Sorry I couldn’t post earlier, but this week seems to be exceptionally busy for me… Since my limited time now, I’ll try to be fast with my reactions.
You are absolutely right BB regarding Small Specs / Non-Reportables - as CFTC officially calls them, and it is truly more precise. Since I have called them Small Specs from the very beginning, I ask everyone to forgive me if I will be calling them SS in the future.
Another great example and confirmation that the cot report not being a derivative of price makes it so valid… Here’s an interesting fact, I don’t know if it will be new to you or not. Have a look at Livestock commodities. I’m attaching the chart on Feeder Cattle. Can you see the “normal correlation” between LS and SS? If your answer in NO --> congrats! In these markets, SS correlate significantly with Commercials. Reason? Simple: A lot of small businesses, not reaching reporting limits – as BB correctly stated in his post. So the typical rule that Small Speculators are the “dumb money” is truly not valid in these markets!
On the other hand, I have to disagree with BB on his statement regarding the effectiveness of Small Speculator’s signals. I think they give excellent signals! Just one market that “popped” into my head now… a famous and well known one: GOLD. Small Specs are great indicators there!! Here you go:
Ahhh, too bad… It would be great if they made an ETF on Orange Juice… If there were, maybe you could trade that. By the way… Let me share with you a little table I did a bit more than two years ago… It may need to be updated, but still it could be valuable for some of you. Here’s the link to it: MyAirBridge.com | Send or share big files up to 20 GiB for free
Yes, I remember in the beginning we has a discussion FE on the question of net positions… you were on the standpoint that is not reliable enough since it is changing… Maybe it is the case, but until now, I could not find a better way to analyze the data.
I’m a very visual person and that is why I like to see these charts. Yes, the cot charts I’m showing you are the net positions of Traders. Unfortunately I don’t see the cot index on a graph, but I have the option of getting the values in % terms which is great also!
COT Index is simply another too for measuring cot extremes in a market. It is based on the lookback period on which you wish to get the value. At COTbase.com I can set this from 1 year to 5 year.
Just thinking about Gold, four days ago we noted ‘what’s up with Gold’, well the wedge has well and truly broken, so is it a bottom.
Well it certainly was a jump, but I’m not so sure that it can yet be called a bottom, even though price broke it’s recent daily low.
The first hurdle is that 50sma, also investors have brought GLDX up as the volume had indicated, but there has been no follow through volume since, so wouldn’t be shocked to see some USD strength in the next couple of days.
Dunstan,
well, we do analyse many indicators in COT. You will se if you find them useful. We are at 6 indicators now but BB keeps adding new ones:-) As we have a graph from all indicators actually they are perfect for visual presentation. You also mentioned the time periods which you use. We use here what Williams and Briese suggests as it is the most widely used in the markets. This means 3 years of data for deciding the trend and find tops and bottom and half a year data for the current situation and for finding entry points.
Peter,
great analysis and nice graph. We will see if we can break that 50SMA. Keep us updated always when you see something unsual or some kind of a signal.
Mike,
the big boys know everything out there, you can bet. Your current findings do not support my trades so I hope tomorrow I will see the comdolls on the top and EUR with GBP on the bottom. Are you reading nowadays any economic books?
Book Recommendation: I just started reading [I]The Zurich Axioms[/I] by [I]Max Gunther[/I] and can’t put it down. I suggest you take the time to read it as it really puts speculation into a new perspective.
Wow tight SL paid out good this time. I cannot even imagine what in the world did in 20 minutes had to happen that gold lost 20$ from value and silver 30cents. I think I enter now at lower prices.
Sorry I have not been active. I went through all the posts. I wanted again to tell Mike to clear his inbox so I can send him a message.
On shorting SPX which FE mentioned, it is a very fascinating topic. Firstly, we should distinguish between fall and reaching a top. The A/D line is a reliable signal for entry, but shorting SPX at the moment is a counter-trend trade.
Every is starting to pick the top of the SPX but I think its too soon. If anything I think we are just getting started. This is a disinflation era so stocks will reign. The US and even Britain are hiking rates soon, but that will also have an impact on inflation. Even when the 2% inflation target is achieved by the US and Britain, the threat of deflation could prompt the ECB to start QE, which again should keep the stocks going. Only when the world manages to overcome (or fails to) the threat of inflation can we look for a top.
On oil, I had a meeting with a very influential man with close ties to the beasts of the oil business. Saudi Arabia has been purposely dropping its oil prices. More importantly, he told me that the price drop is likely to continue in the immediate future. We can talk about why that has happened if you’re interested as the man did tell me. But the key info for now is that $65 is a must-buy in oil.
The S&P /Russell2000 relationship had a little wobble back 7 - 11 Nov, at that point the S&P had made 2 new highs, the Russell2000 did not (area circled)
Then the Russell 2000 happily went on up to reach it’s previous high, the new highs on the S&P were confirmed.
The thing is that investors have not bought into the Russell to push that index any further, so there are a few traders watching that with interest.
Orange line is the S&P
The advance decline on the S&P is showing divergence on the S&P ($NYAD)
There are those who refer to this as a phase 1, where there is divergence on MACD and NYAD, which can be a heads up on a shallower pullback.
The index that is also watched for warnings of stronger pullbacks is $SPXADP which is currently in tune with the bull trend.
One other thing often monitored is The Dow and the Transports (dow theory) - were still waiting for the transports to make their new high, the dow did so yesterday.
I was just watching the videos in Larry Williams’ Picture Perfect Commodity Trading seminar in which he brings up an interesting (and probably) valid point. He says that each commodity has different hedging cycles. In other words, the time needs of the Commercials to hedge are not the same in the market of Gold as it is with Sugar for instance. I’d love to make a study of the phenomenon but it would be a lot of work if I did it alone, so I need some volunteers. All you have to do is to create a COT Index with a specific look-back period (which I would give to you since Mr Williams shared the optimal periods in the seminar) and attach a historical chart to it.
Philip,
I agree with you, S&P is very fascinating topic. I think at the current moment we can both line up many reasons to short and long the index. I think my trade is not confirmed but also not invalidated. I go with my principle and see how it ends up. The price is fluctuating the whole time around the entry level without any kind of important movement.
As what you say about oil is interesting as it comes from first hand. Of course those information are great but Rookie sent a very nice article once which could be on spot. Usually I do not believe much for such articles but that story seems to be logical. The idea was that Saudi Arabia wants to push out its competitors as the competitors do not have as much currency reserves as Saudi Arabia does. Also the supply increased this year in the US so prices should go lower. The thing is that earlier Saudi Arabia would have decreased it’s production to hold prices high but actually that helped the competitors. So instead of doing that they rather want to destroy a bit the market. I think this is a quite good explanation. Especially as the article honestly mentions that this reasoning seems to be logical but the real reason might be known only a handful of people around the world. I am interested on what you have to say.
Peter,
I have to say your analysis are very quality posts. The very least you should be a blog writer here. People could learn from these intermarket relations a lot.
If I might write a critic which I miss a bit from your part is a little conclusion. I read all analysis but I do not see if you are bullish or bearish. And I have a question. I have to admit I am a bit confused. I do not know now which A/D Line I have to look. What is the difference between the $NYAD and the $SPXADP? I mean one is NY and the other is for S&P. That is ok. But what is the difference in interpretation? Who is watching which one?
Mike,
I am interested what today comes out. Actually it should be a comdoll day. I expect GBP to lose and NZD a comeback. It is interesting that CHF holds quite good lately, I do not know why. If the SNB steps in there will be “bloodbath” – to use a Babypips expression.
BB,
what is with your during the week historical analysis? I am ready to learn!
Rookie,
is there holiday in Bangkok that you have nothing to say?
Well that article is spot on. US is now relying more and more on shale gas, something that pushed Nigeria out of the US market completely. So Saudi Arabia is lowering prices to put more pressure on shale gas producers. To Saudi Arabia, the decline is not really a problem because their budget is calculated with the price of oil at $65. Plus they have a budget surplus anyway. So they seem intent on pushing shale gas out and maintaining their share in the North American market.
When I asked him if the drop had any political agenda like putting pressure on Russia and Iran, he said “it could be.” He went on to point out that Russia’s growth forecast for the coming year is -1%.
He added that Venezuela and Iran are asking OPEC to start lowering production, but until price moves below $70 or they put shale gas production off, they will not do it. Its an interesting battle.
