COT Report Analysis - a thread on market sentiment

[ForExchange]

I use the 1 minute commodity trader system. So I use 6 months data. We are in an extreme on that, I’m just waiting for that 52 week MA to turn.

Hi Philip,

yes we discussed that more times here in the thread. But the point of that was to use MA and COT Index indicator in the direction of the trend. You try to spot a reversal with it.

FE

[Nebula9]

Hi FE and guys…

Time flies so its already been a month since BB joined. I fully agree that its about time we start doing our analysis in the form of BBs as cliche as it sounds its now or never. Of course everyones entitled to choose. For me, you’ve guessed it right FE I’m in.

I’m not going to be trading commodity futures or stock indices anytime soon but that doesn’t hold me back from analysing other markets now that I’ve become more comfortable with currency trading. I’ll treat this phase as a warm up and I’m sure there’re plenty of stuff to be learned, when you start doing it - first hand experience. Look at this way if you’re on the same boat as me guys… So I’m hoping ‘fingers crossed’ for all of you to participate

As for distribution first and foremost lets work out what we have going on. So its easier for distribution.

Commodity futures:

1. Energy commodity futures : a)crude oil , b)gasoline, c)natural gas, d)heating oil
2. Precious and industrial metals commodity futures : a)gold, b)silver, c)copper, d)platinum, e)palladium
3. Agricultural commodity futures : a)corn, b)wheat, c)cocoa, d)cotton, e)live cattle

FX spot

1. Dollar pairs
2. Crosses

Stock indices

1. S&P500 and mini
2. Nikkei 225
3. NASDAQ Composite Index /I’m not sure if have this on my platform/
4. Dow Jones Industrial Average /I’m not sure if have this on my platform/

And as we progress there’s more to be covered but lets leave those out for ‘later’

I had the same thought on distribution as FE that each one of us gets to pick a couple of items from each segment for instance I analyse crude oil, gasoline /energy commodity/ and gold, silver /precious & industrial metal/ and so on. That way if we mix and match we’ll all get a first hand experience in every market and segments rather than being confined into a single segment or market. And its always good to have perspective. I think for now, its better for us to layout things this way to mix and match until each one of develops an expertise.

What do you guys think ??

[Nebula9]

Hi Rookie,

sorry, I do not get it. Why should we go long based on AUDUSD that graph? You just said there is no resistance to see. I mean it lines up what you right with my current bearish USD bias but the graph does not seem to confirm it.
FE

I was hoping that AUD=X aka USDAUD soon finds a resistance and AUD eft finds a support. In that scenario I was suggesting we could look for possible opportunities to go long on AUDUSD but now that i think about its counter trend move, and the general picture suggests bearish sentiment for AUD especially if you look at AUD eft, recently broke major support if you have seen a daily chart of AUDUSD you would think downtrend might resume soon.

[PhilipPirrip]

Hi Philip,

yes we discussed that more times here in the thread. But the point of that was to use MA and COT Index indicator in the direction of the trend. You try to spot a reversal with it.

FE

Analyzing COT is about spotting the tops and bottoms, reversals. So I don’t understand your point.

[BBalazs]

Analyzing COT is about spotting the tops and bottoms, reversals. So I don’t understand your point.

Not necessarily. If you have the Commercials being bearish in a downtrend (in a correction), you have the perfect scenario to go short. That’s what the MA is for. If it’s lower than X days ago, then you have a downtrend (Williams used it that way).

[BBalazs]

Hi BB,

thanks for the fast answer. So the question is if you really follow all 14 markets or you only have the database. If you only have the database but you do not really update it on a weekly bases then we should look what we choose you to watch. In case you update all these markets every week, you can post your results.

Important is that you do not have to post of course charts for all analysis. That would make a lot of senseless work as in most markets there are no signals. I think how you analysed last week or I did this week are two good examples how it functions right. Also Platinum and Palladium from this week is a good example. We should all post a few words for all products which does not get our interest because nothing happens and concentrate us on the few where we expact “action”.

Still I think it is good to write at least “Nothing special” for all other products where there is not to see (For example: Platinum - Nothing interesting, Palladium - Nothing interesting …) because this shows all other readers that you have checked them, it is not forgotten, but there is nothing to do at the current situation.

FE

I have these in my database, so I’m updating them Weekly.

[PhilipPirrip]

Not necessarily. If you have the Commercials being bearish in a downtrend (in a correction), you have the perfect scenario to go short. That’s what the MA is for. If it’s lower than X days ago, then you have a downtrend (Williams used it that way).

Ok let’s recap.
The rules of the 1 minute trader are as follows: 6 month COT index reaches extreme, let’s say 90. That means the commodity reached a bottom. Once the 52 week MA’s value for one week is higher than the previous two weeks, you buy. The rules are simple as that, there is no word about trend or counter trend. I don’t know where you guys are saying that, but it definitely isn’t in the rules of the system.

Having said, it is common knowledge that the MA is a lagging indicator, so for oil’s MA to turn up the commodity has to have been going up for sometime, so you guys are right from a technical point of view.

[ForExchange]

Hi Philip,

don’t think we want to insult you. I will get myself together on this topic and answer for all your posts regarding this issue. I just wanted to warn you that it is used for reentries in the running trend. I do not write more about it until I read the book again. But earlier we only used the signals in the direction of the main trend.

It is a team work and as you do help us if you see something that might not be right, we just expressed our worries on your idea. That is all.

FE

EDIT: I wanted to update this post with my findings but could not do it because of the multi quoting. Please check post 1990 for the answers.

[BBalazs]

@PhilipPirrip

Ok let’s recap.
The rules of the 1 minute trader are as follows: 6 month COT index reaches extreme, let’s say 90. That means the commodity reached a bottom. Once the 52 week MA’s value for one week is higher than the previous two weeks, you buy. The rules are simple as that, there is no word about trend or counter trend. I don’t know where you guys are saying that, but it definitely isn’t in the rules of the system.

Having said, it is common knowledge that the MA is a lagging indicator, so for oil’s MA to turn up the commodity has to have been going up for sometime, so you guys are right from a technical point of view.

“Speaking of gold, I’d like you to turn your attention to the chart of gold in Figure 13.6 with the moving average and COT index. Keep in mind what you are looking for: COT selling in a downtrend puts us short, while COT buying in an uptrend tells us to become buyers. Please take one—and only one—minute to see if you can’t mark off the times you would have been a buyer or seller in that yellow metal that our economic world still revolves around. That was not so difficult, was it? If the trend is down, take sells; sidestep them in an uptrend. Do we miss some great short selling points? You bet, we would have missed some profits. But we avoided a lot more questionable trades and several that would have taken money from us.”

That’s from Williams’ book.

Here’s a picture with lines marking trades (also from the book).

[ForExchange]

OK sorry for the late reply but again the system is yet to generate any trading opportunities for the upcoming week. I thin however we should pay attention to Oil in the coming weeks.

Hi Philip,

of course we can pay attention on oil, it showed some support but in the COT there is nothing intersting about it, that is what my analysis showed. It does not mean there are no good opportunities but based on COT we are far away from all extremes. Of course it also helps to define at least which Oil product we are talking about. I mean US Crude oil.

FE

I use the 1 minute commodity trader system. So I use 6 months data. We are in an extreme on that, I’m just waiting for that 52 week MA to turn.

Isn’t that system about going with the trend?

Hi Philip,

yes we discussed that more times here in the thread. But the point of that was to use MA and COT Index indicator in the direction of the trend. You try to spot a reversal with it.

FE

Analyzing COT is about spotting the tops and bottoms, reversals. So I don’t understand your point.

Not necessarily. If you have the Commercials being bearish in a downtrend (in a correction), you have the perfect scenario to go short. That’s what the MA is for. If it’s lower than X days ago, then you have a downtrend (Williams used it that way).

Ok let’s recap.
The rules of the 1 minute trader are as follows: 6 month COT index reaches extreme, let’s say 90. That means the commodity reached a bottom. Once the 52 week MA’s value for one week is higher than the previous two weeks, you buy. The rules are simple as that, there is no word about trend or counter trend. I don’t know where you guys are saying that, but it definitely isn’t in the rules of the system.

Having said, it is common knowledge that the MA is a lagging indicator, so for oil’s MA to turn up the commodity has to have been going up for sometime, so you guys are right from a technical point of view.

Hi Philip,

I tried to collect all related posts to this topic. For the following discussion I only use COT data, no fundamentals and no technicals. And yes, COT is used to find reversals, I guess we do not have to discuss this point after 2 000 posts in a COT thread

(I could not update the post earlier because I can not multiquote in an existing post I think.)

What a great thing we have a table of content because I can relate to some links without searching. And actually I think I found the root of the problem. Please check out the link for setting up the system (just to make sure we talk about the same thing) 301 Moved Permanently Then please check post 901 for the illustration from me and the contradiction comes from your post, 910. Check please that one too.

Now go to the Williams book page 150 and read the first sentence under the topic: „Now on the buy side”. It says: „The lesson is pretty simple: buy when the trend is up and the COT index is in phase with the trend.” It seems with BB I have the same opinion on the issue, I am not sure what he thinks but I think you violate this part of the book.

Of course it can be a different discussion (and I do not want to start that) how we define a trend. In case of COT only, I define a trend from one COT reversal to the next COT reversal. Saying that, we hit a top on Crude some months ago and we are heading down. The 26 and MA is confirming this trend, but if they wouldn’t, based on COT report for me trend is still down. And Williams basically says we use the system to re-entry purposes in the direction of the trend but not against it.

I asked BB some days ago if we need an extreme reading always for a main trend change. He said not always but usually. This means of course that you can be right but for sure we are not at extreme levels.

Putting that all together you define a trend change I think based on technicals and BB and I do not see a trend change because COT does not show anything particular.

In the end, as always, I want to say that of course I am no better trader than you are, I cannot tell what happens. Price might shoot up and you would curse me for missing the move. I do not want that. All I wanted is to share my view and that I thought you might have missed a point in the system. For this reason I checked all sources and materials to give an accurate answer.

FE

[BBalazs]

Hi Philip,

I tried to collect all related posts to this topic. For the following discussion I only use COT data, no fundamentals and no technicals. And yes, COT is used to find reversals, I guess we do not have to discuss this point after 2 000 posts in a COT thread

(I could not update the post earlier because I can not multiquote in an existing post I think.)

What a great thing we have a table of content because I can relate to some links without searching. And actually I think I found the root of the problem. Please check out the link for setting up the system (just to make sure we talk about the same thing) 301 Moved Permanently Then please check post 901 for the illustration from me and the contradiction comes from your post, 910. Check please that one too.

Now go to the Williams book page 150 and read the first sentence under the topic: „Now on the buy side”. It says: „The lesson is pretty simple: buy when the trend is up and the COT index is in phase with the trend.” It seems with BB I have the same opinion on the issue, I am not sure what he thinks but I think you violate this part of the book.

Of course it can be a different discussion (and I do not want to start that) how we define a trend. In case of COT only, I define a trend from one COT reversal to the next COT reversal. Saying that, we hit a top on Crude some months ago and we are heading down. The 26 and MA is confirming this trend, but if they wouldn’t, based on COT report for me trend is still down. And Williams basically says we use the system to re-entry purposes in the direction of the trend but not against it.

I asked BB some days ago if we need an extreme reading always for a main trend change. He said not always but usually. This means of course that you can be right but for sure we are not at extreme levels.

Putting that all together you define a trend change I think based on technicals and BB and I do not see a trend change because COT does not show anything particular.

In the end, as always, I want to say that of course I am no better trader than you are, I cannot tell what happens. Price might shoot up and you would curse me for missing the move. I do not want that. All I wanted is to share my view and that I thought you might have missed a point in the system. For this reason I checked all sources and materials to give an accurate answer.

FE

Philip probably got an extreme signal as he is using 6 months instead of 3 years as his look back period. The trend is defined (according to the 1 minute commodity trader) with the help of the 52 week MA. If the value (of the MA) is lower than 2 weeks (not sure) ago, then we have a downtrend.

[ForExchange]

Hi FE and guys…

Time flies so its already been a month since BB joined. I fully agree that its about time we start doing our analysis in the form of BBs as cliche as it sounds its now or never. Of course everyones entitled to choose. For me, you’ve guessed it right FE I’m in.

I’m not going to be trading commodity futures or stock indices anytime soon but that doesn’t hold me back from analysing other markets now that I’ve become more comfortable with currency trading. I’ll treat this phase as a warm up and I’m sure there’re plenty of stuff to be learned, when you start doing it - first hand experience. Look at this way if you’re on the same boat as me guys… So I’m hoping ‘fingers crossed’ for all of you to participate

As for distribution first and foremost lets work out what we have going on. So its easier for distribution.

Commodity futures:

1. Energy commodity futures : a)crude oil , b)gasoline, c)natural gas, d)heating oil
2. Precious and industrial metals commodity futures : a)gold, b)silver, c)copper, d)platinum, e)palladium
3. Agricultural commodity futures : a)corn, b)wheat, c)cocoa, d)cotton, e)live cattle

FX spot

1. Dollar pairs
2. Crosses

Stock indices

1. S&P500 and mini
2. Nikkei 225
3. NASDAQ Composite Index /I’m not sure if have this on my platform/
4. Dow Jones Industrial Average /I’m not sure if have this on my platform/

And as we progress there’s more to be covered but lets leave those out for ‘later’

I had the same thought on distribution as FE that each one of us gets to pick a couple of items from each segment for instance I analyse crude oil, gasoline /energy commodity/ and gold, silver /precious & industrial metal/ and so on. That way if we mix and match we’ll all get a first hand experience in every market and segments rather than being confined into a single segment or market. And its always good to have perspective. I think for now, its better for us to layout things this way to mix and match until each one of develops an expertise.

What do you guys think ??

Hi Rookie,

nice post and distribution ideas about the segments. There are only 3 commodities I would like to add to this list: coffee, sugar and soybean. The first two are already taken by BB so it is no extra work.

If you look at BBs list, basically he covers all metals so this is solved. Or actually he doesn’t. The COT report more metals and BB covers the 5 main markets. The problem is for me it does not make sense to analyse the remaining commodities because I can only trade what BB already analyses. For the record, the remaining products are Hot Rolled Coil Steel; Iron Ore 62% FE, CFR China TSI; Random Length Lumber; Calif Carbon All Vintage 2016 and two furhter commodities where I do not even understand the names. Very nice short names You can decide if you choose any of the remaining markets to analyse.

Actually what you wrote in your “for instance” part I hope it was an example as you mentioned all the products which are distributed So please choose markets which are not distributed until now.

How about this: you choose a major currency and a comdoll. I also take a comdoll from the rest. You take an index, I take another one. You can take an energy product and 1-2 agricultural. At his point you have 5-6 products, I have one more with an exotic currency. I think this should do it in the beginning.

Further distribution does not make much sense until we do not know what is with Mike and Philip. The currency pairs are the most important so if they do not come then we have to divide it between us, if they also do it then we should specialize ourselves more. Write down your list so I can continue my excel sheet.

FE

[PhilipPirrip]

Ok these are all great points. Now, it is Williams’ recommendation to take those trades with the trend as a filter. Now let me ask you this, what is the trend in crude Oil?
You assumed that it is a downtrend because COT reach an extreme and reversed. This happened in 2012 and oil declined. But COT reached only a reading of 62 (100 on the 6 months index) before bouncing back up.
The truth is in my opinion oil is in a range so both buy and sell signals are valid. The thing is I never said buy oil, I only said keep an eye on it during the next few weeks

Any was I did a back test to see how reliable were buys and sells in oil using the 6 months index since 2011 (when the range started) You know what the entry was, A move below the extreme 80 or above 20 was my exit.

Buy on June 20, 2011. Closed on July 25 for +45 pips.
Buy on August 15, 2011. Closed on September 5 for +52 pips
Sell on August 28, 2013. Closed on February 25 for +70 pips.

The funny thing is that the system, (6 months index) missed all the big moves whether long or short. Including the last fall. It is mainly because the 52 MA was always one step behind. Selling just when the index hit 100 or 0 was much better.

On the other hand the three-year index produced sell signals only but failed to detect all the major rallies. The sell signals it produced were, typically very early. The commercials have been in an extreme since December 2013 before we saw the recent decline in oil.

So really the fact that Oil is away from an extreme on the 3-year index means next to nothing since the index did not really pick the bottoms.

Here:

[ForExchange]

Hi Philip,

as I see the COT Index for the last years and comparing it with your writing, there is one thing to see: it did not give great signals because there were no clear trends. There were no really bull or bear markets. As you also said you see a range out there. In a range trading environment it is not so profitable to wait for a trend catching signal. The same goes for the slow MA.

Checking the data from the last 3 years, I do agree with you that the index gave better signals for sell than for buy. If I have time, I might do the next analysis for the historical price analysis on Crude Oil so we can better observe this.

I post here the weekly Net Positions and Cot Index based on the suggested 3 years data (for the COT Index the calculation is based on 3 years data but the data itself what you see on the chart is only the year of 2014). They both reached an extreme reading in the Summer and gave a good signal.

FE

[Nebula9]

Hi guys… BB

Was there any signal on copper lately ?

I was browsing through my charts and found this. The pin bar ‘I’m assuming it is’ formed on 5th Nov and coincidentally on major weekly support. Ignore the last bearish candle. I’m thinking its probably from bad news, apparently there’s an indefinite strike going on in one of the biggest copper mines in Peru.

[MikeWolski]

Hey guys.

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

Majors eeked it out by +1.

Mike

[BBalazs]

@rookie39

Hi guys… BB

Was there any signal on copper lately ?

I was browsing through my charts and found this. The pin bar ‘I’m assuming it is’ formed on 5th Nov and coincidentally on major weekly support. Ignore the last bearish candle. I’m thinking its probably from bad news, apparently there’s an indefinite strike going on in one of the biggest copper mines in Peru.

Yep, there still is a valid bullish signal. Post #1957

[BBalazs]

I managed to get my hands on Larry Williams’ Sure Thing Commodity Trading course There are a lot of new and potentially profitable information there!

I’ll make a summary once I’m finished.

[ForExchange]

Hi everyone,

I have not had the time to read the posts but I try it until the evening. [I]BB[/I], a short question: how is the database “faster” creating video doing? Have you started it?

Thanks,
FE

[BBalazs]

Hi everyone,

I have not had the time to read the posts but I try it until the evening. [I]BB[/I], a short question: how is the database “faster” creating video doing? Have you started it?

Thanks,
FE

I downloaded a capture software. I’ll make the video tomorrow.