COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
3259

Hi Rookie,

Murphy is a TA and intermarket specialist, and a good one at that.

My understanding of fundamentals is based on the business model, my sentiment of mentioning the ‘voice in the wilderness’ was to highlight the fact that a couple of weeks ago all charts ,TA and commentators were singing from the same sheet - saying that the USD was unstoppable - I mentioned heading to the moon, I’ll post that specific chart next, complete with the moon attached.

I’m not sure what is meant by economic indicators, what I could see was that US imports were falling, exports were falling, pmi was down (very important), consumer confidence down, there was an increased likelihood that retail spending would fall (as it did), there was increased downward pressure on prices - all in all there was one thing that suggested better times ahead - the NFP

So whether the economics were reporting to ‘be a voice in the wilderness’ amidst all the hype from charts and indicators etc, or maybe just because the USD was ‘overbought’ - I don’t know, all that I do know is that the retail sales, I felt, would be almost like the kid shouting ‘look the emperor has no clothes’.

The investor/ trader relationship is one that has fascinated me for many years. There is a guy called Guppy who created a system for following the investors - something to do with lots of ma’s I think.

For me investors are not like the comms, a little more like the funds but way more risk intolerant. I doubt they would wish to attempt reverse the market - too much risk, but they very much look to the long term future, one of their important yardsticks is “growth potential”. I forget who used the term ‘intelligent foresight’ but a successful investor requires that particular attribute.

So if I am an investor, I must weight up where the most growth potential lies, anything that is likely to give me that growth, whether better interest rates, whether an economy that is likely to grow and thus offer good growth in it’s companies or whatever.

If I decide that the EZ is likely to grow, helped with QE, then I will not care in the least about QE ‘diluting’ the Euro, instead I will want to buy into EZ companies, to do so I will need a few Euros.

It’s an interesting subject.

3260

One last little thing - about context:

A few months back we saw a little rise in wti - the S&p responded positively, this was a risk on signal and the s&p rose, led by the energy sector.

3 days ago, wti rose on the back on Yemen crisis, the S&P fell on the news of the oil price. The fall here wasn’t a risk off reaction per se, it was a reflection of the market fear to anything that could be used by the Fed to justify a rate hike, rising oil prices would be one such justification.

Different reaction in a different context.

3261

Forgot about the moon (post number 3153) on the USDX.

Here is that chart, now on hr1, up to date, two yellow horizontals, bottom one where USDX was when looking at the monthly chart back on Mar11, the second, higher line is the top that was made two days later, the little moon remains where it was.

What is interesting is the notion of ‘overbought’ as personified by the original monthly chart on the moon post.

I remember a trader laughing at the idea that anything can be overbought, I timidly agreed, I too did not believe in overbought/sold in the market.

Then again I now do not believe in Santa Clause, but experience has taught me to believe in the Santa Clause effect on retail sales - any market aspect is to be ignored at the user’s peril.

3262

[B]Crude Oil[/B]

Isn’t that interesting? Since the beginning of the massive decline, the Commercials reached extreme bullish stance for the first time. Well, not quite extreme, but they are a shy 1% away from it. The current Composite Index reading is 11%. I’ll sit this signal out, as I would have to go against the huge bearish trend. No thank you.

There are no other instruments to mention. [B]Sugar[/B] remains a buy, as well as [B]Natural Gas[/B].

3263

Guys, I managed to create the Williams’ Valuation Index in TradingView. It’s still in experimenting phase, but if you are interested, I’ll share with you the source code or upload it to the Public Library once I’m finished.

Edit: There are surprisingly many ways to enhance the indicator. I’ll share my findings with you guys later. It’s really interesting.

3264

Most of the time if commercials are long it is an indication that they are bearish themselves and prefer to hedge. In my opinion I am sure we get a pull back in oil to the short side.

3265

May be explain this a bot because it doesn’t make sense to me. Commercials are basically oil producers, they sell Oil no matter what the prices. Their hedge would be selling in case oil prices go down. How come their hedge is buying oil?

They buy it when its cheap to sell it when its more expensive as far as I know.

3266

Nope. They are always in the market. They can be divided into two groups: Producers and Consumers. Producers are short the market in order to protect themselves from a sell-off, which would force them to sell a particular commodity at a lower price than they expected. That would hurt they profit. If the price rallies, their loss in the market is offset by their gain in profits.

Consumers are long most of the time, because they have to protect themselves from a possible rally in commodity prices, which would force them to buy the commodity at a higher price (paying more for the commodity which they use to produce products or services). That would hurt the net profit. If the price indeed rallies, the loss they suffer by their business is offset by the profit from the futures contracts.

3267

It is not IMO. We are looking at extreme readings from the Composite Index Indicator. The 11% means that they are 11% away from being the most bullish (having the most long contracts) in the last 3 years. While Commercial NPs are usually negatively correlated with price itself, it is common (if not all the time) to see them being the most bullish/bearish at major highs/lows. It is only natural. Funds are taking the other side of their bets, causing them to be heavily invested in the wrong direction at market turns.

3268

Hi Team,

I am back at my computer and checked the first time my charts after a week. So the first question is if someone is in S&P and any USD pairs. If you trade USD, which direction this time? Let´s start the discussions.

FE

3269

I’m not in any trades at all since closing my trade before the fed meeting. Even the Dow trade I had my eyes on didn’t materialize. How about you?

3270

I am getting back to the feelingt again. All trades are closed besides the long term NZD/CHF although there is a strong retracement. I have to see if the average SL for all positions will survive or not. I wish I was in for S&P but missed the signal. I will look for new signals there for the long side. With USD I am cautious.

FE

3271

Long S&P, may add to that if the USD numbers are weak this week pre NFP.

If NFP disappoints then maybe I’ll get that new high.

Was short USD, flat since Fri, may go long again on Eur/Usd, especially if the EZ cpi is better than expected tomorrow - no decision yet, German retail sales might set the tone, wouldn’t be gobsmacked if those numbers are better than exp.

S&P is half way between recent support and the recent highs so maybe needs some direction.

That’s all.

3272

German retail sales were better than exp, but timing of a long on Eur/Usd might be off due to the Greek scenario, keeping powder dry.

3273

Hi Guys,

I found something very interesting to talk about. I checked the DAX, S&P and Nikkei. They all show different stories on daily and on H1. DAX is about to make new high, S&P is in indecision and Nikkei shows weakness today. If this pictures stay like this, I will change my main instrument from S&P to DAX. I will observe for a little while from now on before I make the move.

FE

3274

Hi FE - the effect of QE on German shares - money from ECB is seen as positive for EU companies - having said that if the S&P tumbles then the Dax will follow, risk sentiment would take over.

3275

Hi Team,

is it only me or you guys also do no not see anything to trade? Pretty boring to wait but I do not have a better plan. I even got stoped out on a strong retracement on my long-term NZD/CHF trade. I look for S&P long opportunity, maybe if the little retracement is over.

What are you guys up to?

FE

3276

Yes I was just telling some of my friends about that. Its like trading in deflation when nothing is going up to trade it against something going down. Stock market is down, dollar is down. But at the same time commodity currencies are struggling and Euro strength not sustaining.

Very, very tough. Still better than losing money though.

EDIT: Things will probably explode after the employment number but I’m not going to make a prediction which way. Not even with a gun to my head.

3277

I’m flat as well. Doesn’t matter, I usually use quiet times to discover/develop new methods which I can add to my trading arsenal.

3278

Hi BB,

that is a wise suggestion of course. It is always good to use the quiet times to develop our knowledge. And what exactly do you learn nowadays? You make some indicators or read some books?

FE