COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
2609

Hey Mike,

You’ve got my vote !. I think your topic isn’t too far off topic. You’re talking flow of things - isn’t that part of market sentiment as with intermarket analysis ? Either way, I think your plan is coming along. I did like how you went long on AUD across the board last week - you’ve caught the best possible momentum. If you can keep doing that. You’re going to have to go live soon ! :45: I’m interested. I’ll be following.

And on AUD, it was totally out of the blue - I mean the whole USD buying thing. I was long on AUD against EUR, CHF and USD since early asian session - they were going great. Had stop losses went offline for a while to find out USD gained exponentially against everyone almost on hr1 TF. It was not a healthy correction. There was no significant economic data.

I did some reading on forex live , apparently there were few bad headlines on Chinese banks liquidity, concerns on bubble and enormous amount of debt they’ve got - no good news for AUD and the commdolls.

Then there was talk of QE in EU - that there’s some serious obstacles to kickstart the program. Equity markets in EU printed some gains. Then it had me thinking, remember a month or two ago I posted a link how money was flowing out of troubled EU to AAA rated AUD ? Well this time around, AAA ratings wasn’t an enough reason for investors or whoever it was that made the move - mainly on concerns on China - my assumption. USD probably was a better bet. At that moment S&P did gain a little and soon after US10yr. Currently S&P is down and US10yr up testing a resistance on hr1 a phenomenon I have never encountered. I’m thinking S&P went up a little on the premise that speculators believing that it was a risk on scenario everything was in line after all USDJPY up, then US10yr was flat gold was down , oil was flat. However not soon after S&P started heading down and US10yr was climbing up.

Shorting gold was a good move FE to capitalize on that short term prominent dollar strength. I haven’t checked my charts just yet. But I wonder how things will carry onto US session - if there will be another turnaround - speaking of turnaround as I’m typing this AUD is up against USD. I knew it! We’ll see what happens.

2610

USD/JPY down with S&P - Energy sector yet again the leader down, not unlike last Monday.

XLE opened gap down with vol

2611

No, this is a new trade. I put usually soon my SL to around BE, so did I the last time and I was stopped out.

2612

Hmm… things looking a little better now - if the energy pulled it down then the financials will pull it up

2613

Hey guys.
Monday’s results.

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

Well if this is not cut across party lines nothing is. Majors took it.

How about a shot.
0050 GMT

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Mike

2614

Hey guys.

Mike, would you look at your stats and tell me who’s ranging from trending on daily TF ? I can see them myself on daily but I was wondering if your way of classifying a range might be different to mine.

I’m not sure if Peter will be around to read this, but I was wondering if there’s any ETF thats asian based that tracks copper like Global Copper Miners ETF , NYSE is closed as I’m typing this copper closed with a loss. On daily its broken a range 2.81 on 6th Jan. BBs report revealed that copper is due for some correction. So far I see no sign of correction. I was thinking if it was safe to jump on board short now. After all the trend is down and copper has just broken a out of its daily range.

In my limited observation commercials usually go against the trend - cause corrections on weekly S&R levels. So I checked copper weekly chart to see if I can get any clue. And this is what I’ve got. What do you think guys ? BB and FE ?

Screen Shot 2015-01-13 at 1.21.18 PM.jpg700×271 27.2 KB

I will be watching out for 2.71-2.65 level.

PS: I’m not trading copper btw just yet. Its just an experiment.

2615

Well I talked earlier about how the week of January 12 and the month of March will be key for oil. With $33.17 being the first possible turning point and $14 the second.
It looks like the week of January 12 will be important for oil for all the wrong reasons, it was down 5% yesterday and it is already down 2.4% today.
Since you guys have been talking a lot about intermarket relations I thought I discuss another thought with you:
We have England and US with inflation numbers that is slightly below the targeted 2%. That holds true for Australia and New Zealand. Europe is struggling with a threat of deflation and Japan already is in deflation.

So the world is struggling with a lack of inflation (disinflation). This usually means strong dollar, stocks and bonds. It also means weak commodities.

With the rapid decline in oil prices and the slowdown in Chinese economy, is it possible now that the global economy will slip into deflation? In that case we are talking about falling dollar and stocks while rising gold (and may Australian and New Zealand dollar)?

How can we use intermarket analysis in your respective experience to keep an eye on that threat so we protect our capital and make profit if the threat of deflation realizes.

2616

Hey guys. Doc.

This is what I got.
Ranging on the daily time frame.
You need to know that on this time frame this switches often. Way more often than on the weekly time frame.

Dominant currency–against who–

[B]USD[/B] – JPY- Was trending high for a long time but just last week it has switched back and forth. And at the present I have it as ranging.
[B]USD[/B] --NZD- Is trending high now, but has been back and forth lately. It just switched as of Monday from ranging to trending high.
[B]USD[/B] --AUD- Is trending high now, but on Friday it changed to ranging, then on Monday back to trending high.

[B]GBP[/B] --CAD- Have as ranging. On the weekly time frames I have the pound trending low against them.

[B]CAD[/B]–EUR- Ranging. Last week showed a couple days of trending high, but switched back to ranging. So, that might be some signs of something to come. Would need to see CAD get stronger to take back their trending high again.
[B]CAD[/B]–CHF- Ranging. Last week showed a couple days of trending high, but switched back to ranging.
[B]CAD[/B]–GBP- Ranging.

[B]JPY[/B]–NZD- Ranging. Been like that but just yesterday (at the close of Monday) they are on the verge of trending high. If JPY gains a little bit more they will have it over NZD.

That’s all the ranging ones I see.
I don’t play on that time frame. It switches too much. Weekly is much better.
And by the way, I determine trending by looking at the fractals. Ex…Higher highs and higher lows (trending high).

Hope that helps.

Mike

2617

Rookie,

I wish you made that short trade on Copper. Your reasoning looks good, Copper basically broke all support zones to the downside.

Look at NAT GAS, it gave a buy signal recently on 1H W/S.

FE

2618

Very bad GBP news across the board, this lines up perfect with our short bias.

2619

Seems like someone is improving his style quite fast. Deserved a like already before reading the post!

EDIT: after reading the post, I have to say most of your ranging pairs (not all) line up great with the fundamentals as it is a strong vs. strong and weak vs. weak setup.

2620

Yes, I’d say the threat of global deflation is at it’s strongest in a long time. The catalyst is commodities’ prices in general and oil price in particular.

Oil is notorious for momentum in either direction - soon ‘speculators’ will be blamed for the price drop.

The question or fear that is increasing lately is where will commodities, again in particular oil stop? - in truth all anyone can do is guess, one thing investors have a dislike for is guessing.

So this past few weeks, since falling below $50, each day that oil falls then so does the S&P, then, in turn up goes bonds, Yen and Gold.

It means, for me, that medium or longer term analysis is like the oil price, it is uncertain. I see a well known TA guy is pointing out that Gold is giving a clear buy on the medium term - if the price of oil stops falling that analysis is shot.

One other point, in this see saw of risk aversion I mentioned the financials, they are part of the ‘offensive’ sector along with energy. It seems a few banks have exposure to energy via energy companies.

Anyways the financial sector is XLF - in a bear market the ‘Offensive’ sector feels the chill most, the current 3 offensive are Financials, Energy and consumer discretionary.

Some info here:

S&P 500: Why “Buy The Dip” May Lose its Effectiveness in 2015

How to play it? It seems that each portion of the week is divided by the see saw, the early indications for today for example is that it see (up) on risk - yet copper fell early this morning along with Brent, Brent has since stabilized, thus encouraging the FTSE buyers, and Gold sellers - Copper is still deciding.

It would seem that the New York opening carries a lot of weight of late.

2621

Btw long Ftse, short Gold, Long USD/JPY - my hedge is gold, it is reacting more slowly than the rest, so if I’m wrong, exit yen first, then ftse and finally gold.

I know a hedge is supposed to be in opposite direction, but this type of hedge is trying to limit loss but increase gains, if I’m right gold will fall faster that it may rise if I’m wrong, judging by yesterday’s price behaviour. ( I am judging that it’s commodity value will help the hedge)

2622

Hi Peter,

thanks for the great post. I never thought of gold that way, trading the opposite direction of oil. I find gold one of the most difficult but also one of the most interesting commodity to trade.

And the article was great, I think it was written for me.

FE

2624

Hi Peter,

in risk off sentiment JPY gets strong. So, the question is if a stock bear market comes which means there is a problem in economic progression and risk sentiment is off, can the JPY get strong based on risk off sentiment in the long-term even if its economy is doing bad?

Thanks,
FE

2625

FE, nail on the head - the knee jerk is buy yen, not long ago it was buy chf, there will come a point where the shine on the yen will not gleam as brightly, then it’s over to the bond market for many investors, maybe they are already doing that, have a look at daily 10yr, especially since no santa effect on the stock market.

Much still will depend on the next round of earnings reports from US.

2626

XLF (financial) has opened gap up, not a lot of vol, XLE also up - GDX opened up and is falling fast, volume good, reflecting the change of mood.

In this case I expect Gold to fall some more.

2627

And finally, when there is choppiness I prefer to exit at 16.00 gmt (London Close) to protect profits - I mentioned before that it’s possible to leave on the table, but many times a reversal will occur in the couple of hours after that time, always better to keep profits even if leaving on the table than to give all back.

2628

Hey guys.
Tuesday’s results.

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

Comms took it by a little.

0105 shot.

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Mike

2629

But interestingly pound is mostly ranging to trending higher against NZD, possible reversal on daily.

Yeah I wish I was short on copper but no rush there should be some correction on copper :44:. Interestingly gold, oil suffered to a degree but it wasn’t as big as the one copper had yesterday. When oil broke out of its range so did copper - a huge decline. I did further investigation on copper, we’ve often talked about its reliance on China - as its the biggest consumer pretty much of all raw materials copper included. Apparently when copper broke down another support at the beginning of Jan after the holidays - on 31st Dec last year China PMI ,a gauge of manufacturing came at 50.10 lowest in 18 months. For some reason, it could be oil tumbling further down and bad news on Chinese banks - low liquidity - therefore slowdown in construction - manufacturing - together with the lowest PMI reading lead to copper plunge. The next PMI reading is due at the end of this month. I don’t expect magic numbers just yet. But I do expect copper to correct - its way past the weekly support area that I was talking of yesterday - after that much decline - and also COT signaled possible correction.

I read an interesting article on commdolls, as I see widespread commdoll weakness across the board Commodity rout weighing heavily on Australian dollar, stops triggered | ForexLive. [B]Watch out Mike[/B]. I haven’t changed my bias on AUD a possible upturn even against USD. But just in case. I’ll be in regardless when the aussie breaks out of its range.