COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
3094

Hi BB,

lot of thoughts on your post.

First of all it is good I think you told your view on my signals so we can agree only basically on Copper. That is good to know.

That other issue is your new database. I find it important that we discuss the differences we make because if you have completely new indicators then we can hardly compare our findings. So as I see the attached picture you deleted very many colums. Is it right? You had on the right side a lot more columns than now. I guess it is the mentioned COT Index, but I do not know if you deleted other stuff too or not. Why do you investigate Willco now for three years instead of 1? Any reason?

FE

3095

Hi Mike,

yeah it is nice to see when your and our analysis line up. You never talked about excel. Did you manage to update your database on the computer and make your work faster or you did not make the change just yet?

What do you predict based on your analysis for next month?

FE

3096

Yes you are right. I got rid of the CP/OI Index, Willco (temporary) and the 6 months COT Index.

I want to see whether Willco with the 3 years look-back period gives different signals than the COT index. If so, then itā€™s a keeper, if not, then whatā€™s the point of having it?

The Composite Index moves similarly to the traditional COT Index, so we should be able to compare our findings.

3097

Rookie, I am working with a 3 years variable, thatā€™s why I have a signal on Copper for a while now.

About PA. I take positions only if I have an extreme COT Index signal. Otherwise, Iā€™m sitting on the sidelines. I donā€™t quite agree with the Commercials finding ways whatever the circumstances are. Take a look at the Dollar Index for instance.

PA & PL usually dance to the tune of Gold. Once they begin to move in the opposite direction, thatā€™s when I take notice. That does not mean that I jump in instantly. Itā€™s just a warning. Once Commercials give a signal, AND thereā€™s divergence, I usually take the position regardless of the current trend.

3098

Hey FE.

Well, Iā€™ve totaled all numbers up, and trends determined. This is what Iā€™m looking out for this month.
First some background. (the numbers are subjective, just see the comparisons)

This is a summary of the change of trends. (From biggest positive change down to most negative)
[B]From Jan 1st to Feb 1st-[/B] Major domination.
CHF: +5
JPY : +5
USD: +1
AUD: +1
EUR: -1
GBP: -3
NZD: -4
CAD: -4

[B]From Feb 1st to Mar 1st -[/B] Comms dominated
NZD: +4
GBP: +2
CAD: +1
AUD: +0
JPY : -1
EUR: -2
CHF: -2
USD: -2

What I find interesting is those 2 line-ups just seem to be reversed. The GBP/NZD/CAD lost the most trend changes, then turned it all around and gained the most. That would be 2 of 3 Comms, and 1 strong Major. And the USD and CHF have been losing ground. JPY dropped a whole lot. Also EUR is just starting to drop.
So, we can see how the tables have turned. Comms (lead by the NZD) came back alive. And the Majors (all except the GBP) have been losing it. It sure does seem like in the Major camp there has been a change of command.

So, thatā€™s a little bit of history for you. We just donā€™t know what will happen this coming month.(as always)
I tend to look at the Major/Comm relationship like this. As a seesaw, 5 against 3. Where is the imbalance gonna come from to tilt the sides? If more Majors are weakening, and only like 1 Comm is weak, then it normally will favor the Comms. But all you need is at least 2 strong Majors to tilt it their way. Look at this past Friday. All three Comms were the strongest. And also we should remember that the USD and AUD are for the most part leaders in their camp and there will be followers of each, for a tilt their way.

We will be having a jam packed week of data/speeches. I canā€™t remember what happened last NFP, did that set the tone for the rest of the month?
I donā€™t know if the Comms are gonna continue on their roll. Maybe it will depend on if the USD can perk back up and help the GBP beat up on the Comms some.
I do have my eye on the EUR. Thanks to you guys, I also think they just might have a beating coming to them. (like they were used to) (correction over?)
I do have this written down, PA related. Check these. All daily charts.
[B]USD/CAD-[/B] On the daily chart this is showing something. Pennant? Flag of some sort? Well, I just know something has to give. Consolidation has been happening. This should be some clue to where things are gonna head, with the aggregate.
[B]GBP/AUD-[/B] Also consolidation ranging been happening, and something should give, to clue us in on a direction. I just realize both of these pairs are a Major/Comm. So, will the Majors have the upper hand this month? Or the Comms? Maybe by looking at a breakout of these we can tell.
[B]EUR/AUD-[/B] This one interests me very much. I have a ranging condition for ā€˜long termā€™, ā€˜medium termā€™, and ā€˜short termā€™. But itā€™s getting really close to a tilt. And it would be for a long AUD, short EUR. Iā€™m thinking a prime place to short this is at 1.4204 (hundred pips away from now). But I would also like to see the EUR nose diving across the board, and maybe if the Comms are keeping their control over the Majors. Sure I will be checking the price, but I would like to get confirmation by knowing whatā€™s the big picture telling me also.

Well, thatā€™s what I have written down. Not much.
And I donā€™t know what Iā€™m gonna do this week yet. Will be watching for changes, especially after some big announcements and data. You know.

So, now that I got that out of the way. I really really really want to dive into the intermarket analysis field.

FEā€¦Iā€™m ashamed to say that the whole excel thing fell through. A site that had it all doesnā€™t play with anybody other than professionals. (fxone) I had to get over that, wasnā€™t easy. Globalmacro helped me with that, but I couldnā€™t get all the way to the live streaming data. I was in, but not fully. Then found out the bad news. Not available anymore.

Iā€™ll talk to you guys later.

Mike

3099

Hi Rookie,

Right, Palladium rallied. Still the reason I did not take it and why I do not take Copper because it is against the main trend. That is just not a good R:R for me to take but of course it can make also a gain. Actually I checked Palladium COT and I do not even see anything on it :frowning:

So I attach you what I saw on Copper as it is heading up. Once more, it is against the main trend so I wait until it is up and then I will go short.

Keep in mind, both commodities are only analysed by me only based on COT, I did not open a single chart. If I do not see a reason, then I do analyse them in detail.

Which currencies and commodities are you going to trade next week?

FE

copper.jpg700Ɨ430 36.7 KB

3100

Hi BB,

ok, we compare the signals. From all of them the 6 months COT index is the best one for me. I will let you know (as I already do) when I see the signals.

FE

3101

Hey guys.
I forgot something. Been wanting to put it out there. Interesting.
You remember the CHF bombing. And I sort of remember looking at HOW much each currency lost against them. I ranked them, to show the strong/weak. (I should dig that up)
But anyway, we know that lately everyoneā€™s been appreciating against them. But week after week if you look at it, some are going up much stronger than the others. So therefore we can see whoā€™s stronger down to the weakest. I have done this. And this way. By the fib. (Iā€™m not an expert on that, but have plotted the 38/50/61/100 . This is what I got. From the open to the close, on the weekly chart, this is how much of a retracement each one has done since then.

[B]GBP[/B]More than 61.8%. Like around 70 something. The most retracement than anybody else.Strongest.
[B]USD[/B]Right at 61.8%.
[B]JPY [/B]More than 50% but less than 61.8%.
[B]NZD[/B]Right at about the 38.7%.
[B]EUR[/B]Only about 68 pips under the 38.7%.
[B]AUD & CAD[/B] Both at the same. Under the 38.7%, by about 100 pips or so.

So, what does that tell us? Well, of course itā€™s all about the strength against the CHF. But, since itā€™s been a pile on in the last few weeks, I think it is a judge of strength across the board. TO SOME EXTENT, not completely.
I see more Majors at the top.
Interesting how the 2 Comms at the bottom. Worse than the EUR. Is kind of close though.
Does this tell us that the big money prefers a Major against THE Major? More than a Comm against THE Major?
How is the NZD down on the scale so far? Been very strong lately.

What do you all think?

Mike

3102

This was a very useful post. It would be even better if you make an edit and post your chart with all currencies vs. CHF from Jan. 15.

This really tells the story of currency strength. I used to do something similar after a large report. Like NFP comes out and analyse the reactions after a couple of days to see which currencies could take longer term advantage and which couldnĀ“t etc. Your CHF example is a lot better of course than a high influence report because the reactions were worldwide huge. We shouldnĀ“t forget though that normally we do not have such an indicator to analyse the markets. Couple of thousand pips moves are not normal.

The reason why NZD I guess is down because you are looking at a 45 days old data and not the last couple of weeks. Maybe it makes sense to analyse it once from 15. Jan. and maybe once only for the last couple of weeks.

That is what I think :slight_smile:

FE

3103

The Kiwi is till very undecided and trapped between the 0.7500 and the 0.7600 levels.

3104

Hi Team,

I am not into bottom picking but I made the decision not to short the EUR more. At least for the upcoming weeks. Actually the last reports are not as bad - including the readings from today - and the ECB played out all itsĀ“ cards already to weaken the currency. The current very low levels have to help exports, very expensive Switzerland also helps the Eurozone and the QE has to kick in sometime.

Any thoughts?

FE

3105

Hey FE.

Ahā€¦yeahā€¦maybe that is a good idea.
1hr lines from the open.

2015-03-02_0713.jpg700Ɨ426 34.2 KB

Either that will be the trend, or a set up for a massive downfall.
Iā€™m thinking your right.

Mike

3106

Yes I agree re Euro.

If there is another push down the expectation is that it is the last and will have little or no follow through.

Piponomics gives a good overview in his blog on the front page for this coming week on Euro, Cad, Aus and Gbp.

3107

Hi Guys,

Just thought this is of interest, I often mention Willspread, below is current h1 of AUDUSD.

I just chose this one at random, the two indicators below price are Willspread at my usual settings, set on the USDX and RSI(10) with only a 50 line - (a not uncommon setting).

3108

Hey guys.
Iā€™m getting ready to run the numbers, couple minutes to go.
But in the mean time, hereā€™s a follow through of the EUR. (1hr lines from open)

2015-03-02_1855.jpg700Ɨ380 40.1 KB

3109

Hey Team.
Mondayā€™s results.

USD: +330///+3.19
EUR: +375///+2.94
CAD: +73////+.85
GBP: +116///+.27
CHF: -122/// -1.33
JPY : -176/// -1.42
AUD: -258/// -1.98
NZD: -122/// -2.52

Majors +3.65%
0020

2015-03-02_1922.jpg700Ɨ317 19.3 KB

Mike

3110

Hi Peter,

some intermarket homework. The EU data came out positive once more. So if it is going like this in the future then we will not need to have QEs in the long term. Most likely a strong EU economy would spread out in the world and other nations would also not need QE.

Now the question is what will be a reaction on stocks? On one side no QE is bad for stocks, on the other side only because everything looks better, it is still a low inflation situation which is good for stocks. So which of those factors would be the winner and how is the longer term future seems to occur for stocks?

Have a nice day,

FE

3111

Hi FE,

I suppose when you think deeper, from a business point of view there lies an answer.

I was delighted to at last see QE in EZ, it was needed a long time ago. The reason that business (stocks) react favourably to QE is that it is perceived by companies as a ā€˜stimulusā€™ for business, itā€™s a remedy for an existing malaise, the remedy is needed because business is stifled, held back.

The holding back, whether by deflation or large unemployment, consequent low consumer spending, or whatever is bad for business and thus bad for stocks.

If a central bank concludes that QE is no longer needed then that in itself is testament to positive business outlook.

Aside from a negative knee jerk by traders ,investors would have long recognized the need for QE had diminished, therefore they would be bullish stocks.

There is a recent model for all of this - the current bull market on the S&P started just after the introduction of QE by the Fed, it has continued through the tapering of QE.

Quantitative easing - Wikipedia, the free encyclopedia

3112

So I was reading yet another interview for former PIMCOā€™s Mohammed el Erian and he said something that caught my attention. I wanted to convey that here because I couldnā€™t quite grasp it fully.

He said the Fed will hike rates (gradually) in 2015. He added that the Fed is wary of keeping interest rates at 0 for a long time. His main reason for that is that keeping interest rates at 0 encourages investors to take on more risks in the short-medium term.

Does that mean that hiking rates would have a negative impact on stocks? Isnā€™t that incorrect?

3113

I think its because some people may take their money out of stocks and invest it in cash.