COT Report Analysis - a thread on market sentiment

Hi FE,

Well, it’s more about the timing (if we’re going to short JPY for the long term). Like you said, we were not at any extreme level yet. I think there’s still room up. The weird thing I notice about JPY is that selling opportunities are usually when OI is low. This year’s lowest OI is 150ish while, currently, we’re at 220ish.

Hey guys.
I just wanted to throw in my sentiment, (hopefully it will be same as all you guys) for the week.
So we have USD sentiment for long. According to the COT report, cause everyone is pretty much bearish.
And we had them correct last week, as the results showed they turned out as the weakest for the week. So making it a healthy correction. And fundamentally, nothing has been put out there that they are turning any weaker, like some real bad figures or rate hike talk to be pushed further.
We just have to wait to see a turn around or find a good point to take an advantage of a good run up. I haven’t checked, but is there a possible catalyst this week for the USD?

GBP. According to Philip we have some signals. Up on all except with USD. I just will be watching them for any breakout to the upside. Sizeable.

AUD. I know their not really in the cards guys. But I have them in mind. Look…for as strong as they were and have shown, I am pegging them as the underdog. I kind of view them as a sleeping giant. If the Comms decide to come out and play (risk comes back on) I kind of think it will be them leading the way.
I could be way off and wrong. Honestly. But that’s what’s going through my mind. Has been.

So, I would get in on one of those 3 scenario’s. Waiting on those opportunities.

Guys, I’m working on something. It’s gonna take some time. I tell ya…after the last 2 weeks with the NZD shenanigans, I’ve been wondering a lot. Also as I see the numbers I see everyday, weeks, months.
I have some back data to run first. And I plan on showing you what I’m talking about. I want to give proof to some facts. Actually it is a factor. I’m working on a factor that we need to factor in. It has to do with the “who’s dominating” sentiment. That changes. And it’s not always because of a fundamental reason. Things go back and forth. I guess it could be called a technical aspect. But I think it’s something else. I don’t know what to call it. Actually it’s along the lines of my so called “underdog” theory. In a sense, that is.
I believe this to be a factor. Something we need to consider, to some degree. Someone is on top, someone is on the bottom, and that always changes. Sure, over a longer time period we will see some things constant, like the EUR, JPY, but there is some patterns that we need to factor in, on “who’s dominating now, and for how long”.
Give me some time to get all the facts together. I’ll bring you proof, as opposed to randomness.

See you guys in the am.

Mike

[B]Mike…[/B] You got me excited on your ‘who’s dominating sentiment’. I already have a vague idea how I’m going to use that for my crosses system - I think it can be a great confirmation tool. But first off we /I/ need COT data for crosses that is going to be the foundation.

I agree with your view on AUD, but you want to play it with great caution. As for GBP I’m not bullish just yet, specs have been going from long to short and vice versa for the last 4 weeks showing indecisiveness. Probably not a wise decision to jump on board even on a breakout.

[B]FE…[/B] I am very keen on your system as well! I’m excited to see how everyone’s working on something. Throw in your ideas guys! we’re already learning a thing or two about futures market by looking at BB analysis so I’m hoping our transition into other markets will come easier. I’m thinking of reading a book on intermarket analysis I am fascinated by how all these are interconnected, if you’ve got spare time I suggest you to do some study on the subject, Peter has proved that it works and
it is logical.

PS: NZD is bouncing off so is his brother AUD just as I had suspected. Risk is back on ? specs have been selling kiwi during NY session last friday so I assumed the selling trend will continue onto asian session. The good news is I only got one small position running so I can keep it for a while and observe before putting a tight SL.

It really is a thinking persons game Peter :45: So I’ve decided to get Gayed’s book ‘Intermarket analysis’ think this should be a good start I will venture into Murphy’s book later. Apparently Gayed’s book is read by many hedgefund/asset managers or the professionals. Had great reviews despite being published in 90s.

Hi guys,

I am in contact with the babypips.com support. I already talked with Philip about changing the thread name. What do you think about the following name: “COT Report Analysis” - a thread on market sentiment

Maybe it does work out to change the name.

FE

Yep, that would have made more sense. I was wondering that myself. The change is far from being drastic though. If you look at the bigger picture, it is clear that Commercials were buying into the whole decline, increasing their CL/OI from 40% to 47%.

Good morning fellas.
As I check the charts just now, looks like there is some changes going on. JPY has been turning low. FE…I forgot to mention that in my last post. I’m with you on the JPY for low. You in yet?

Here’s the 0710 shot.


Hey Traders!

As promised, here comes the study of the relationship between Open Interest and Price.

There’s some interesting stuff going on with Silver! As you guys already know, market bottoms usually comes hand-in-hand with low OI readings. Well, that’s what Larry Williams claims. I don’t simply take his word for it. Also, ForExchange pointed out earlier, that despite the fact that we are fishing for a bottom in Silver, OI keeps on climbing higher and higher. How is that?

In order to understand the phenomenon, we have to take a look at the historical chart of Silver spanning over 10 years.


Okay, what do we see here?

Red Circles represents the most obvious lowest OI readings.
Oranges Circles represents the less obvious low OI readings.
The single Green Circle represents the only time Silver bottomed out on a high OI reading.

I don’t know about you guys, but I think it is safe to say that low OI readings usually the symptom of a market bottom.

I wonder though whether the reverse of our statement is accurate or not. So let’s examine the relationship of high OI readings and Price.


Interesting stuff, isn’t it? Seems like when an instrument is really hot, it becomes vulnerable to topping out. I wonder why is that. Tomorrow, I’m going to attach the Positions of the Commercials to find out whether they have to do anything with the phenomenon.

Anyway, that’s all for now. Have a great day!

Edit: I circled the same circle with green & red. That reading is kind subjective though, since the highest reading came right after the top. Well, interpret anyway you like. Also, I noticed that in the second picture, the second red line also represents a bottom in high OI reading.

Hey guys.
I got to run now. But thought I’d leave you with one more shot. 0940


Hey guys.
Well we’ve been rolling for a Monday. Right now it’s approaching the US session, about an hour away.
I just wanted to let you know that I got into a trade this morning. I’m gonna let this ride out.
AUD/JPY going long at 93.72. Looking good so far.

So far up to this point it sure does look like the Comms are coming back. NZD and AUD. Except CAD. They are being taken advantage of. And on the other side it looks like the JPY is dropping much also, along with some other Majors also.

I’m thinking the Comms just might take this week. I really don’t know of course, but the way the trend has been going, which is just back and forth, it should be the Comms turn this week. And I’m hoping it will be the AUD leading the way.
So, once again, I really don’t know but for a Monday I’m making that call. We’ll see if my sentiment will be matched with what the market thinks. Someone remind me at the end of the week to look back at this post.

Ok guys. Be careful, be smart, and let’s just go with the flow.

Mike

Hi Team,

we have an interesting day out there even if half of the world has banking holiday. On one side we can say risk on sentiment is out there today and the three comdolls are gaining on it. What is strange though, the one currency which should lose big time (JPY) in these market conditions; is holding pretty good to its’ levels. I wait for your observations guys because I am not getting exactly how both these moves are possible at the very same time. (I know Mike said JPY is dropping, but I think comparing in what speed and how much JPY earned lately, the loss is only a minor loss).

Mike,

I was missing your screen shots in the morning. I see you posted them later. Good luck with your trade, I am also in with AUD but not vs. JPY. I am in vs. EUR and CHF. But I have to admit you made me think to jump in. Looks like a good long term setup.

Balazs,

good explanation and charts on OI and Price. Really nice work there. If I examine the price levels with the OI readings, and then look at the successful trade ratio (assuming I was always entering the trades on the signal), well it would not have made a great result. It was still possible though to make the signals you mentioned to a good revenue source. Some of the biggest market moves were right on spot. This means, entering all the trades you posted with a very tight stop loss would have worked I think. We would have been stopped out very often, however some great moves would have been caught and these trades make up easily for the many small losses. What is interesting, silver is more on a high level, which would suggest a selling signal now. At these levels I just definitely do not have the guts to sell. It does not mean it is not the right thing to do, but for sure not for me (I know you did not say to trade it).

FE

Hey guys.
I don’t know if your aware, but the NZD had prices come out Monday. Wasn’t good. But…have you seen them today? Are up. Along with their sister AUD. Comms definitely have it today.
But anyway, take a look.
New Zealand Food Prices Drop 0.8% In September
Interesting.
Who needs good news? Bad news will do just fine for them, apparently.

Hey fellas.
I got another one. Interesting article on the Russia/China currency swap deal. I don’t know what it means to us, but maybe have an effect on the USD sometime.
Maybe someone real smart out there (BabyPips old guys) have something to say about that.
Well, take a look.

Mike

Keep in mind that the chart is a Weekly chart. If we would zoom in, we might spot some great setups at the highlighted points, probably with a nice R:R ratio.

Huge spike on EUR/USD and some other EUR crosses, fear re Ebola in Boston, USA.

My test system had me exit my short on Eur/Usd with 32 pips, it took me long and then I exited with 2 pips profit just before the huge spike. (wrote in my journal - not much movement likely, has ran out of steam)

Still happy with the exit decision regardless, but just shows how wrong it is possible to be.

The system has indicated a short on Nikkei so took that is evening, also long on Eur/Jpy on a buy stop (probably triggered by the surge, pending orders long on Aud/Jpy and short Usd/Jpy,.

Will update later.

BTW strong correlation on Silver with many currencies at present.

Update; apparently a false alarm at Boston, thank goodness, now the interesting thing is will the move fade?

Hey guys.
Monday results.

AUD: +6 -0 1///+4 -0 1
CHF: +5 -0 2///+2 -0 1
EUR: +5 -1 1///+2 -1 0
NZD: +4 -3 0///+3 -2 0
JPY : +3 -4 0///+1 -2 0
USD: +1 -5 1///+0 -2 1
CAD: +0 -5 2///+0 -3 2
GBP: +0 -6 1///+0 -2 1

Comms took it today, not by much though. +2

The 00 shot, beginning of Tuesday.


We’ll chat in the am guys.

Mike

Morning guys!

I’ve been watching the flow of things since yesterday morning. Its been an interesting day. Thanks Mike btw for updating us on the dairy auction.

I’ve learned not to short NZD when AUD is up they go hand in hand and so does EUR and CHF, Mikes stats confirmed just that. I don’t know what it is but I’d like to know :45: in the absence of dollar bulls I think it is a safe bet to long AUD against yen or euro this was my conclusion for the day. And I actually have opened short EURAUD took profit yesterday and long AUDJPY. There’s going to be few data to be released for euro today if euro reacts negative on the news I’m thinking of shorting EURAUD once again. Its early into the asian session and dollar bulls are nowhere in sight.

Morning fellas!

Yesterday, we concluded that with the help of OI, we are able to find trading opportunities. Now, that is and edge, hands down. But I wonder whether Commercials got anything to do with the phenomenon or not.


What you see here is the chart from yesterday, but I attached the Longs of the Commercials. (How much of the overall OI Commercials own)

Okay, here is something mind-blowing.


Each and every time the masses had no appetite to participate, the Commercials were going long. I’m talking about massive positions. Now that is something the watch out for. Here’s something else. There were two instances when our Commercial Long / OI reached 100%. See what happened next? A BADASS RALLY.

Should we keep an eye on this relationship? You bet!

I’m currently working on a formula that would convert OI into a percentage.


Now, it’s my time to ask you guys about your role in the group. Since I’m new here, I don’t really know the ‘old-timers’ here. So I’d appreciate if you told me something about yourself, your trading method, etc.

  • How long have you been following the thread?
  • Do you have your own COT database or gather the intel from a site?
  • Are you into fundies or TA?
  • How long have you been trading?
  • etc.

Good morning guys!
Before I forget, here’s the shot. 0730


[B]Fed officials say global slowdown could push back U.S. rate hike[/B]

(Reuters) - Federal Reserve officials on Saturday took stock of a slowdown in the global economy and said it could delay an increase in U.S. interest rates if serious enough.

Fed officials are worried about growth around the world, there are downside risks than upside risks and Fed will have to think about in policies. Chicago Federal Reserve Bank President Charles Evans said a strengthening of the dollar and weak growth abroad could mean slower inflation in the United States, and less justification for the U.S. central bank to raise rates.

Large developing nations like India and Brazil have been concerned a rise in US rates could suck investment away from their economies just as they earlier criticized the Fed’s bond-buying stimulus as a “currency war” that caused a fast increase in their currency values.

Fischer spoke in part to calm concerns among developing nations about a potential tightening in U.S. monetary policy, saying the Fed would only move rates higher if the U.S. economy was ready for it. Overall, he said, rising borrowing costs in the United States were unlikely to disrupt flows of capital and investment around the world.

“In determining the pace at which our monetary accommodation is removed, we will, as always, be paying close attention to the path of the rest of the global economy and its significant consequences for U.S. economic prospects.”

Morning BB!

You’ve been posting analysis after analysis since this past weekend I have yet to catch up with all that been busy lately but I will.

As for me I only trade currencies on a live account been demoing since a year ago , studied on and off since 4 years ago but been taking it seriously from April this year. I have joined this group in July , so I have been a member of this group for a little over 3 months, I bet most of us are except for Peter and FE. Thats how I’ve gotten around trading with COT and fundamentals. I don’t have that much of a database just yet but I wouldn’t mind if you’d share yours with us :13:, my COT data goes back 3 months, roughly. How about you BB?