COT Report Analysis - a thread on market sentiment

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.

Hi BB again,

I wish you good luck with programing. You finished the indicator the best time because I think tomorrow the COT report will be an important one. It will show us the crazy price action from the end of last week!

I like the charts how you combined them with the new indicators. The interpretation is not that clear in the beginning though. Maybe it would be better of you drew your “usual” lines to show where to look and describe what conclusions you come from the action you see on the charts.

If you do this, I will arrange you a Junior Membership at Babypips :slight_smile:

FE

Am interesting point today, one that portrays some of what I posted yesterday in that big long boring post spanning 100 years.

The general theme was “Investor Sentiment” some refer to it as herd following or momentum etc - but when you get in tune with it a lot of sense goes out the window.

I posted early this morning that Asian traders were anticipating a miss on pmi services, the services industry in UK is extremely important, in usual times such a miss could be worth 100 pips, especially taking into account the strong USD.

In the current climate the best I aimed for was 20 pips and was relieved to get them.

Another example of sentiment - the first thing an investor looks at on a company balance sheet is current sales vs last year sales. Sales, or sometimes called turnover, are the life blood of any company, none more so than a retail sales company.

The FTSE rose by 85 points at close today, a well known constituent of the FTSE, a very large retail sales chain reported today - Marks & Spencer.

It had some good news to report including increased dividend and increase in gross profit.

The really bad news, sales of it’s key component, merchandising, were down for the 13th consecutive quarter, even online sales were down.

The biggest riser in the FTSE today was … yep, you’ve guessed it - Marks & Spencer.

Like the bounce in GBP today many journalists are coming up with all sorts of reasons, to me it just reflects investor sentiment.

ProGo

According to Williams, we have to pay special attention to the difference between the market’s opening and it’s closing price. Why is that?

Let Larry Williams answer the question.

“The sudden change in prices, the gap from one day to the next, I think, is a reflection of what the public is doing. They read something in the paper, get goosed by talking heads on television or some likely inane news from the night sessions around the world, and make a rush to judge those results in their orders coming in before the market opens—thus causing the disparity of price change from last night’s settlement to today’s open. The other side of that coin is that the change from today’s open to the close today captures what the professionals did in the market. I see it like this. A market opens, then gets attacked by floor traders along with full time traders, professionals like myself, while the public goes about their tasks and jobs for the day. We are the driving daily force and if a market closes above the opening of the same day, I think it means that we professionals rallied it to the close, even if it closed down for the day.”

Interpretation
It is simple, really. All we have to do is look for divergences between price and ProGo. In other words, we need to look for times when a rally (decline) is not accompanied by professional buying (selling).


WVF

Now, that is a really powerful indicator in my opinion. With it, we are actually able to reproduce the well-known VIX Index for any instrument. You might be aware the usefulness of the VIX, as it measures the Volatility in the S&P using some complex formula which is derived from options or something like that.

High VIX readings are usually the symptom of a bottom.
Low VIX readings are usually the symptom of a top.


Accurate enough? You bet. There’s only 1 question remains. How do we know when the indicator is high or low? I’d go with Bollinger Bands attached to the WVF.

Hey guys.

Wednesday results.

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

Majors took it. +6

Wow. So Majors are taking it so far this week.
Monday = M +10
Tuesday =C +4
Wednes =M +6

So, do you think the Comms are gonna come back?
I do.
Watch out for them.

Here’s 0125 GMT shot. (after the AUD news)


Mike

I’m still missing WillSpread :frowning: I’m trying to program it, but I’m having a hard time creating it.

Hey FE, I’m not sure if this is after we talked. I removed some messages so now you can send me again.

Hey Mike, thanks for this. It seems that US is strong one day, weaker the next. Don’t you think?
PS: How is your trading doing this month.

Hey Philip!

Yep, isn’t that always the tale…back and forth, back and forth. That goes for any currency. (we all know that)

Well, since you brought it up, I guess I must tell. (rather not talk about it)

I crashed my account. Demo. See, no one will understand. I take this very seriously. And I had to start over. Starting in Nov. now. This only means I can’t go live in Jan. I have rules and I won’t break them. If I can’t prove to myself that I can be consistent for 3 months straight, it’s back to the drawing board. This will be my 4th demo account started, at 1,000. Since the start of 2013. It’s depressing. And only means that it is taking so long. I haven’t lost any ferver, drive, determination, hope, on this quest. It’s just the amount of time and energy that I put into this, you would think I would be making progress, (in my time line). But I’m learning that my time line is not lining up with the ACTUAL time line…where I am confident, consistent, and making serious progress in my business.
So, however long it takes, then so be it.
I’m in it till the end.

Sorry about all that.

GO AUD!!!

Mike

P.S.

This month I’m on the AUD. So, whenever they go up, I should be making some pips. And when they dive, then I’m losing.