COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
3677

Now back to GBP - interesting day, the vote count unchanged but price went on up anyways, has fallen back to the mid Asian where some buy orders awaited.

Now retail sales, the only minus that I noticed was that imports were down, so if retail sales are up then has to come from stock - stock levels reported high in the first qtr.

The all important weather, shoppers stay in during periods of severe inclement weather, there was none reported, likewise they stay in their gardens or on the beach if the weather is extremely hot, none reported, just nice shopping weather.

So the all important British Retail Consortium report may shine the light on the likelihood of the numbers.

The expected number is up on the previous, letā€™s see can we beat the expected.

3678

Hi guys.

Just to check inā€¦
Well the Pound did look good earlier today. I did make up a lot of lost pips there. But, on the other hand, I do have running the NZD against everyone also, to the down side. And that is whatā€™s hurting me now. If it wasnā€™t for them, I would be in good shape.
So, I will be waiting for a turn around. (cause Iā€™m not jumping out of these trades until one thing or another trips)

Mike

BTWā€¦hope you guys made some pips on the way up with GBP/NZD. Then jumped off. (Eddie, Rook)

3679

Peter,

I have came across posts like these numerous times on forexlive Forex option expiries for the 10am (14.00 GMT) New York cut but I could never figure out how it would affect fx ?

Went long on USDJPY early Asian session with a tight SL. NZD is jumping up regardless of the rate cut. And is reaching a bargain level against EUR and GBP. Iā€™m guessing buy orders are in for either one of them at the least. We shall see :33:

3680

Hmmmā€¦ UK retail sales disappoint, seems the import numbers were the flag after all.

Oh well, gbp trade still positive so will just stick with it. Eur/Usd helping in that quarter, some usd selling coupled with the Euro buying - target there is 1020, no target yet on gbp/usd.

rookie, they are talking about the fx option expiries Iā€™m guessing, havenā€™t read it.

How to use option expiry info

3681

Update on above, notice how price went to 1019, 1 pip short of target - happens frequently when day trading, I always account for the spread and a couple of pips if setting a specific target.

Many times you will see price turn just shy of a round number or target , especially at a session change

3682

Hi Peter,

why did you ahve 1020 as a target? I was also disappointed at the Retail Sales, your Analysis was great yesterday. Well, the main fundamental drivers did not change so I guess everything remains the same.

I guess you are done for the week on Thursday night.

Congrats to your winnings,
FE

3683

My stop got hit, leaving me 330 pips up.
Ive gone back in again at a lower level, although its dropped since it seems to be bottoming out

3684

Hi FE,

Yeah, I bailed on Gbp/Usd at b/e, clearly had lost itā€™s legs - Iā€™d say itā€™s looking for the 15490 area, s maybe long there again next Tue.

It was disappointing on the retail sales - having said that it was a low risk trade, I was getting in on the anticipation that others also had of a good number so the entry was early.

Imports are very significant indicator on retail sales regardless of the rest I suppose.

1020 was a simple target, two nearby Asian highs of 1010 and 1025, so a first target 1020 - likely the point of interest is still a little higher.

3685

Btw, thereā€™s a handy indicator when trading GBP - Eur/Gbp, when they are buying this cross they are selling the pound, affects most the other Gbp crosses as a consequence. - when they stop buying then all returns to normal - maybe tomorrow around the 71 area

Banks were offering 69 on this cross a couple of days ago, first time in 8 years - UK exporters not a happy bunch trying to do business in their biggest market.

(Technically not ā€˜exportsā€™, declared as ā€˜dispatchesā€™ to another EU country, but makes them very uncompetitive whatever Intrastat call it).

3686

There is a new webinar by Larry Williams on Youtube published by e-signal. Its specifically on how to use the COT report. You guys should check it out.

Back to the COT report, we talked how New Zealand is reached an extreme. Now we should also note that CAD is very close to an extreme as well. I think it is also a more relevant extreme for two reasons: 1) Fundamentally CAD is still better than New Zealand, although slightly. 2) The open interest was got very close to the three-year low a number of weeks ago. This is usually an indication of market bottom. NZDā€™s open interest is actually close to a three-year high.

Another important observation in my opinion is that Gold is also close to extreme. It seems that little by little, all things commodity related are creeping up higher. Should we prepare for a possible ā€œcounter-attackā€ by commodities as we enter the final two quarters of 2015?

3687

Hey guys, Philip.

Well, thatā€™s what Iā€™ve been thinking also. Commodities breaking out.
Also Iā€™ve noticed that the EUR has come on back also. For some reason, after last week, I counted them out. I thought they were back on the down slope. But this week they have just been killing it. Other than Wed (which was a correction day) the EUR has been on top.

And this leads me to tell you guys what Iā€™ve been up to lately.
Iā€™ve been trying to figure out a system of determining a way to look at the [B]field[/B]. See, thereā€™s nothing more important to me than to know whatā€™s going on. I put all things into perspective. I must know whatā€™s up. And I think I got it. Tell me what you guys think about this.
Since I already have a weekly line-up of everyone, I start with that. That is a line-up of strongest to weakest.
Then I look at what happened on a daily basis. Iā€™m gonna just show you what this week looks like as an example.

[B]GBP (1)[/B]ā€“8--4ā€“1--4ā€“
[B]USD (2)[/B]ā€“4--8ā€“8--5ā€“
[B]CHF (3)[/B]ā€“6--6ā€“2--7ā€“
[B]EUR (4)[/B]ā€“2--3ā€“4--8ā€“
[B]JPY (5) [/B]ā€“1--7ā€“5--3ā€“
[B]AUD (6)[/B]ā€“7--5ā€“3--2ā€“
[B]CAD (7)[/B]ā€“3--2ā€“6--6ā€“
[B]NZD (8)[/B]ā€“5--1ā€“7--1ā€“

Now, there is the line-up as the week started. The time frame perspective for that is the weekly. Kinda far out
And the numbers are what happened each day of the week so far. Basically it is how they are ranked.
The first column is Monday. The numbers signify the rank. And the top row is who came in first, and then on down to who came in last. So, this is what Monday looks like.
NZD was in first (the strongest), EUR came in second (next strongest), AUD third, USD fourth, GBP fifth, CAD came in sixth, CHF seventh, JPY came in last. (All determined by % higher against everyone, not just a pip count).
So the numbers there are really the ranked currency, and the top row being the strongest that day on down to the weakest. And thatā€™s the [B]field[/B].

Now, in the following, this is the best way in which to add up whether the trend was followed or not.
I categorize it all into 3 different manners. Either things are Trending. Counter Trending. Or Mixed.
And Iā€™m talking about the [B]field[/B].
Here we go.

I will rate each day. And then end up with a weekly determination also.
For the [B]daily[/B].
If things are trending (high), then the top three spots should be #1, #2, #3. [B]And[/B] the last 3 spots should be #6, #7, #8. Given thatā€¦ I add up the number of correct ones to which a trending condition exists. So, for Monday, I count how many positions there are that make up a trending condition. How many do we have? ā€¦Oneā€¦ Cause look. In the top three positions, there is no #1, #2, or #3. (we had 8,4,6. So that means that would be a 0. And we have to also look at the bottom 3 positions. For a trending condition there should be a #6, #7, #8 down at the weakest positions, for that day. And how many do we have? ā€¦oneā€¦The seventh ranked currency placed in the bottom 3 places. (which was CAD) They were the only currency that followed a trending condition that day.
[B]Now[/B]ā€¦for that day, I also add up how many currencies have [B]Counter Trended[/B].
In the top three positions we have 2 currencies that CTrended. And in the bottom 3 positions we had 1 currency that CTrended. So therefore that number would be 3. (2+1)
And now I will put those 2 numbers together and come up with what happened on Monday, regarding if it was a trend following day, a counter trend following day, or a mixed day.
We have a [B]1/3[/B]. The first number signifies the trend, and the second number signifies the counter trend.
Now this is how the week has progressed.
Monday = 1/3
Tuesday= 0/4
Wednesday= 4/2
Thursday = 1/3
ā€¦
Letā€™s add them up. ā€¦6/12ā€¦
That means there were 6 times that the field has trending high, and 12 times the field has countered trended. On the daily basis. So far this week.
I kinda think that today we will see more of a coming back around.
But we should all know that this week the [B]field[/B] took a deviation from the trend. (Yeah, thanks alot NZD) (Also GBP took a beating). Also the EUR came back!!

So, what do you guys think? Is this a good way to see a trending condition or not of the [B]field[/B]?

BTWā€¦I went back to the beginning of the year and ran all the numbers up to date, with this system.

Talk to me.

Mike

3688

Hi Mike,

wow, this look very interesting again, but to me sometimes a bit complicated. I like to keep things simple. Still, I believe it is interesting.

I have one important question though: how exactly do you want to take advantage of these findings? I do not see how we can use these stats in our trading.

BTW if you pay Attention on your style, it is just a lot more fun to read your posts!

Hope your week is running good.

FE

3689

Hi Philip,

I am very happy to read something about the COT Report.

As we know each other quite good by now, and also help each other, sometimes we have to show the ā€œred flagā€ as a sign of caution for our friends.

I use this option now.

In our many COT Analysis I think we can agree that we found two ways of making money:

  1. spoting reversals of net positions
  2. jumping into trends with the COT index

Everyone can decide which strategy to follow, but most of us likes the second one I believe as our own experience and PeterĀ“s many examples helped us to realize how dangerous it is to try catching a falling knife (a.k.a. spoting a reversal).

I do not know how you trade on the COT Report but I like this way: when the COT Report finding has the same direction as my Fundamental and Technical view. Lets suppose we are at an extreme for CAD and NZD or Gold. Now we look at the Fundamentals and Technicals. And here is a problem. I do not know what about you, but for me there is no single reason based on those two sectors why NZD, CAD or Gold should rise. (I am not interested in some Banks opinions or some Analysts out there.)

If there is a contradiction maybe it is good not to trade those setups. (I am shorting BTW CAD and NZD).

About the net positions. I did some historical analysis with BB if you remember. I remind you what happened to the USDRUB. Trend was up (technicals) and fundamentals has shown no sign of return at the value of about 40.00. We were at a net position extreme. Those who went short based on that, would have lost their hosue. Why is that? We came to the conclusion that net positions are only showing the last 3 years of net position extremes. That is why it did not help much with RUB.

The situation is a bit similar with CAD and NZD. NZD was many times quite strong because of fundamentals and interest rates and they did not even have any kind of larger retracements which means there were absolutely no extreme net positions to the down side at all. This means, looking at the data there is really nothing to compare it in a 3 years time. CAD is a bit more difficult to look at from this perspective but the result would be the same.

These were only my own thoughts, we all do what we want, but I do not want you to lose too much on these :slight_smile:

FE

3690

I totally agree with you. Just to echo your thoughts, there are two things Williams kept repeating in his recent webinar. 1) COT report is not a timing tool, it is a set up tool. So just because NZD is showing extreme levels, doesnā€™t mean we should buy now. 2) Williams said that when these extreme levels occurs counter to a strong trend (as is the case with NZD) price is likely to consolidate rather than reverse.

However when analyzing Gold he said that we were getting ā€œvery closeā€ to a buy. Not to mention that the extreme position on the US dollar index did work and the rally stopped. It also worked for the Euro and we saw some nice rally. So there is at least [B]a case for a no trade in CAD and Gold shorts in particular for the coming week[/B]

PS: I mostly use COT as a filter. If I get an index extreme, I look for a seasonal pattern. If I find it, I examine the fundamentals just to see if the opportunity would be a reversal/consolidation or a pull-back. So now we have a buy extreme in New Zealand. So I look at my five-year seasonals indicator. I see that we will have a top in NZDUSD on September 21. That top was confirmed in GBPNZD as well, a top on September 21. So around that date I make sure Iā€™m not selling NZD. Then starting September 21 I look for NZD buys using my technical system.

3691

Hi guys.

Well, what a week. The first one with my new system (newest augmented). And I have just finished with all the totals, updated line-up, etcā€¦

And Iā€™m not ashamed to give out some pretty bad numbers. I still feel really really good about this system.
And FE, maybe you will be able to see some of the reasons (below) [I]why[/I] I have come up with that ā€˜field trendingā€™ stats. Also you should be able to see [I]how[/I] I can use that for my trading.

So, this past week, as you all should have a sense of (but I have concrete evidence), we have had a [B]Counter Trending[/B] condition. Ok. Look. Maybe we can also say it was a ā€˜Corrective Trendingā€™ condition. But, when I think about it I would prefer to separate it all as either Trending Condition, or Counter Trending. Again, this is from the perspective of activity in a weeks time. Not daily. The beginning of the week to where it ended at the end of the week.

[B]Results:[/B]
Counter Trended.
ā€”9 times (of the daily ranked currencies) followed the trend.
ā€”13 times they followed countered the trend.

But, it is interesting that the weekly line-up (strongest to the weakest) stayed the same. Which isā€¦
[B]GBP[/B]
[B]USD[/B]
[B]CHF[/B]
[B]EUR[/B]
[B]JPY[/B]
[B]AUD[/B]
[B]CAD[/B]
[B]NZD[/B]

That tells me that even though it was a counter trended week, it wasnā€™t enough to upset any strength to weakness, in the line-up. Basically I feel there will not be any trend changes. (speculation of course)

[B]My trade results[/B]: partially (cause I canā€™t see my balance yet from my broker, will shoot it out later when I see it)
22 trades ran.
6 trades closed. /// -660.3 pips
16 trades still open. /// -897.1 pips
Total = -1,557.4 pips

% of account not determined yet. Will disclose it when I see it.

Ok guys. I have to run.
I [B]will[/B] be back this weekend. And clue you in on what I plan on doing this coming week.

Mike

3692

Hey guys.

Hereā€™s the summary of my account activity this past week.
[B]Closed trades[/B]:
6
-660.2 pips
[B]Still open trades[/B]:
16
-847.80
[B]Total[/B]:
-1508 pips
-9.6%

[B]The field[/B]:

[B]GBP[/B]/// 7 trades opened
1 closed (GBP/NZD) -600.4 pips
6 still running- presently at -447.9 pips

[B]USD[/B]/// 6 trades opened
1 closed (AUD/USD) +110.1 pips
5 still running- presently at -187.4 pips

[B]CHF[/B]/// 4 trades opened
1 closed (AUD/CHF) +110.0 pips
3 still running- presently at -211.1 pips

[B]EUR[/B]/// 2 trades opened
1 closed (EUR/CAD) +180.1 pips
1 still running (EUR/NZD)- presently at +61.6 pips

[B]JPY[/B]/// 1 trade opened
still running (NZD/JPY) presently at -63.0 pips

[B]CAD[/B]/// 1 trade opened
It closed (NZD/CAD) for -230.0 pips

[B]AUD[/B]/// 1 trade opened
It closed (AUD/NZD) for -230.0 pips

So, thatā€™s what happened to me this past week. This is the first week for this system.
I am not moved whatsoever. I still believe in this strategy. I am looking at these results as what happens in the worst case scenario. Major draw down. And the reason is the field did not follow the trend. I had a feeling I jumped in the market with this system at the wrong time. But, nevertheless, results are results.
I can see that I lost mostly because of the major counter trend activity with the Pound and the NZD.
But, as I see the field at the present moment, there is very little change with the weekly trends.
Every trade that I still have running is still considered trending high. So, I will keep those on.
And I will add on 6 more trades, at the open. And there is one other trade that I have on hold for a day. (will explain in a minute)

These are the 6 that I will add on. (Because their considered trending high on the weekly time frame)
[B]GBP/NZD[/B]
[B]AUD/USD[/B]
[B]AUD/CHF[/B]
[B]EUR/JPY[/B]----newly trending high
[B]EUR/CAD[/B]
[B]AUD/JPY[/B]----newly trending high

All of the other trades that I have running and those 4 above [I]have[/I] been trending high.
Hereā€™s a quick run down.
[B]GBP[/B]ā€“7 trades (all)
[B]USD[/B]-- 6 trades (against all except GBP)
[B]CHF[/B]-- 4 trades (against all the Comms plus the EUR)
[B]EUR[/B]-- 3 trades ( JPY,CAD,NZD)
[B]JPY[/B]ā€“2 trades (AUD,NZD) ā€”But I have the CHF/JPY on hold. Favoring JPY. Because I believe that pair has just started to trend high. But, I need to see if it will continue for another complete day.

Soā€¦as I see itā€¦I have no Comm trending high against anyone (even another Comm). Last week I did and got burned (AUD/NZD, NZD/CAD) .
Therefore I donā€™t think we have any real major trend changes approaching. Well, AT THIS TIME ANYWAY.
Surely if this week coming up shows the NZD chip away the pips against everyone, then we can determine a trend change approaching.
And that, FE, is the reason why big brother is watching the field. I want to see any change happen. Cause I am in the market broadly. See, all I need and want is to see the field continue on a trend. And I like to see the concrete evidence of it.
It should reflect in all my trades.

But unfortunately I have tasted the bitterness when it doesnā€™t trend.

I cannot wait to taste a trending field.

Talk to me.

Mike

3693

Ok guys. I almost forgot. This is the last week of the month. So, Iā€™ll try to put it all into perspective for you.
Hereā€™s how the month progressed so far.
This is % totals of this month up-to-date.

[B]Currency total %[/B]////[B]Against Majors[/B]///[B]Against Comms[/B]

[B]USD[/B] +19.75//////+6.69///+13.06
[B]JPY[/B] +11.49//////+1.52///+9.97
[B]GBP[/B] +10.19//////+.63///+9.56
[B]EUR[/B] +4.92///////-1.76///+6.68
[B]CHF[/B] -2.72///////-7.08///+4.36
[B]NZD[/B] -4.61///////-8.41///+3.8
[B]CAD[/B] -16.15//////-15.81///-.34
[B]AUD[/B] -24.13//////-20.67///-3.46

[B]Notes[/B]:
[B]USD[/B]ā€“strongest currency this month.
[B]JPY[/B] --stronger than the Pound.
[B]CHF[/B]ā€“weakest Major. Therefore I ask the question here. Will they come back at monthā€™s end play??
[B]EUR and CHF[/B]ā€”have diverged against the Majors. But the same against the Comms. (look above)
[B]AUD[/B] --weakest currency across the board. This month.
[B]NZD[/B] --strongest Comm. So, is there more room for them to fall a lot this last week?

Iā€™ll just throw this out there.
This was Juneā€™s results.
[B]GBP[/B] +20.12%
[B]EUR[/B] +10.41%
[B]JPY[/B] +8.14%
[B]AUD[/B] +3.77%
[B]CHF[/B] +1.44%
[B]USD[/B] -1.66%
[B]CAD[/B] -3.57%
[B]NZD[/B] -38.65%

One major point here to note is how the AUD came on down to the bottom with the rest of the Comms, this month.

Mike

3694

Hi Mike,

I have a couple of questions to discuss with you. If ok, I do not speak about what is functioning good because there is no point IMO of doing that.

So I rather get to the point.

  1. Losing about 10% of your account in a week looks too much to me. Maybe some other risk measurements? I mean maybe the trends just change tomorrow and your stats still show trending high in the next 5 weeks. Or it is a stronger retracement. So if it is a strong retracement for 5 other weeks, you cannot afford to lost 5x 10% of your account.

  2. About the two new trending high pairs. I would like to ask how is AUDJPY trending high. AUD is one if not the weakest currency currently. In fact I made some pips exactly with that pair but with shorting it. I talked to Phillips maybe two months ago what about shorting that pair.

  3. I stil believe the risk can be reduced if you do not jump with every currency against all currencies into trades. You open 7 GBP trades. If GBP has a bad week you lose all 7 weeks which is too much risk.

Now I read the second post.

FE

3695

Ok, now I do not understand the correlation between the two tables. You write AUD came down but I see a +3.77% at them. What does that number mean. I do not see exactly what are the tables? It seems like you put twice up there June results but with completely different numbers.

I advice you to read Forex GumpĀ“s article from yesterday. An awesome write up on NZD fundamentals. It might help to understand what is going on in the Country.

In general I can say guys that Forex Gump has great articles in the last weeks, on a daily basis. This is no marketing, only my own opinion.

Have a great rest of the weekend,
FE

3696

Hi guys.

I came across this.
Is very interesting. Seasonality. Especially for this up coming month.
Philip. This is all up your alley. And maybe old news for you.

Seasonal Trends In The Forex Market

Mike