifth in a row. The two signals that make up this setup don't agree with each other again. However, some possible light at the end of the tunnel: my signal based on the large speculator total open interest (long plus short positions) has flipped to bullish. That signal has a seven-week trade delay - which means the overall setup can't go to bullish for seven more weeks. Until now, the large spec total open interest has been persistently excessively bullish during the recent gold rally. That turned the setup to cash after a three-week bullish call. Now, the large specs have suddenly pulled back from being 1.07 standard deviations above the moving average to 0.72 standard deviations below. If my other signal - based on fading the large spec net percentage-of-open-interest position, but with no trade delay - is bullish in seven weeks' time, I'll be shopping for some bullion.
Hope you have a good weekend. And be sure to check out the updated post on my portfolio page early next week. TAGS: S&P 500, SPX, gold, COT, Commitments of Traders, derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission, COTs Timer, Monte Carlo, out-of-sample testing, walk-around testingRead more at: Recommend this article... Related items
Last update : 05-06-2009 15:33
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