COT Report Analysis - a thread on market sentiment - Page 105
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  1. #1041
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    Quote Originally Posted by peterma View Post
    Rookie, I'm a grandad, so I watch some cartoons when the kids come to visit - one called Curious George
    In this perpective I understand the tricky answer from Mike! Still I do not know the George guy :-)

  2. #1042
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    Hey guys...I'll explain Curious George.
    This is a long time book. Child's book called Curious George. Then turned into a cartoon. It's about a monkey named George who often gets into mischief. He lives in an apartment building with his owner "the man with the yellow hat". And the doorman of their building has a dog called Hundley. George and Hundley are friends. They act as if they are little kids. And George is always getting into trouble.
    It's a great book for little ones. Very popular here in the States.
    Don't go buy it. Unless you have youngins.

    Last edited by MikeWolski; 09-20-2014 at 10:20 AM.

  3. #1043
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    On COT divergence on GBP - this is interesting - the commercials have switched sides, now net long, price up and OI down.

    I'll just quote Williams -

    "Price up, OI down is bearish (conventional wisdom) - remember I said conventional. I do not say it is correct."

    "Low OI means the public and funds have lost interest in this particular market. Their attention and money have been diverted elsewhere .. the fact that the public are not interested means I should be."

    Williams later quotes some examples " The hefty decrease in OI means that the only buy orders coming in (new trades) were from the smart guys while the large traders were selling short or decreasing their bullishness by not buying.

    Again our inside view of the inner workings of the marketplace reveals what is really going on here, and in this case the OI decline is bullish".

    Basically Williams is suggesting that when he sees a decline in OI coupled with a marked increase in Commercial buying that, in his words, "a rally is near at hand".

    He suggests the opposite case scenario is where price has been in a rising trend, there is increased OI coupled with an increase of Commercial shorts, then a top may be near at hand.

    Edit: Page 91 "opening up on Open Interest"
    Last edited by peterma; 09-20-2014 at 10:17 AM. Reason: Page details

  4. #1044
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    The idea of the crosses system is based on the 1 minute trader system of Larry Williams.
    Step 1: I wrote all the crosses for the currencies we do the COT report for (USD, GBP, CHF, JPY, AUD, NZD and CAD.
    Step 2: I wrote the currencies in a another row.
    Step 3: I calculated the commercials' net position of each currency.
    Step 4: I calculated the net position of the crosses. Example: I want to know the commercials net position for EURUSD. I simply add the commercials net position on EUR to their net position on USD.
    Step 5: I calculated the lowest net position and highest net position for the past 6 months of each cross.
    Step 6: I calculated the COT Index value of each cross.
    Step 7: I highlight the crosses that are under 20 or above 80. Then I go to my chart.
    Step 8: I look for bottoms at the chart using the 1 minute trader. So for example let's say that GBPJPY gave me a value of 100. This means the pair is at a bottom. So I go to a weekly chart of GBPJPY and plot the 52 week MA. A buy signal is triggered if the value of the MA for the latest week is higher than that of the last two weeks. The opposite (having a value of 20 or lower and an MA lower than the previous two weeks) represents a sell signal.
    Step 9: Take the trade on the first minute of the Monday trading session.
    Step 10: Close the trade at the last minute of the trading week.

    That's all there is to it really. I have been looking at possible technical entry and exit techniques. But I have not used them for the test yet.

    I hope this clears things up.

  5. #1045
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    Quote Originally Posted by peterma View Post
    On COT divergence on GBP - this is interesting - the commercials have switched sides, now net long, price up and OI down.

    I'll just quote Williams -

    "Price up, OI down is bearish (conventional wisdom) - remember I said conventional. I do not say it is correct."

    "Low OI means the public and funds have lost interest in this particular market. Their attention and money have been diverted elsewhere .. the fact that the public are not interested means I should be."

    Williams later quotes some examples " The hefty decrease in OI means that the only buy orders coming in (new trades) were from the smart guys while the large traders were selling short or decreasing their bullishness by not buying.

    Again our inside view of the inner workings of the marketplace reveals what is really going on here, and in this case the OI decline is bullish".

    Basically Williams is suggesting that when he sees a decline in OI coupled with a marked increase in Commercial buying that, in his words, "a rally is near at hand".

    He suggests the opposite case scenario is where price has been in a rising trend, there is increased OI coupled with an increase of Commercial shorts, then a top may be near at hand.

    Edit: Page 91 "opening up on Open Interest"
    I absolutely loved your analysis and it really cleared things up for me. My concern though is that commercials themselves have also decreased their positions. Doesn't that affect our analysis?

  6. #1046
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    I think what Williams is saying that with such a large exodus from the swimming pool it is important to watch what those commercials remaining did, in this case it seems they switched sides and went long.

    (For those not having read Williams' book, he likens OI to swimmers in a pool, the pool is the market and OI are the swimmers (players), a drop in OI and many swimmers got out.)

    It will be very interesting to see next Friday's positions, I would like to see a strengthening of their longs, maybe not as definite as last Friday's but at least some sort of additional longs - this would help confirm what the fundamental numbers are saying about the UK economy outlook, despite the fall in GBP.

  7. #1047
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    Hi guys,

    I did what Mike suggested last time. I made likes so you guys see I read the post and like them, only cannot answer at the time. Now I made the time. Mike, you answered only for the riddle from Peter. Now my cartoon knowledge is also improved.

    Philip, thanks a lot. I wrote down the points. I like for the early phase of the test the entry and exit. It makes it simple for the test, later on we can use other techniques. Now it is enough. Sorry, we move so fast, did you write something about entry also or only hightlighted the two possible exit scenarios until now?

    And I also remember what was the other thing in the afternoon what I forgot. It wasn't a question. I wanted to thank you for your work vocation (not 100% that is the right word). In this thread everyone has his place but you just give me always a huge help and backup. I really believe in the crossover system, highlighted the idea and thought it can work out. Others were busy with course (this is very acceptable!) but you came in, were positive about the idea, helped, brought new ideas and did not let the action "die". I think the biggest problem is with innovative ideas that no one looks into it, it is not tested and after a time it is forgotten although the work was in it and it might have changed everything. I was/am busy at these times but you did not forget about it, you made the test and continue the work. I am confident with the thread and new ideas because I know even if I am busy or forget something, you are always there to help out. Also when I cannot push the issue further on, you step ahead like it is an intuition and get into the action to push the issue further on. This is great and thanks again!!! Your post was great, I wanted it with steps so I can do exactly the same way the test as you. I go back now and read all post, check in the beginning of the week timingcharts too, and start working on it. I see huge potentials. As you also said, if we do the work we should work now on efficiency. I also think we should continue the testing, looking at maximum drawdowns, optimal lot sizes, entries, exits etc. and when we found it, work will be quite easy and the gain comes. We can name the compact system something like the "MikePhilipRookiePetermaForExchange System". If flows turn up again we can add his name into it.

    Although you explained the system great, I still have 2 question that I need to know. When you wrote down the steps I saw right away the point I did not get the last time. It is the "1 minute trader". I do not know if it is a charting program, a term, a special forex expression or what exactly. So I do not know what you mean under that and if I can do this step at all. The other thing was about your excel steps. The question is if you calculate and evaluate the values one by one or do you use equations in excel that you just put the position numbers in and it calculates everything? This is very important because the work you do looks huge. If I do it with all alone it takes me I guess at least a day to get the thing first, but later on it would still be 3-4 hours at least every weekend. So I am interested if you do it all the work or you are great at excel. Again, google drive would be good or to know your formulas.

    Peter, thanks for the explanation, I guess we are expecting the high quality content you always give to us. Everything was exact, the page numbers included. I like that you wrote it on OI because for me it is just the toughtest part in the book. Philip made a concern, I do it too. Not to question your knowledge but I think we cannot forget in this case something. I am interested about next Friday's report too. However I am quite sure on OI rise, no matter what. The thing is, the book was looking for the OI examples as great game changers as I remember with the very low readings. I do think we might have a very special case and no game changing at all. This case was "The Vote". I call it with this name because participants just wanted to get out their money from the uncertain UK. It does not necessary tells us I think a game change, they did not want to be in risk. I can expect the trend going on, both longs and shorts will be adding for both specs and commercials next week and The Vote ended with a "No". Do not think that I do not find your answer relevant, I give it at least the same as possibility as for my version. I just thought mentioning it, because I think in this case the descrease of OI was dependent on a very special event. We will see what happens.

    Maybe you guys are surprised how am I in the thread. I really do not have time but luckily I have internet where I am. The weekend is really tough but I decided after I found net (I am not an iPhone or high level mobile freak so I do not have internet there) that I just sleep less and work with you guys.

    Ok guys, I have some thoughts on NZD that I also want to discuss with you, I post it soon.
    Last edited by ForExchange; 09-20-2014 at 05:57 PM.

  8. #1048
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    Default NZD thoughts

    Hi guys,

    I said I write on the NZD in an extra post. The thing is that I see some fundamental and COT divergence.

    Since we follow here the COT report we have found some extremes, but these extremes were only extremes compared to the 3-4 months data to follow. So relatively short-term. This time however we are heading quite fast to a 4 year low extreme for the NZD!

    Where is the problem? If we are reaching a 4 year extreme, then the chance should be good for a reversal. Now here comes the problem as for a reversal the fundamentals should be supporting the rise I guess.

    My view is a short-term fall still, until the COT extreme as diary prices are still falling and AUD is not doing so good either. As rookie or Mike posted once, I think we have seen an article where they wrote that prices for diary will rise in the end of the year. This would come quite good to our COT extreme and might help the reversal! The carry trade is also on the NZD side so a short-term bearish (maybe even 1-2 months) are still in the play and then a reversal based on COT.

    Now here comes the problem with the reversal. As there are quite some fundamentals against it. If AUD goes down it is not good for the NZD for sure. USD getting strong and Comms are going down generally which is also not good for the NZD. Data are also not so great which is of course not good for NZD. Not even mentioning if diary prices will not rise.

    Usually I feel good about a good with a one direction bias. Here we see many mixed information which makes it harder to decide which way to go. In the current state I still favor short-term downtrend and long-term uptrend. If some conditions change I stay flexible and "update" my view.

    I thought it is important to mention as I am really exited about "our" first really extreme COT signal since the start of the thread. In this excitement I do not forget Philips 1-2 posts; maybe in August when he already highlighted his long-term NZD long view. The data slowly moves to this direction.

    So as always, I am looking for your opinion.
    Last edited by ForExchange; 09-20-2014 at 07:08 PM.

  9. #1049
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    Default Seasonal trends from Philip

    Hi Philip,

    you work quite a lot already and I do not want that you wake up with a nightmare with the many expectations but I ask from you one more post.

    It is about the seasonal trends. You have been writing about your expecatation in August, what might come in September. I did not find the post (went back until 890 so that is why I guess it was probably in August), but as I remember you wrote Comms strength (AUD and NZD mainly) and GBP strength. But I am not sure if it was like this, my memory says it. Now if I am right, I do not want to pick on you (because of the Comms lost), but I do find it important to write us a quick review what exactly the expectations were and how they work out. I do think it is another issue to learn but if we only write about it before the event and comes no evaluation later on than it is a lost discussion before the event. End of September is already there so it might be the right time to analyze it and remember how it worked out, regardless if it is a positive or negative result.

    As you guys see, I stayed up with my standard pretty late to contribute here, I try tomorrow abend also to come here for some time.

    Cheers

  10. #1050
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    Heys guys!

    Here's what COT looks like as of last tuesday.

    I quickly went through some of the posts and saw some of you were well Peter already having a discussion on turn arounds in net positions on some currencies. So let get to it...

    Name:  COT data analysis 16 Sep-page-001.jpg
Views: 312
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    The commdolls
    AUD, NZD and CAD


    Non commercials: Specs have been selling AUD for the 3rd consecutive week as we see them reduce their net positive position and longs on AUD. Last weeks drop was however quite large specs reducing their net positive from 41229 to 22140. AUD has plunged to 0.9148 from 0.9281 against USD. Specs outlook on AUD seems bearish.

    Specs have been selling NZD for the 8th consecutive week as they progressively reduce their net positions /longs/ and longs for the 7th consecutive week. We saw quite large change in net position last tuesday specs reducing their net position /longs/ from 9522 to 1120. NZD have plunged from 0.8302 to 0.8217 against the dollar last week. 4 year low net negative reading was at -5530. Is there a room for kiwi dollar to plunge further down at least against the dollar , I would say sure yes. Specs outlook on NZD is bearish.

    Specs have reduced their net position /longs/ from 11630 to 7544 on CAD. Just the week prior last week we saw specs adding up on their net position /longs/ and they appeared somewhat bullish on CAD. Not anymore. At least against the dollar. Specs appear rather bearish to neutral on CAD. CAD jumped to 1.1028 from 1.0949 against the dollar last week.

    Commercials: Commercials have been on the other hand reducing their net positions /shorts/ on AUD for the 2nd consecutive week. Rather bullish reading. However I want to highlight that it still is net negative and we're yet to see a transition from negative to positive reading as we have with some currencies that we will later see.

    Commercial net position on NZD has turned from net negative /-9702/ to net positive /39/. Commercials have started buying kiwi dollar. As I recall commercials buy when price is down and sell when its high and move the opposite to specs or the trend.

    Commercials net position has turned from net negative to positive on CAD. Commercials have started buying CAD the week prior last tuesday commercials net position on CAD was -6359 and last tuesday we saw them turning it all around and now net position stands at 3203. Rather bullish reading.

    The majors
    GBP and EUR


    Non commercials: Specs net position has turned to net positive from net negative on GBP. As of 9th Sep specs net position /longs/ was at 26727 and last week it plunged down to and into the negative zone at -6581. Most of it I suspect was due to Scotland referendum. Spec bulls were pricing in on or just seconds after the no vote came out, we saw pound sterling rising up across the board before giving it all away. So I'm not reading much into this change from net positive to net negative reading. However I do think we can't be too optimistic on pound sterling neither as general election is coming up in May 2015 and there was slight slowdown in key economic data that was released recently. Scotland referendum may not be the end. And there's a genuine uncertainty in that regards, politically speaking. That might deter investors away from investing in the UK - decline in pound sterling. And BoE may not start hiking rates until after next general election.

    Specs have reduced their net position /shorts/ from -157505 to -137149 on EUR. While they reduced their net negative positions specs still appear very much bearish on EUR. EUR has plunged to 1.2908 from 1.2996 against dollar. Like I said I'll be bearish on EUR until key economic indicators pick up.

    Commercials: Commercials GBP net position has turned from negative /-17678/ to positive /15775/ reading. Commercials have started buying pound sterling. Probably a bargain price to get in pound sterling plunged to 1.6153 from 1.6329. Does it mean that we'll see pound sterling plunge further down ? probably it will against the dollar.

    EUR net position /longs/ has declined once again for the 2nd consecutive week. Commercials have been selling EUR.

    Safe havens
    CHF, JPY


    Non commercials: Specs have been reducing their net position /shorts/ for the 3rd consecutive week on Yen. Yen rose to 106.68 from 105.515 against dollar. While it may seem like a rather bullish reading. Fundamentally speaking japan is in a decade long deflationary cycle. We've been seeing yen decline against everyone across the board lately, is weakening much against dollar. While the policy makers are in for a weak yen to boost export and the economy things are not the same anymore as it was back in the 80s or 90s. Now much of the japanese manufacturers have moved their facilities outside of Japan, they all produce and purchase locally. There isn't much manufacturing and producing happening in Japan anymore. Weak yen to boost exports ? And there's another tax hike coming up soon however with stimulus this time around. I doubt that extra stimulus will do much. We'll have to see on that one if japanese economy can swallow another major contraction due to another tax hike. I am still am very much bearish on Yen.

    Specs have reduced their net position /shorts/ on CHF once again and they have been for the 7th consecutive week with some minor fluctuations in between but nothing too major.

    Commercials: Commercials have been reducing their net position /longs/ for the 2nd consecutive week. They have been selling some of their yen longs. We saw commercial selling some of their CHF longs as we saw them recuce their net position /longs/ and longs.

    Conclusion

    AUD - bearish
    NZD - bearish
    CAD - neutral
    GBP - neutral
    EUR - bearish
    JPY - bearish
    CHF - bearish to neutral
    Last edited by Nebula9; 09-21-2014 at 04:19 AM.

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