COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
2247

Hi everyone,

As I stated earlier, I will drop S&P 500 Consolidated from my analysis. I also dropped earlier Nikkei and this brings me to the conclusion that I have to trade any kind of Index without the COT Report. This is not good news as I actually only want to trade with the defined direction of the COT Report. Peter introduced same great tools though to use on the Index so I think I will stick to them. I will also not the analysis.

I think this time the COT report is not that important. It shows the situation last Tuesday night, which was almost 7 days ago. We shouldnā€™t forget how much has happened in the market since that time. Still, a fast look might be good to know what the numbers tell us.

So now it is time for the report.

[U]Silver[/U]
I am waiting for BBs analysis here. OI has decreased significantly. As we have observed low OI readings often come at turning points. It would be also interesting to compare silver with gold.

[U]Crude oil[/U]
The report shows nothing special but we know how much happened, especially after OPEC meeting.

[U]Soybean[/U]
Not much to report, I keep an eye on it.

[U]JPY[/U]
The current yen party might not hold on too long. We are going with a very high speed to extremes. No worries yet but still. There is one thing to mention here though. I check what happened when we last time reached JPY net position extremes in the end of 2013. Prices went from 105.00 to 101.00. and then an 8 months long ranging market came. What is interesting, in this ranging market the commercial net positions went from one extreme to the other and started the huge current rally.

[U]RUB[/U]
Basically all indicators moved away from the extreme readings, price does not confirm this just yet. Yesterday my dad wrote me an email and said: ā€œHey son, the Russian government took action. Buy those Rubles fast!ā€ Well I do not know if that is true or not but who would argue with his own dad?

[U]EUR[/U]
The report says there is still some room to push EUR down but it wonā€™t be as easy as it was until this point.

[U]NZD[/U]
Some weeks ago we talked about the extreme reading on NZD net positions. The chart action on NZD/USD shows perfectly in this case the situation of the Kiwi: indecision. There is no further fall but the commodity currency can also not turn at the extreme level and beat the USD.

Last but not least: one of the basic things is trade your system when you get signals. I do it about 90% of the time which is 10% less than I should. We had a discussion on Wheat and Soybean a week ago. I did not listen to my own voice and analysis. I did not took the trades. Soybean would have been a small loss, but with my last lot size Wheat would have turned to trade of my life until this point (because of large pip sizes).Wheat gained 10% within 1 week. I can only blame myself for missing that huge chunk of money. So keep in mind, do your analysis and trade your signals.

FE

2248

Hey guys!

Just finished the update of my database, so here comes the results.

Copper

Commercials are still bullish, but Iā€™d be careful with going long just yet. Although yesterdaysā€™ rally was pretty spectacular, Iā€™m still uncomfortable going against the bearish trend. ProGo follows price action, so last weekā€™s drop was valid.

Gold

No signal here. The current reading of COT Index is 81, which is neutral in my opinion. Iā€™ll stand aside and wait for a bearish signal whether from the COT Index or Movement Index. Same goes for Silver.

Notice the sudden drop in OI (Gold & Silver).

Platinum and Palladium

Nothing significant to report.

Cotton

Commercials are at it again! COT Index extreme, reading is 90.

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Looking at the chart, the bullish divergence between ProGo and price is evident (professionals are not backing up the recent selling).

Currencies: I wonā€™t cover them as you guys are on top of that.

Iā€™ve got a question for Peter: Is there a reliable indicator of inflation? As you know, Gold tends to rally in times of inflation so it would be nice to keep an eye out.

2249

BB, the most reliable meter of future inflation is the CRB, commodities are the raw material of prices.

Yeah many will say it is not that simple, that unemployment levels, earning/wages growth, retail spending etc impact on inflation, all these are correct, but for a straightforward outlook, worldwide inflation outlook, regardless of upward/downward pressures relevant to each particular economy, can be measured by the current direction of world commodity prices.

2250

I just need the simplest way to measure inflation. Thank you for the answer :slight_smile:

2251

The USD did indeed have some strength, everything now hunky dory on the indexes, the little pullback seems to have finished.

2252

Just a little comment on why I could see USD strength this morning. A quick glance at USDX with EURUSD as the influencing market, this is what I could see when I posted:

Then a quick glance to GOLD, with USDX as influencing market, again what I could see.

Willspread on these hr1 charts was suggesting no upward move on Gold and the reverse on USDX - it was that simple.

2253

Hey guys.
Tuesdayā€™s results. (funny how Iā€™m following Peter, cause heā€™ll like these results, after his post.)

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

Majors took it. +2

USD did dominate today. Although it was a fight, because both GBP and AUD were strong also.

0125 GMT

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Well, I just seen the AUD gdp newsā€¦not good. They are gonna drop out of site. (I think)

Mike

2254

Hey guys.

So this week Iā€™ll be adding CHF into my database. Dollar pairs are covered by FE and I pretty much and its my last dollar pair if youā€™ve been following my posts you all must be aware of that. But Iā€™ll start analyzing cross pairs from this weekends and onwards and see if that could be of use :13:


Commercials have been ramping up their net longs while specs increase their net shorts. OI has been increasing steadily.


Both are away from ā€˜conventionalā€™ extreme levels. What I mean by that is both commercials and specs have never reached conventional extreme levels as far as my database goes back. Commercials the highest 3 year COT index reading was around 80s range it never went higher than that range. But there has been plenty of 6 months COT index signals.

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Commercials longs take up 74% of total OI while their shorts take up 13%. 74% is pretty high according to my database.

Screen Shot 2014-12-03 at 3.59.10 PM.jpg700Ɨ263 15.3 KB

And weā€™ve got Willco at 95.

This was confusing. Although 3 year COT indexes of both players were away from ā€˜conventionalā€™ extreme levels commercials longs takes up 74% of total OI (thats amongst the higher readings as far as my database goes back) and weā€™ve got Willco flashing 95. Although I wouldnā€™t classify this a buy right away. I think we should take note of this. 6 month commercials index is however 97, and 0 for specs. Still a little confused.

USDCHF weekly chart

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Aha! there we have it. These lines on weekly charts always come at a rescue. Donā€™t they. It does work for me :47:. Looks like weā€™re approaching a major resistance up there on weekly. So the buy signal that I was talking of earlier might just flash at this major resistance. In any case lets watch out for that level.

2255

And the remaining currencies.

AUD
Nothing significant to report on the aussie. Commercials are stacking up their net longs and specs still are in the sell mode. AUDUSD is creating new lows on the weekly. Current commercials 3 year COT index is 80 and 18 for specs. Weā€™re not quite there just yet.

GBP
Again nothing much happening here. Besides commercials heavy buying and specs selling of pound. OI has been increasing steady. Weā€™ve got 6 months commercials COT index signaling 100, and 0 for specs. Just looked up GBPUSD weekly chart. Weā€™ve got a long way to go -down-. Guys FE and BB when would you go short ? Weā€™ve got 6 months COT signaling 100 commercials and 0 specs

CAD
Nothing much going on here as well.

Russells 2000 mini
Again nothing much to report.

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The index has been trying to break above this major weekly resistance since march this year. Remember last week I was saying how weā€™ve missed a buy signal and how I was saying if we could spot a sell this time around at this level. Well so far I donā€™t see any. Commercials have been selling off their net longs during its recent rally and now are buying some back. If you look at the chart. I donā€™t see one side taking the lead just yet. Weā€™ll have to watch out. Russells may just well range for a while.

PS: FE which one do you use , futures only or futures and options combined report for currencies ?

2256

Hey guys.
Well, Iā€™m taking a step back for the rest of the year. I must get things in order. (trading plan)
Donā€™t worry. Iā€™ll still be posting daily results, thatā€™s a must for me. And thatā€™s if you still want that.
I just have so much work to do, and I want to start off the new year with a formidable trading plan. And only then can I be freed up to do all the research that I want. Let alone be able to read some books. My most important objective is to establish a good trading plan. And I just have not been able to develop what I want yet.
But, Iā€™m around. Always have been. Everyday.

I do have a question to Peter.
Can you give me your thoughts on the FTSE? Hereā€™s the monthly chart, and it looks like itā€™s topped again. So next year it looks like back down. Any analysis? Been looking at this?

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Thanks.
Mike

2257

Hi Rookie,

I like the posts, I have quite many comments.

First of all on CHF. It moves hand in hand with EUR and we already spotted in EURUSD a very strong support at 1.20. I also analysed the road can get bumpy there, you come to the same conclusion and Jack has also spotted the same Get Ready for a Euro Rally. Or Donā€™t ā€¦ and Iā€™ll Get Ready for You

I am not in any long USD trades. If I was however I would probably go with Peterā€™s favorite pair. I still believe GBP is overvalued and you also said there is plenty of room to go.

I have a comment on Russels. Please do a historical analysis. I covered earlier Nikkei and S&P, gave both of them up and do not do it anymore. BB said he also does not follow S&P anymore. You might also see there low OI and absolutely no correlation between the net positions and price action.

Based on the GBP COT index there is no signal. You look for an extreme reading from Comms in the direction of the trend. You have a buy signal but the trend is down. This means no valid signal.

I follow the futures and options combined report. And you? Earlier I followed the futures only report when we did our analysis, just like it is suggested on the babypips site. However everywhere else when I read about it, they refer to the combined report and BB suggested it, so I did not want to work with different numbers.

Hope I have answered everything,
FE

2258

Hi Mike,

happy to hear about you. That is a wise thing to work more on the trading plan. I might listen to that one.

It is funny that you do no participate in any chart analysis and you just post a monthly FTSE chart and start talking about it. Made me smile. Probably you got your strong morning coffee and spotted this nice setup. We will see what Peter has to say.

FE

2259

Hey FE,

As for commodities and indexes I do follow futures and options combined. But as for currencies Iā€™m following futures only reports. I have noticed that Oandas COT report does the same - follows the futures only report. Do you think thereā€™s going to be any major difference between the two as far as currencies are concerned ?

And on Russells, I know. Ive been reading the posts. I will. So for indexes if COT is not reliable all weā€™ve got is intermarket analyses ?

2260

Mike, on FTSE and indeed all the indexes, Iā€™m a great believer in that if the daily is going up then to be a bull, yeah, I look out for pullbacks because they cause that thing that I have an abhorrence for - drawdown.

The only reason for a bounce would be some sell orders, when it falls in will come more investors until they see a reason for getting out.

Sometimes we have to remember that the index itself is a reflection of the share values of the constituent companies, whilst those companiesā€™ prospects remain bullish so too will the index.

I see 2015 being a good year for stocks, well I donā€™t see anything on the immediate horizon that would change the outlook.

2261

Hi Rookie,

I checked more times on timingcharts.com for certain commodities the Futures Only and Futures and Options Combined reports and have never seen a major difference. It can be that at some markets there are, but for me not yet until this point.

So I guess if Russels turn out to be disappointing on historical analysis then yes, we will have to rely on intermarket analysis.

FE

2262

Hey guys.
Wednesdayā€™s results.

GBP: +6 -0 1///+2 -0 1
CAD: +6 -0 1///+4 -0 1
USD: +5 -2 0///+2 -1 0
EUR: +1 -3 3///+1 -1 1
CHF: +1 -3 3///+1 -1 1
JPY : +1 -3 3///+1 -1 1
NZD: +0 -3 4///+0 -2 3
AUD: +0 -6 1///+0 -5 0

Majors took it. +3

0115 GMT

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Mike

2263

Hey guys.

Just got a headline : Saudi Arabia cuts all oil prices to U.S., Asia - Bloomberg (OIL) :
Had to close my CADCHF long. Was thinking of holding it through. Iā€™ll see what happens next. If this is going to have any impact at all on CAD and oil prices.

Whats up with the aussie lately ? I havenā€™t been following them. I donā€™t see anything good for them news wise. But theyā€™ve already dropped a lot against USD.

2264

Okay, I picked up John Murphyā€™s book again, hopefully Iā€™ll make it to the finish line this time. Although there are many interesting ideas in the book, it is awfully disorganized.

2265

Hi Rookie,

good question about the Aussie. Everywhere they write it is gold but I do not know if gold can alone decide the direction of a currency. AUD economy is still not doing bad compared to other so I do not know. Especially I am sceptical to give gold the reason to weaken Aussie because Oil is also down but CAD does not weaken like AUD does.

Maybe it was too early to close your CADCHF trade but I do not know where you entered it.

BB, good luck with the book.

FE

2266

Hey guys.
Thursdayā€™s results.

CHF: +7 -0 0///+3 -0 0
EUR: +6 -1 0///+3 -0 0
NZD: +5 -2 0///+3 -2 0
JPY : +3 -3 1/// +2 -1 0
USD: +2 -3 2///+1 -1 1
GBP: +1 -5 1///+1 -1 1
AUD: +0 -4 3///+0 -3 2
CAD: +0 -6 1///+0 -5 0

Majors took it. +7

0100 GMT

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Mike