COT Report Analysis - a thread on market sentiment

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945

Hi Mike,

today I was thinking that you might ask yourself why is my answer always the shortest on your analysis. I just want to tell you I like your work a lot and take it into consideration into my trades. I know it is a lot of time, especially because you do it on a daily basis (all other team members do the COT on a weekly basis). The reason why my reaction is short is only because it is numerical and it is hard to make outstanding remarks on hard facts.

I have something though. Your analysis is already very high valued and I do not want you to work more. Still, pay attention when you say EUR is twice as strong as CHF because it has the double plus pips. No question how strong EUR is but pay attention on the pip values! Do not forget that CHF is a countercurrency (only not vs. the JPY), and for a countercurrency it is very strong and high value. So the value of a pip in CHF pairs is very high and do not have so much pip movement. On the other side EUR is not a countercurrency and for example it is hard to compare EUR/NZD with NZD/CHF. You understand what I mean? For the same size of movement EUR gets just a lot more pips vs. NZD than CHF.

Everything is fine besides that and have a nice weekend.

PS: between the huge amount of workloads you make, do not forget private life :slight_smile: look at rookie, he becomes the next bodybuilder champion in gym this weekend

946

Hi flows,

first of all, I appreciate all you efforts and thanks a lot that you try out this work!

First of all, Philip corrected me yesterday or the day before with one rule so I read the book again and he was right. I told three rules but the system is even easier than that, the are only two rules! The comm index has to be below 20 and in the last two weeks SMA has to be less than before. I thought it is important if price is below or under the SMA but it is not. Based on what Williams wrote and Philip said you have a valid order to sell as you found a point where the cot index entered under 20 and SMA was moving continuously down.

My opinion is still that I am not confident to sell on that signal. The reason is simple: if SMA is under price for me it is more a bullish signal or a range trading. But no clear sell signal. With Philip we are looking at the very last candle on the chart. That can be actually a very strong and valid signal for all rules!

To find another valid signal on the chart, go a bit left until you reach 2013 November 4. That was a big retracement. If you look at it is has all the rules confirmed. The sign was not coming on the peak but I we would have caught that move it would still have been hundreds of pips for us.

I hope that helped.

FE

947

[I]No trades.[/I]

Can it be more simple? I am not confident with GBP before the election, with AUD because of the huge downward movement, with JPY because COT is still different than my fundamental bias and CAD is also not so clear for me. Besides that we have all kind of reversals so I would just rather wait to get better setups.

It will be enough to manage all the trades I opened in the second half of the week.

I still share with you something. My AUD trades. As you know I have two long and one short position (bigger lot size) for hedging. The news this week were confirmation for me that AUD is heading down in the long term. We got nice pips in the short uptrend but I am pessimistic. More than that I think tomorrow night we will see a big gap against the AUD. Today there were Chinese news coming out, donā€™t know if you guys checked them. They were all bad for AUD. So pay attention if the gaps happen. I do not think that AUD can hold after NZD and CAD suffered so bad losses. I just think it goes down too, just like Jack the Pipper wrote.

So, would you guys close my AUD longs vs. EUR and CHF right at the open or wait a bit and decide it later?

Have a nice evening and waitinf for all your posts.

948

Morning guys!!

Looks like I have a lot of catching up to do. And I only took a day off. I know better now that I shouldnā€™t snooze :33:.

Iā€™m excited to just read through what you guys have been discussing about COT index signal and developing COT index for crosses and some other issues like working in a more efficient manner. I just wanted to let you guys know and FE /our leader/ that Iā€™m here and I will be around for as long as we continue to work together. I agree with you and Philip now that weā€™ve got 5 people already its good and more efficient that we each person take on a role, specialty as Philip put it. In that way we can achieve more efficiency and we will be able to progress even faster instead of working on same stuff. I like the google drive FE !

For one I think we must get COT index for crosses out of the way first. Now since I joined this thread about 2 or 3 months ago Iā€™ve been following specs. I didnā€™t see results right away due to my poor knowledge about COT report in general and things that has an impact /geopolitical risks, political condition and so on/ however once I got that out of the way and really got it I started seeing tangible results I was able to bring my gain % back to positive /since I started trading about 6 months ago/ now I see that as a progress, a good one indeed. Now however the problem that Iā€™ve experienced whilts following specs move was when I tried to determine my bias for crosses based off of COT specs report - which we all know that COT report is relative to USD and is a futures. Iā€™m looking at my trade history guys and since I started trading with COT specs trades that I took with USD turned out a lot better than crosses. To simply put USD pairs had more winners than crosses guys. Now Iā€™m used to having wide SL for every one of my trades as I was getting quite confident in my bias, however with crosses even with wide SLs something was off, and Iā€™ve lost bad with EURAUD and some other cross trades that I opened based off of COT specs. This tells me something guysā€¦ that we canā€™t be determining biases for crosses based on COT specs report as it is relative to USD we should get working on developing our own COT index for crosses.

Now onto the next, Iā€™ve played around the timing charts and I have to say with every bit of information that Philip provided thanks! I think this could be something :33: Iā€™m excited. If Philip sends me his data collected on commercials Iā€™m willing to check if thereā€™s any data error first and foremost I think we need to get that out of the way. We need to start sharing on google drive guys! I think it is crucial to have both specs and commercials in our radar. We continue following specs but keep an eye on commercials move at the same time and when we see them turning the tide we go with it and we ditch the specs right then and there until they too get on the right side of the trend. And when they do we follow them as well while keeping up with our commercials. I think if we get this phase and learn to blend these two players move. Its almost certain that we can move on to the next challenge commodities that is!

One thing at a timeā€¦ Iā€™m excited to dive in to commodities FE. When I started currency trading Iā€™ve always had a thought that soon when I get this that Iā€™ll move onto commodities, futures and etc. I think youā€™re almost right about that in commodities bulls and bear trends generally tend to be longer than trends in currencies. It seems logical to me thats the case, just think about it guys how low or up can a currency go ? Currency is a representation of that whole country and how the economy is and investors interest and etc. Thereā€™s a lot at stake in currency, so when things go sour there always comes a manipulation either by their central banks and etc. Thus limiting our chance to profit more from any given trend. Iā€™m with you on that regard. And like I said just know that Iā€™m willing to put it all 100%. Just tell me what I need to do.

And on the last note I will buy the book soon when I get more time probably in a month or so. Thus we can have more exciting and fruitful discussions about COT index signals and COT index for crosses. However in the meantime Iā€™ll to try contribute as much as I can from the little knowledge that Iā€™ve been gathering from reading your posts from the book and your discussion with Philip.

See you around guys!!

949

Sorry to hear about your bad EURAUD trade FE! When I looked at timingcharts how EUR was oversold and AUD was overbought EUR was at an extreme for a while /commercials/ I think we need to take that into our consideration. That tells something. I wasnā€™t aware that bad data came out for China - however I was reading few headlines on China and its slowdown on bloomberg on friday.

Regardsless of everything else if commercials decide to turn the tide then nothing else matters isnā€™t it ? Thats my opinion maybe wrong but based on all of these I closed my other 2 positions on EURAUD it was over 200pips. Iā€™ve learned my lesson that donā€™t determine my bias for crosses based on COT specs - that is relative to USD and play safe with currencies that are at extremes overbough or oversold /commercials/.

Its good that youā€™re hedging against EURAUD with AUDUSD , but I think its better to close that bad trade when you think youā€™ve cut your losses at a level youā€™re comfortable with. What if EURAUD turns the other way around that is very possible I think given that both are at a critical point /COT/ and fundamentally speaking AUD might not fly high and their other two commdolls buddies arenā€™t doing well neither. I personally donā€™t like the idea of hedging if I lose then I accept my losses learn from it and move onto the next.

950

Hey guysā€¦

Just as I was about to get on with my weekly analysis CFTC website isnā€™t working. My part might come out a bit late. But I will try to get it out before market opens.

951

Ok I did do an index for crosses (by adding net positions of currencies without the -1 rule for now). The initial work was a lot because I didnā€™t have the values but I think next week it will be easier.

The ideas I shared (including long NZD) do not reflect my biases at all. They are just the signals produced this week for the system we are testing. I published them only so you guys can monitor the movement of those currencies in real time with me. I also mentioned particular crosses based on the crosses index as well so we can rate that part as well.

You asked me FE how I came up with buying GBPCAD and NZDCAD based on the system (which produced a very strong result). I had not done the crosses index for them yet (actually GBPCAD is not in an extreme according to the new crosses system). But I ran the 1 minute commodities trader on all the currencies from last weekā€™s data and the results were [B]sell CAD, buy GBP and buy NZD[/B] So I just crossed them together and voila.

I will share next a picture with the exit strategy.

952

This chart shows an illustration of how to use the exit strategy. Donā€™t forget to use the money management system accompanied with it.

953

HI FE, Philip,

Hm, but I see the SMA does go lower; from 93.02, to 92.79, then to 92.58. Personally, I wouldā€™ve gone short there, expecting that the SMA acts as resistance. I try using EMA instead, and only then I see that the MA value is actually flat. Or perhaps we need to see several bearish bars before Comm. index go to the extreme?


954

It is a very interesting idea. We do not have a technical entry signal. So if you want you can monitor that and report to us how it works?

One thing, we check the MA on the weekly chart only. It is possible that it went down on your chart not mine, because different brokers will have different data.

955

Hi Phillip,

Hm, that was a weekly chart from the timingcharts.com. Iā€™ve checked my brokerā€™s chart (FXCL) and theyā€™re roughly the same. May I know what broker you use? Oh, and also, whatā€™s the title of the book where I can find this strategy?

Cheers,

PS: Nvm, I got the book.

956

Just finished reading the analysis by Jack the pipper that was impressive! FE thanks for sharing and I hope you all read it guys. Mike, Philip and flowsā€¦

He put it all together nicely. It was an easy read yet very convincing. That made me want to do that sort of analysis. What do guys think ? FE? I liked how he presented his findings there was a lot to take, weā€™ve already got Philip on with developing COT index for crosses and COT index signal weā€™ve got flows and Mike and youā€™re on it. I just thought we canā€™t be dismissing correlation and all those things on top of COT that should provide us with more confirmation to take trades. And while I cover this gold, oil and etc /economic datas/ this should also make our transition into commodities very soon I believe :51: if we keep this pace much more easier and smoother.

I will however still be posting my weekly analysis. Like I said I think its good to compare both a reminder that we donā€™t forget the one or the other besides what weā€™ll be working on.

Thanks Philip for doing all that work! It gets better ! So we should be looking at GBPCAD long and NZDCAD long next week :). I want to have oil price on top of this CRB index maybe for further confirmation. I think I could go with oil price instead of CRB index especially with NZDCAD as theyā€™re both commodity currencies. Oh wait ! weā€™ve got dairy for kiwi ā€¦

957

Hi guys,

the power of working together brings sometimes such a perspective that one would never thought. I checked my trading journal on what rookie said. I recognized that my USD trades are running better than crosses. The last time I closed a USD trade with a loss was 1st of August. Now, comparing the amount of trades I made that is not bad. I like trading crosses, as they give great setups and more possibilities. I also like how Philip decided his cross ideas I will follow them. Still, it can be that we can make success easier as rookie also said with USD pairs. At the very same time we should not forget that USD was easy to trade lately. If we are honest, it was not easy to lose money in the last times with USD. We just had to go long with it :slight_smile: Conclusion: I like trading crosses and get good setups but I might try it in a way that position sizes will be larger for USD pairs.

I do think though that we can use the COT Index for crosses, others use them too, so it is possible. Also we should remember (rookie) that we need the crosses. Once USD is choppy or there is no clear trend, we have to trade crosses. I like your idea actually but we cannot close out the good cross opportunities.

Rookie, why do you say that AUD and EUR are in an extreme? I looked at the 3 years data and did not see any extreme points.

Thanks Philip for the chart, now I understand it a lot more. I just like to see such things, it is way easier to understand. If I understand the strategy right, based on the chart you posted, when you entered the trade, the exit was on the lowest low; because it was two bars under the current bar. As price moved up you trailed your stop to the current SL.

Flows, the first picture and explanation makes sense. It could have bounced back from the SMA. Also you reached COT index extreme. So I can accept it as a valid trade like I said before. I just do not know if we had enough patience to sit through the whole Aussie rise last month! However as it is a long-term strategy I guess it is ok. And after all, the signal was a winner as AUD/USD is heading down. The second chart I do not like that much. EMA is not in any description of the system, I usually do not use it and I do not want to mix something completely new. If you can use it great than ok use it, I am not so familiar and do not want to mess it up. Actually the system has nothing to do with chart formations as no one knows what kind of charts we use. Of course being fit with candlestick helps no matter what your strategy is :slight_smile: I would continue your first posted picture maybe on other pairs and see if you find something. We could also discuss those and evaluate how good the signals were.

As I see I am in contradiction in this issue with Philip. I see a valid signal, he doesnā€™t. Can be the broker, maybe not. It would be important to clear for the future.

Flows, we discussed in the last time 2 strategies from two books. The currency cross COT Index comes from:

ā€œThe Commitments of Traders Bible ā€“ Stephen Brieseā€

However as I wrote, this strategy is very short in the book (half a page).

The system that you analyze now comes from:

ā€œTrade Stocks & Commodities with the Insiders ā€“ Larry Williamsā€

So rookie, in your last post I actually see you are positive about crosses :slight_smile: Yes, Jackā€™s analysis are great but for sure he has a lot longer history than we have. It takes time to make such analysis. I think it is too demanding for us at the moment, sticking to the basic, being COT masters would be enough for me in the beginning. Then such great analysis could come later on :slight_smile:

958

Hey FE!

For a second I thought about sticking with Dollar pairs. But youā€™re right itā€™s always good to have crosses into the mix to diversify. Iā€™m with COT index for crosses we need to work on that !

Iā€™m sure that guys got plenty of experience and we wonā€™t be able to cover as much as he did but if you ask me to pick one id go with gold.

Reasons 1. Investors buy gold to hedge against inflation /gold price has been falling im looking at monthly chart relative to dollar through some other source this might be wrong please check guys/ biggest economies have been doing bad lately performing a lot less than their inflation targets can it in turn offset the investors from buying gold thus decrease in gold price as thereā€™s no demand but supply

  1. Correlation between net importers/exporters of gold and gold price

Countries like Australia that exports gold /it only takes up 5.4% of itā€™s total export though/ for instance when thereā€™s a trade deficit increase in gold price can help offset the trade deficit or can create a trade surplus and the other way around for countries that are net importers of gold like Thailand, Singapore India and UK. So we can use this both ways. When price of gold increase we know that Australia will produce trade surplus or look at trade deficit and surplus over time and gauge how gold will price. As the value of a nations currency is dependent on net imports and exports, we can in turn predict or confirm our setups with this piece of information by looking at this correlation.

I meant commercials when I said AUD overbough and EUR oversold /refer to timingcharts/

Its just an idea guys let me know what you think! I guess was too excited FE I got it lets master the COT first. But hereā€™s an idea lets keep this on mindā€¦

Update: I did some reading on correlation between oil and CAD its alot more complex than I thought and not as straightforward as we would assume guys. Australiaā€™s biggest exporter of coal and iron gold comes 3rd - their biggest importer is China. Things arenā€™t looking good for AUD, we might see trade deficits coming out soon.

959

Good morning guys!
Well you all have some good stuff flying around here. I just got caught up now.
FE, I liked your write up about how you see the possibilities of what we can do together in the future. I can tell Rookie is excited! And you need to know that I feel the same way. Iā€™m all in here also! I understand what your trying to do here. We are a team. We have a goal. And that is to become successful in the markets. And by that we are developing a system that requires many specialized functions to work together for a final outcome. We each having our own important role to perform. It kind of reminds me of a composer (of music). In order to create a masterpiece there are many different things that must work together, all for a beautiful thing. You have specialists in many different areas that need to come together in harmony for one and only one purpose. For us, thatā€™s success in the market. And since this stuff is my life, I will only get there quicker by being part of this team. Thereā€™s so much to learn in our trade. And since we are all serious about this, I do believe there is no reason why we cannot become very successful in the markets. And speaking of market(s), I am definitely in on your idea of spreading out into other markets other than just currencies. I always had that in the back of my mind, when I first started out on this journey. It only makes sense to start with currencies first, because any financial instrument will always have to use a currency. Everything hinges on what is happening currency wise first. I think they are all interconnected; equity markets, bond markets, commodity markets, future markets, etcā€¦ So, the short term thinking of getting into the commodities futures market is a great idea! There is so much I want to learn about, and being with you guys in harmony will be the only way to get there, I think.
So, needless to say, Iā€™m with you on this stuff. For as long as it takes. This is my life. I love this stuff!!
Therefore I think we need to realize that this is a long road. We need to pace ourselves. Letā€™s be smart about it. Things will eventually come together. For as serious as we all are, it has to!! I want this real bad. And you know what it is? Itā€™s gaining knowledge about something and then bearing fruit by it. Financial compensation.
Also thereā€™s nothing more interesting than understanding how the market is operating, and moving.

Just clue me in on what you guys know about (I forget the name) how we can be centralized on a website together. Iā€™m assuming that. Itā€™s what you all are talking about. But, in any case, Iā€™m in.

Ok. Enough of that big picture talk. I want to talk sentiments.
Coming back with a link I want you to see. (just an analystsā€™ view)

Mike

960

Check this out. (funny that you Rookie just talked about gold, and AUD).
Interesting what he thinks about the AUD.

The carry trade notion. Volatility.

961

My part might be coming up quite late guys probably tomorrow morning /evening for most of you I suppose/ sorry for being late the website is still not functioning. I should have got it done earlier. But weā€™ve got FEs part out already that should be enough until I get mine up. I will be drawing up my trade ideas based off of FEs report and will soon share with you guysā€¦

I was thinking guys, speaking of COT index for crosses is there a way to get the numbers out for crosses or how should I put it, the COT report that we analyse is relative to USD. Well it has to be relative to something, in this case I guess dollar acts like a nominal value and other currencies a real value. So for crosses how do we do this ? A COT reading for crosses is it even possible , besides index for getting at bottom and tops. Why not readings, can we detach the numbers or do something on the numbers that we already got that is relative to dollar and construct it in a way /that Iā€™m not quite sure how/ and use that as a reading for crosses to follow the trend on top of COT index for crosses. Is that even possible ? Dollar index may be of use ā€¦ lets think about this guys!

962

Hi FE,

Lol, yes. But perhaps a five months in advance signal is normal in long term tradings? :smiley: Well, I find EMA is more reactive to current price changes than SMA, I may get a lot of whipsaws but I will get early entries. With SMA, I get less whipsaws but a very late entries and exits. So I usually use EMA for long term charts and SMA for the short term ones. Kind of trying to find a balance. Iā€™ve got my hands on the 2 books, reading them, however, will take some time.

Cheers,

963

Hey Rookie, and all.

Iā€™ve been following you. So, letā€™s just keep throwing stuff out there.
COT does follow the USD against the others. And that is on the futures market. Thatā€™s using the USD. Or the value of the USD. And the USD is traded on the currency market also. So, shouldnā€™t we be somehow comparing both markets?

ā€¦back it up a little bit. Whatā€™s the purpose of finding a COT index anyway? What do we ultimately want to do? Help with the currency market crosses?

Thinking.

964

I already did that with help from FE but we are still testing it. The pairs that we are keeping an eye on are long GBPCHF, GBPJPY, GBPNZD, NZDUSD and NZDCHF.