COT Report Analysis - a thread on market sentiment

[ForExchange]

@rookie39

Hi FE,

I don’t know which TF you were referring to but interpreting volume proves to be tricky, very tricky thus far at least to me.

But I’ll give it a go again.

Take that green line as a support on 1h chart of SPY. See the huge volume right below where price bounced back ? At the same time, you’ll notice that stochastic indicated SPY was oversold. Price goes up, but with no follow through in volume with stochastic fairly high up, you’ll see that price is struggling to get above 20ema. In fact 20ema has already crossed below 50ema on 1h chart. All very bearish indication.

That was a very nice analysis Rookie. I like this combination: nice and easy.

I checked your chart, look at the middle of your chart, when the support was tested. It was the same combination: price hit support, large volume movement to the downside but no follow through. I see you put Philips settings on the chart, lets do that!

I do believe we will see a nice downward movement. I am only looking at this pair today. Of course NFP might do some surprise but I agree what you said. I especially like it beacuse it lines up with my analysis.

FE

PS: briefly, I do not remember the exit rules on Philips system. Is it the EMA crossover or the Stoc to watch?

[ForExchange]

Yeah, a number of ways of using volume. On the daily chart that I posted see the highest volume was a bottom, but note the price bar that day - the spread was wide, a huge interest occurred that day on preceding rising volume.

Will post some more later on volume.

Hi Peter,

I can´t even imagine what you did so early in the morning. I thought on Mike and Rookie are the ones who cant stay in bed until morning.

But I am happy to read your thoughts on volume for sure.

FE

[MikeWolski]

Good morning fellas.

Well, it’s Friday morning (for some of us). And I know I haven’t been too active on the thread, with sentiments. Of course the facts always come out at the end of the day. But, I’ve been quite down lately.
Why? Well, what else…losing. Draw down is such a killer. Right Peter? Geeeeezzzz.
I’ve been losing my shirt of the Pound. (And I’m sure your all thinking ‘yeah right Mike, your on demo’)
But…my numbers are just showing me where I’m at. That’s more important to me than ANYTHING.
And I’m not happy. At all.
(…much time elapsing now as I think of what I should say next…)
I could go on and on about it, but I’m sure you all know the feelings.

I’ll be ok.

Ok…that’s nice. I do want to put this out there, about what might happen today. Well…my sentiments.
This is what I see.
NFP day. The AUD dominated the Asian session. Then the GBP came out with some inflation expectation numbers. That didn’t fare well at all for them. So, GBP is out of the picture. The USD has not shown any real good economic numbers this year. And their probably overbought. I think I do remember last NFP day. The market really was waiting for some bad numbers to come out, but that was not the case. Marginal to good. So, their was still some life with the USD. And since then, the market favored the Pound moreso, within the Majors. But the Comms have really been taking over control than the Majors. But, as of this week, the market has dumped the Pound. And the Comms have all been taking turns. And now everyone is looking at the USD. I think the market is just waiting for a catalyst. A real good reason to drop the USD down a couple major support zones.
Well, against the EUR, the USD has no problem. Stronger. And everyone is climbing up on the CHF. GBP has been a threat, and at least has stopped the bleeding from them. The JPY is not giving up too much to the Dollar. They just might be the recipient because no one else is there to be the strong one. Then there’s the Comms. Every one of them has had a field day against the Majors. Even on Wednesday all 3 of them were on top. So, the trend just seems to be slanting towards the Comms. More and more.
So, I think the Comms will be running away with it. And given the fact that the AUD dominated Asia, and London, that when NFP comes, any kind of bad news will only magnify them. I am also watching the JPY. They ride with both camps. Although they kind of favor being with the Comms moreso. Like on Tuesday of this week. It was the Comms and JPY as the top 4.

Well, see.

Got to run.
Talk to you later.

Mike

[Nebula9]

Hey FE,

Yeah just saw that, good vision ! same thing happened right there.
He uses fibs extensions. But exits can be modified I think.

The trend is bearish 20ema crossing below 50ema, now we wait for a new lower low thats going to be below that support. And you wait until price is overbought 80range and stochs trigger line crosses the main line to the downside.

Great sum up ! Mike
I thought you were trading Philips combo ?
According to my backtest, if you abide by the rules strictly its a pretty good system. And it follows trend, combining stochs with ema crossovers on 4h chart was a brilliant idea, I think. This way it reduces the possibility of us going in too early therefore reduces the drawdown. Out of all the methods that Ive tried and tested for this very purpose, I think his system handles it well than anything else.

[ForExchange]

Hey FE,

Yeah just saw that, good vision ! same thing happened right there.
He uses fibs extensions. But exits can be modified I think.

The trend is bearish 20ema crossing below 50ema, now we wait for a new lower low thats going to be below that support. And you wait until price is overbought 80range and stochs trigger line crosses the main line to the downside.

Great sum up ! Mike
I thought you were trading Philips combo ?
According to my backtest, if you abide by the rules strictly its a pretty good system. And it follows trend, combining stochs with ema crossovers on 4h chart was a brilliant idea, I think. This way it reduces the possibility of us going in too early therefore reduces the drawdown. Out of all the methods that Ive tried and tested for this very purpose, I think his system handles it well than anything else.

Hi Rookie,

but, can you write the exit rules? That is what I do remember. Lets say I enter S&P but I want to know when to exit on the system.

Mike,

I think the problem is that you do not listen I try to tell you every time you come out with the numbers that DO NOT GO VS THE ONGOING TREND. Peter told us how dangerous that is but you are keep trying to catch the bottoms. Your thinking and trading is good in a “perfect ranging environment” as you suppose if a currency ha lost a lot then it also have to give it back. This is actually a great thinking but the problem is you do not have the money to sit it through! Your thinking is more the thinking of how Commercials do it, however we are Speculators

FE

[ForExchange]

Hi Peter and Rookie,

I have one more problem in Tradingview. It says it shows now premarket conditions and live update is slow. However every time I click reload on the top, obviously all setting are away. This is a great way to learn the setting by heart but annoying to do it 3 times every hour. Is there a possibility to refresh the chart without losing the settings?

Thanks,
FE

[ForExchange]

Hi Team,

as they say we make the best money when not at the computer. I left my computer for about 70min and at this time S&P skyrocketed. Now I have the decision to close the position before market close or let it go. I know Rookie is not there, but maybe Philip can write on his exit rule.

For sure I will not let this one to become a loser.

FE

[peterma]

Hi FE,

In the volume section, right click.

Then choose (left click) “Format”, then left click “Defaults”, then “Save as Default”

On SPY today nothing much in volume, if volume were rising and price falling then there would be a pattern to follow.

All sectors negative with utilities leading the pack. The falls are spread throughout the sector.

This is the knee jerk that I was talking about re interest rates and stocks, not surprised re the lack of volume.

Would I fade this?.. Monday will tell me what to do.

[ForExchange]

Hi Guys,

hopefully this week many of you will check the COT Report.

Here is what I see:

• [B]JPY[/B] sell signal

• [B]Corn[/B] reached an interesting level, soon might be a buy signal

Unfortunately that is about all for me. However something got my attention. Rookie talked more often about Palladium. Does someone know how come it can hold up so strong and go against the main trend down which all other metals follow? That is something very interesting. It looks like Palladium demand was increasing even the bad economic conditions.

FE

[PhilipPirrip]

Hi Team,

as they say we make the best money when not at the computer. I left my computer for about 70min and at this time S&P skyrocketed. Now I have the decision to close the position before market close or let it go. I know Rookie is not there, but maybe Philip can write on his exit rule.

For sure I will not let this one to become a loser.

FE

That is very strange, my broker is showing that SPX actually declined :S

[ForExchange]

That is very strange, my broker is showing that SPX actually declined :S

HI Philip,

sorry, I meant to say skyrocketed to my direction :-)))

[peterma]

FE, it’s possible that early European may cause a push against your short.

It could happen that the DAX may not be just as bearish on US interest rate effect on EU stocks, any push up there may cause a push up on the s&p futures.

Note how little the dax responded on Fri, although the UK ftse was quite negative.

Anyways, I remain in favour of the long term bull market in stocks, but a short now is a nice trade on the knee jerk.

Btw, utilities remained the biggest seller on Friday, next biggest seller at eod was consumer staples - both are regarded as defensive sectors, in defensive sectors you expect to see strength in a bear market. The reason is simple, consumer staples - in bad times we still need the basics.

[BBalazs]

Mornin’ guys! :44:

This week’s report is pretty dull.

We have a buy signal on Sugar. I might take it, because the price is going sideways, therefore I would not bet against the trend.

Weekly

As you can see, the price is approaching a support zone. Double that with and RSI bullish divergence, and you have a nice entry point.

Treasury Bonds

I’m looking to go long the 20Y T-Bonds.

[ForExchange]

FE, it’s possible that early European may cause a push against your short.

It could happen that the DAX may not be just as bearish on US interest rate effect on EU stocks, any push up there may cause a push up on the s&p futures.

Note how little the dax responded on Fri, although the UK ftse was quite negative.

Anyways, I remain in favour of the long term bull market in stocks, but a short now is a nice trade on the knee jerk.

Btw, utilities remained the biggest seller on Friday, next biggest seller at eod was consumer staples - both are regarded as defensive sectors, in defensive sectors you expect to see strength in a bear market. The reason is simple, consumer staples - in bad times we still need the basics.

Hi Peter,

I just wanted to write you in the morning even before seeing your post. Your writing and technicals for me come into the different direction so I would ask you a psychology question.

As I see you were either surprised or disagree with the movement of S&P yesterday. From a technical point of view I discussed it with Rookie already for a couple of days that a short signal might come. Everything lined up, no matter if MACD, RSI etc.

So my question to you is if you think there was actually any kind of reaction in the cards that would have pushed up S&P? We can never get the right answer but can talk about it. My thinking is that either speculators were already getting ready for such an outcome or the S&P was just oversold (although I am sceptical if oversold/overbought situation exists at all). So I am thinking that technical traders were short regardless of the outcome. Fundamentals are always divided. So actually the only question is how strong the downward movement had to be. A 295K reading is very strong, 200K NFP could still be considered strong, it might have ended in the same result. I do not know if it had to be a 100K or 10K NFP Report for not to trigger such selling but maybe even then the technical traders would have pulled it down.

Thanks a lot on the DAX. It is good to keep in mind so if early Monday stocks go high I will ignore them:-) For me the most important is discipline. I try to wait for other exit signals or adjusted stop loss to hit. I want to go like the system says and not with the emotions. Therefore it is good to know that I can expect a DAX rise. I exited many times way too early trades. On technicals basis I do not see that we should be at the bottom just yet so I wait.

I think actually Rookie and Philip can also write a lot about this from a technical perspective.

FE

[ForExchange]

@BBalazs

Mornin’ guys! :44:

This week’s report is pretty dull.

We have a buy signal on Sugar. I might take it, because the price is going sideways, therefore I would not bet against the trend.

Weekly


As you can see, the price is approaching a support zone. Double that with and RSI bullish divergence, and you have a nice entry point.

Treasury Bonds

I’m looking to go long the 20Y T-Bonds.

Hi BB,

nice spotting. I like your reasoning that it is moving sideways. We are at an extreme net position level, COT Index signal should also come soon and we are at a main support level. For me it is still a bit against the trend as I see more downward movement then sideways however I do agree that based on a COT report analysis, it is like a dream setup.

FE

[PhilipPirrip]

I have to say the strange thing about the SPX movement is that it actually diverged with a dollar, I’m sure that tells us something but not sure what it is. May be the answer lies with 10 year bond.

From a technical point of view, I expect SPX to move back up to 2085-2090 area, only from there can I determine if a short is still on. If I had a short position on I would definitely close it and wait for that retracement. Unless the SPX-dollar divergence means something else.

[anon5370623]

Have somebody availed of NFP move last Friday? Have somebody got SL triggered? What was the slippage?

[peterma]

Interesting discussion.

When thinking about the FED and whether they will raise in mid 2015 there is one thing to remember. No CB likes to KEEP rates to near zero.

From a business perspective interest is just another cost item on the P&L, if a CB comes along and lowers a cost item then happy days for business. Good for business - good for stocks.

There is a pressure on the Fed to raise rates, the longer they do not then the more negative the eventual rate raise impact will be.

Very little surprise on the downward pressure on spx, the TA was reflecting the fact that there was a greater probability of a good NFP than of a bad one - a good NFP increases the FED pressure.

The market reacted in exactly as the above quote, however, the knee jerk is that an [I]increased[/I] cost to business is bad for business, thus bad for stocks.

This is why it is good to step back and think, if I were an investor, would I want to continue selling stocks, or would I wish to buy the dips - will company earnings suffer in the quarters ahead as a result of Friday’s NFP and the picture that the numbers are painting or will they increase.

It’s interesting that the S&P has been on a bull run, the NFP is actually confirming the reason for that run, when you think about it it’s companies in the USA who do the hiring, the better shape those companies are in then the better the NFP will be.

There was one thing that I had noticed, although we haven’t yet discussed much in volume, was the activity is one the “offensive” sectors this week.

The thinking is that investors will sell off first in one these sectors, consumer discretionary fits into this category, (you do not need luxuries in a bear market), I was surprised to see the volume on Monday past:

(this is a Daily, see the likeness to SPX daily)

Just thought it interesting.

[MikeWolski]

Hey Team.

This weeks results.
USD: +14.79%
CAD: +7.02%
JPY : +6.81%
AUD: +5.28%
NZD: -4.97%
GBP: -5.61%
EUR: -10.33%
CHF: -13.06%

So for the week the Comms were over Majors by +7.4%

But then there was NFP Friday. And as I was looking at the USD, I found some very interesting facts, about NFP. I went back and compared Feb. NFP to Mar NFP. The USD against everyone. All the differences. This is the big picture, aggregate, parallelism, perspective.
This is the USD against: and what happened in between both of them
—[B]COMMS:[/B]—
[B]CAD[/B] – NFP day (Feb) result was +90 pips (USD+)
–RANGED–(+93 pips, -134 pips)
NFP day (Mar) result +122 pips
[B]AUD[/B] – NFP day (Feb) result was +10 pips (USD+)
–RANGED–(+94 pips, -67)
NFP day (Mar) result +184 (USD+)
[B]NZD[/B] – NFP day (Feb) result was +61 pips (USD+)
–BEAR MARKET-- -245 pips
NFP day (Mar) result +152 (USD +)

—[B]MAJORS:[/B]—
[B]EUR[/B] – NFP day (Feb) result was +158 pips (USD+)
–RANGED, first 2.5 weeks, then BULL MARKET last week and half.
NFP day (Mar) result +194 pips (USD+)
[B]GBP[/B] – NFP day (Feb) result was +87 pips (USD+)
–BEAR MARKET, up until the last week and 2 days, then turned BULL for USD.
NFP day (Mar) +227 pips (USD+)
[B]CHF[/B] --Nothing but BULL MARKET for USD.
[B]JPY[/B] --NFP day (Feb) result was +155 pips (USD+)
–RANGED, to slightly higher
NFP day (Mar) result was +64 pips (USD+)

So was BEARISH against GBP, and NZD.
Was RANGING against JPY, EUR, CAD, AUD.
Was BULLISH against CHF.

Interesting is the close of NFP Feb is the same as the close of NFP Mar, for the NZD. It went up much then came back all in the last 2 days of this week.
Against the GBP, the open of NFP Feb is the same as the open of NFP Mar. Same scenario as NZD.

It sure does look like this past month was a big ranging of the USD. And now it all came back to where we left off of last month. This time I just wonder if it’s gonna be different, and now continue on with the trending high for the USD.

But…if they show signs of weakness, then it’ll probably go back to ranging for another month.

I think they have the momentum going now. Probably use that to break some major support zones now.

(That sure did fool me) (month long retracement)

Mike

[PhilipPirrip]

Very little surprise on the downward pressure on spx, the TA was reflecting the fact that there was a greater probability of a good NFP than of a bad one - a good NFP increases the FED pressure.

The market reacted in exactly as the above quote, however, the knee jerk is that an [I]increased[/I] cost to business is bad for business, thus bad for stocks.

This is why it is good to step back and think, if I were an investor, would I want to continue selling stocks, or would I wish to buy the dips - will company earnings suffer in the quarters ahead as a result of Friday’s NFP and the picture that the numbers are painting or will they increase.

It’s interesting that the S&P has been on a bull run, the NFP is actually confirming the reason for that run, when you think about it it’s companies in the USA who do the hiring, the better shape those companies are in then the better the NFP will be.

There was one thing that I had noticed, although we haven’t yet discussed much in volume, was the activity is one the “offensive” sectors this week.

The thinking is that investors will sell off first in one these sectors, consumer discretionary fits into this category, (you do not need luxuries in a bear market), I was surprised to see the volume on Monday past:

(this is a Daily, see the likeness to SPX daily)

Just thought it interesting.

That’s interesting. But isn’t it possible that investors also saw that wage inflation was very poor, thought it is now less likely we will see a rate hike in June and decided to move out of SPX temporarily (hence the pressure on FED you suggested)? On the other hand dollar rose in interpretation of the headline number as a push towards a rate hike in June and then at the end of the day (figuratively) one will have to follow the other?