COT Report Analysis - a thread on market sentiment

Hi guys,

some update on our COT watchlist products. As Peter highlighted, we have to watch out for silver. Oil and copper are falling rapidly, but silver falls very very slow, at the moment of this writing gold even has a little gain. This might show that there is buying interest out there for silver.

For those of you who is interested to buy Copper besides BB and me, check from now on the daily charts.

FE

Hi guys,

these chart analysis are not so easy. I write this post to give information for rookie and Mike, and to get information from BB and Philip. I know it might be annoying to ask these question but very important to discuss. If we discuss it once it can be understood by everyone and everyone can benefit it. I do the BB analysis first do I see the difficulties first as well.

I tried to find everywhere the Williams commercial index and COT Index what Philip. It was not clear when he wrote if the indicator should be on the tradingview.com site or in my software programs. It does not matter, I check everything and I have these indicators nowhere. In tradingview.com I even checked the persons who make the indicator, there was one there who made all COT indicators but they seemed to be useless. Then I check all BBs analysis.

I saw that his solution was (and seems to work):

  1. taking a print screen from price action
  2. copy paste it into excel
  3. combine and price action with the excel table so the time period is together
  4. take another print screen from it together
  5. import it to paint to make the lines on it

Any better idea is appreciated. I did only 1 chart with net positions (post it soon) and now I really appreciate what BB does every week. I took at least a half an hour to cut it good together. I hope someone can share more advanced knowledge because it is slow. But BB is right again, the findings are useful and hopefully will result in pips.

BB, I have another question: I checked your studies. You usually make the price chart with net position and Willco. There must be a trick with Willco. With net position everything is easy but your Willco seems to be full with ups and downs. The original Willco which we post on the weekend is slow without much movement. So I think you might change something in your excel table so it seems more volatile. Please tell me how can I get such a Willco that you use for historical analysis.

I hope this makes it a bit clear for Mike and rookie when they come to this point. Any ideas are welcome as reducing this torture time would be great.

FE

Ok guys, here is a study how timely net positions can tell us the action on the USDRUB pair in the last three years.

Take a look:


Conclusion: as you can see the results are pretty amazing. The black lines represent all the COT Commercial buy signals and the green lines represent all the COT Commercial sell signals. Actually there were 2 signals completely off: the 3rd black line from the left (the place was a perfect entry actually but as there is a huge and sudden downward movement it would have hit the SL for sure) and the 3rd green line from the left. All other signals are good and more than that: timely accurate! We read often that COT is not a timing tool however here it was. The price reaction to the extreme reading came always short after the extreme position. This might be such a great indicator in this pair because as we know the ratio of commercial players is a lot higher than in the case of most of the other pairs. Commercials almost have all short and long open interest so looking at their signal seems to be perfect for timing. If we put a tight SL on the opposite side of our trade we could have had very limited loss for the 2 fakeouts mentioned and make some huge gains.

Important: comparing the sell and buy signal the commercial net position chart shows us better buy signals.

As I highlighted how important this pair is to watch (because of extreme level and high carry trade to the short side) I hope I could give you some interesting information about it.

I like your last comment in particular because I noticed too looking at the chart. It tells us that no matter what commercials think, getting our fundamental bias correct is essential.

There is something that is driving me mad about intermarket relations and I hope Peterma helps me with a longer than usual explanation

We say that lower oil prices is good for stocks on the long term. But looking at the chart, Oil topped with the stock market in 2008 and bottomed just slightly ahead of it. So is the fall in oil prices actually a signal of an impending top in the stock market? or was the situation different in 2008? If it was how so?

Philip, there’s 3 asset classes that investors use, Stocks, Bonds and commodities. I’ll not make a big long boring speech, so maybe just go back about 100 years -

There’s always a leader, the flavour of the period that investors, maybe herd-like, run to in order to achieve further gain on their hard earned wealth.

Inflation, disinflation (period of benign inflation) and deflation is the environment in which that investor is acutely aware.

After WW1, inflation was strong (Germany suffered from hyper inflation, many believe that influences EU policy to this day) - so in that environment Commodities were king, common sense told the investor that there was where to invest as a hedge against inflation.

Then in the 20’s things settled down to a period of disinflation, returns from commodites were losing their sparkle, the investor looked elsewhere, the stock market became king.

We know the story FE told us about the postman and stocks, so when deflation took hold and the stock market went down hill then the Bond market was the only safe have - pre WW2

WW2 has the effect of resuscitating the stock market ( I often told the J Livermore story of WW2 outbreak and the stock market and US Steel) - that lasted right up until I was a kid - Ah… the heyday of the 60’s and early 70’s

But that’s what happened, our Govt said ‘you never had it so good’ (bet if you google that), and we didn’t.

But you know what comes with all that spending and earning - inflation, and it came with a bang.

Back to the commodities ran the investors, really scared that inflation would eat away at their wealth, stocks lost their leadership.
Up went our best known commodity, that famous black stuff (I’m speaking of Guiness, it was around 30p per pint) and so also oil.

I’ll finish later :slight_smile:

What I tried to do above was paint the big picture, in particular from an investor’s viewpoint in a capitalist market.

More specifically on oil and 2008, if you look at 2007/8 and 1970’s you can see how oil price can influence the stock market direction.

I remember the 70’s well, I was starting out learning business, many businesses suffered greatly, the rising oil prices had that knock on effect, it led to a stock market decline in 1974, and little wonder.

It’s actually the case that rising oil prices will instigate a stock market fall, has happened a few times since 1974, and more recently the rising price in 2007 finally led to the 2008 stock fall. If you look closely you can see that oil actually continued up even when the S&P had thrown in the towel.

Oil will then follow the stock market down on the basis that falling demand, reflected in the lower stock market,will cause lower prices.

The reverse is also true, low energy price is good for business, what’s good for business is interpreted as good for the Stock Market.

Energy/commodity price influence is as you say a longer term influence, back in 2007/08 stocks continued to rise even though oil was rising also, it’s when oil reaches extremes that the effect is finally felt.

To be honest, I don’t trust any of the sites. I like to do my own analysis so I can be sure that it is done right.

I don’t think there’s a faster way to create these unique charts. It takes about half an hour to cover 10 years of data with pictures once you have a template for it. Should I share it tomorrow?

There is no trick to Willco. It seems slow because we don’t even have one years of data. Since my studies usually start from 2003, that means 10 years of Willco.

Here is a little piece of news - note the first sentence, the last 3 words.

The US haven’t raised taxes, Mike am I right? - if not then where would the increased tax receipts come from - increased economic activity, maybe that accounts for the increase in business confidence in Oct.

Wonder will that translate into NFP.

U.S. Borrowing Needs at Lowest Since 2007 as Economy Strengthens - Bloomberg

and

These are the sentences which gives me good mood after a hard day.

Peter, if I make your story even a lot shorter, can I make the statement that we should invest our hard earned money the following way:

inflation: commodities
disinflation: stocks
deflation: bonds

Good night everyone
FE

Hi BB,

yeah a template tutorial would not be bad. As you see I try everything you wrote as I think it has a huge value to success. But no work no success. So I do it all.

One concern though is the very slow process. I will work on efficiency on the weekend. I was thinking when you said: For a new product I need about 10 minutes to copy+paste all data and setup the analysis.

Well it took me to make those analysis for Nikkei (and for the wrong one…) 90 minutes on the weekend. The historical analysis was altogether another 90 minutes. And we are talking about only one market! I think I will look over and try to optimize. It may not look very important, however I covered only 3 markets since last COT report (crude was fast as I was ready with it, I added Nikkei and USD/RUB). If I would be twice as fast, I would be not sharing 6 markets and potential other trade ideas.

So I think all your tutorials are good, I am interested to see a template. Also I might write once in detail, step by step to you how I make my new market analysis into the templates and you can tell me which steps are inefficient and how can I make the process faster.

FE

Hey guys.

Tuesday results.

NZD: +7 -0 0///+5 -0 0
AUD: +5 -1 1///+4 -0 1
CHF: +5 -1 1///+1 -1 1
EUR: +4 -3 0///+1 -2 0
JPY : +2 -4 1///+1 -2 0
GBP: +2 -4 1///+1 -2 0
USD: +1 -6 0///+1 -2 0
CAD: +0 -7 0///+0 -5 0

Comms took this one. +4


Hey guys. Good stuff flying there. I will have to get to it all in the a.m.
And btw…I haven’t noticed any tax increases here in the USA.

PS…I still am struggling with how to import the COT data into my excel sheet. nod,nod,nod
I’m trying. If you have any DETAILED steps, I would appreciate it.

Mike

Which part are you struggling with?

Looks like everyone played by the rules during Asia, USD up, Gold down, took Silver with it.

The only bright spark is Nat Gas, whether that will hold out or not is hard to tell.

UK services pmi out - will affect GBP, Asia is betting on a slip here.

I like FE’s analysis, The index is a bother right now, investors seem to be hesitating, they are eyeballing further up but waiting for a move.
Frustrating, just have to stay flat until they decide.

Hey BB.
Well, I got as far as setting up the columns and rows. And I go to the site, click on the “excel” button for it to download the data, and I probably have it downloaded somewhere on my computer, but I can’t find it. I simply cannot put that data into the sheet. I don’t know where it goes to and even if I did, I don’t know how to get it into the columns. I see the button “data” at the top of the sheet, and it brings up, on the left, from where to import it from, but I don’t understand anything after that. I just need detailed step by step how to get that data into the columns.

Mike

Hey Traders!

This week, instead of a study, I want to show you how to calculate ProGo & Williams’ VIX Fix indicator, using Microsoft Excel.

I fancy the idea of combining the COT indicators (not price-derived) and price derived indicators. I believe it could give us a serious edge instead of just staring at the charts trying to make sense of the current price action.

So, today, let me introduce ProGo and VIX Fix.

ProGo

I believe the indicator was first introduced in Larry Williams’ book, Trade Stocks and Commodities With the Insiders - Secrets of the COT Report. I won’t go into details here, you can see the reasoning behind it’s effectiveness on page 125.

The formula is pretty simple. You subtract today’s close from the opening and calculate a 14 moving average.


We don’t care about the value of the indicator. All we have to do is look for divergences between the indicator and the price itself.

Price rising - ProGo declining = Bearish
Price declining - ProGo rising = Bullish

Williams’ VIX Fix

I can’t help but loving this indicator. You must be familiar with the VIX Index, and how that measures the volatility in the S&P 500. Traditionally, high VIX readings are associated with bottoms in the S&P 500. I simply apply Bollinger Bands on my VIX chart to see when “fear” is relatively high in the market.


Unfortunately, we don’t have that kind of Volatility Index for Stocks, Futures, ETFs and Currencies.

That’s where VIX Fix comes in. See, Mr Williams developed this indicator which produce the same movements as the VIX itself, without the need of the extremely complicated calculation method. On top of that, it is price-derived, so you can use it on ANY instrument.

Here’s the formula: WVF = (Highest (Close, vara) - Current Low)/(Highest (Close, vara))*100


Since it can be calculated Weekly, it would take no more than half a minute / instrument to update the data in Excel.

There, you have it. I’ll add the indicator to my database on the weekend because it looks really promising.

Turns out my platform has an in-built user friendly application to create indicators. I’ll give it a try, I might be able to create some of the indicators so I won’t have to type everything in Excel.

I think I managed to create ProGo. Fascinating. I was struggling in my programming class for 4 years without getting anything useful out of it. But my time has come! :32: Just kidding. I’m still suck at writing programs :slight_smile:

BEHOLD! ProGo indicator in action.


This was the easy one. Next comes VIX Fix. I expect that to be much more difficult.

Walk in the park :stuck_out_tongue: I had a hard time figuring out that you cannot have “space” in the name of the indicator. Apart from that, everything works fine :slight_smile:

ProGo + Williams VIX FIX (WVF)


In theory, it is possible to obtain data from an outside source. I’ll try to program the COT report tomorrow. Wish me luck.

You probably have the raw data in the “Downloads” folder. You need WinRar to open it because it is compressed. If you unzip it, you should see the Excel file with the data in it.

Hi Mike,

I can advise you to do this on youtube. There are many good videos. It is quite difficult to explain all the abbreviations. First look for the issue where you find downloaded data, then look for “copy paste in excel”. That should solve the problem. But if you cannot copy in excel I would suggest to make some youtube course or order a book. You will need this basic knowledge every time so it is better to do it the hard way and learn it from the roots.

FE

Hi BB,

nice research, analysis and tutorial. Another good indicator. I attach it to the table of content. I am though thinking to skip this from my analysis. If I have to write down the close and open price every day for ProGo it just takes too much time. Or do you do on a weekly basis? You said you do it weekly on the Williams VIX. I think the problem with too many indicator is that we will never get a signal. Also even if every indicator takes only a couple of minutes but at the end all these minutes add up for the many markets. I will look how your analysis go with the new indicator and then decide if I use it.

Please write down the Chapter name too when you refer to the Williams book. I think we have a different edition. Already last time I did not find what you told me with a page number and now also not. If you write down the name of the chapter then I can do it faster.

Once again, thanks for the nice work, I think besides the currency cross index you already discussed all indicators (or at least most of them) from the book!

FE

PS: Philip, I cannot send message to you again. Now the error message is clear: you reached the maximum mails and you have to delete some.