You got my like FE! 
just finished reading Philips analysis of commercials and his trade setups and I must say i really enjoyed it. Its good to compile our interpretation, different perspectives. Sometimes it aligns sometimes it doesnāt. Both can be good or bad depending on how we look at it. It would be great to delve in other areas commodities in this case , but I would actually want Philip to keep on posting on commercials. I enjoyed reading his perspective. Hopefully it wonāt be much work for you.
I wanted to share something I read in a book on volume spread analysis that could explain what we are reading in the COT report on Yen and Dollar.
The writer here describes a stage market makers send the market through called ātestā.
[I]āThe phase of price action we are looking at here follows the accumulation phase, and prior to this, the insiders will have frightened everyone into selling by moving prices down fastā¦ they slowly begin to push the market out from this region and to start the gentle upwards trend, which will ultimately develop into the distribution phase at the top of the bull trendā¦At this point the insiders are moving the market back through an area of recent heavy selling, and the worst thing that could happen, is for this selling pressure to return, bringing the campaign to a shuddering halt. The answer is to execute a test in the rising marketā[/I]
We see that this has happened in the USDJPY; the pair moved to the yearly lows of 101.1 in mid July. Made a test on August 1 and found there were sellers in the market, price was marked down to shake those sellers. Then again market makers started bringing the price up towards the 102.5 level. Another test was conducted and showed there were still sellers in the market. You might wonder how do we know if the test shows there sellers or lack there of? here is the answer.
[I]āThe market is marked lower, possibly on the back of a minor item of bad news, to test to see if this is likely to flush out any remaining sellers. If the volume remains low, this instantly tells the insiders that there are few sellers leftā¦ if the test fails, the selling from the old trading range has not been absorbed in the accumulation phase, so any further attempt to take the market higher may struggle or fail.
A failed test means only one thing. The insiders will have to take the market back lower once again, and quickly, to shake these sellers out.ā[/I]
So we see that from August 1-15 the price of the pair has been going up. Fridayās decline was a ātestā. The high volume on the small red candle reflects that there are still sellers in the market and that any move up will be difficult. So market makers will look to mark prices down to shake out the sellers before resuming the up trend. You can see in this weekās report that the Yen has been longed by both comms and non-comms extensively, in line with what we should expect on a failure of the test.
So Iām not saying that we should sell the pair, but rather look for a pull-back in it towards the 101.5 area and buy it from there.
The book is entitled āA complete Guide to Volume Price Analysis.ā It is written by Anna Coulling.
Hi rookie,
altogether this was your all time best post for me. I really like the table, the structure, the explanation and I am a fan of using [B]bold[/B] and [I]italics[/I] as they show where you have to pay special attention. As usually, I do not say what I agree with you because that is useless, and I do agree with 95% of what you have written. In CHF and JPY it is hard to say for me an opinion as risk off/on drives the markets every day different and it is hard to see for me the real values there. Because of this sentiment jumping up and down have I decided not to enter trades tonight or tomorrow morning for sure. I want to wait and see and manage my older trades.
There was 1 point (this is the missing 5% above for me) where I do not agree with the analysis so I share my thoughts. I want to emphasize, it does not mean I am right, just what I think. So the topic is the [I]GBP[/I]. You seem to be bullish or at least not bearish anymore. Well as the UK economy is still one of the best ones I can definitely not say you are wrong (I am bearish but I have to see how long). What I do not agree is your argument. I think you forgot here that COT report only shows Tuesday night standing. I know you know it of course but you forgot as it plays here a very important role. It makes sense to look at this point to Mikes tables. GBP was just hit in the face for the last 3 days being the weakest currency. And why is that? Well, we know the outcome of the Press Conference and economic reports on Wednesday morning - a couple of hours later when the COT does not show the values in this weeksā report but only next week. So I do not COT data is not so useful on GBP at this point as the last 3 days of the week were the opposite as the days before.
Besides that, it made a lot of fun to read it and to think about all the stuff. I try to read my book until the end and share my COT findings too so we can compare them.
I really enjoyed the last paragraph where you collected information what can influence sentiment and currencies. Last night I was also surfing the internet for news about Russia-Ukraine but did not find any valuable information. I am also looking forward fr the meeting today in Berlin, I guess the first news can come out tonight. If I do see in fact a clear trade signal based on the outcome of that meeting, then maybe I will do some short term trades based on that.
Hi Philip,
thanks for the explanation. Do you find the whole book useful? As far as I see you mean the uptrend will continue but first comes a pullback. Is it right? I am interested to see how this pair will progress now!
Keep us updated if you observe such pattern in any other pairs too!
[B]Free Report by Gary Kamen, Education Director for Commodity Research Bureau[/B]
Get It Now: Learn How to Analyze the NEW COT Report like a Pro.
For Futures, Options and FOREX traders.
We post so much that it is hard to find every post. As I remember Philip said he read the document and found nothing new. I can confirm that. This document is not bad if someone is new or for a review of the basics it is also good. I find it however too, there are not so many new information that we can apply in our systems what we already did not know). You can still read it, it does not do any bad for sure!
I sum up here some points what I thought about the document:
[I]Positive:[/I]
1. the author does give his email address to contact if there are any questions about what we read in the book. The author is really friendly.
2. I like the quotation: āOur greatest weakness lies in giving up. The most certain way to succeed is always try one more time.ā- Thomas A. Edison. I think this quotation is just perfect for forex traders.
[I]Negative:[/I]
1. It is a big marketing document on the first place and not an education document. During the whole document you see everywhere how great their website is. Something like this only makes me sure not to sign-up for something like that.
2. It says on the front it is a book. Well a 13 page document is hard to be called a book (with every marketing stuff it is 20 pages).
Altogether the document is good if someone is newbie and wants to read an introduction to COT. It is a good summary without really deep analysis. The slogan āLearn how to analyze the new cot report like a Pro.ā is hmmmā¦ wellā¦ you know what I mean. It takes 1-2 hours to read it through and interpret it. For me, it also shows about the value of the report.
Hi guys!
Ok. Here goes what Iām thinking about this week.
Iāll give you the precursors first, then my possible trades. (Iām not in any trades presently)
Iām going to start to base a lot of decisions off of the outlook of my view of the Major/Comm relationship.
So, to start, I look at AUD/USD. Thatās a good overview of that picture.
That is the weekly chart. We see the correction that the Comms took last week. And this chart is showing the weekly back to the beginning of this year. So yes, the Comms have been dominating most of the year, but recently we can see that their top is about turning. That purple line up there is a major resistance level. So, guys, after looking at a number of charts (other than this one), and looking at the big picture with the M/C in mind, I believe the Majors are turning the tables around for the rest of the year.
This is the daily chart. We can see more precisely whatās been happening. The comms were trending high up to around April (for the most part). Then since April itās been ranging (back and forth). And we can see some kind of head and shoulders possibly. So, couple that with the sentiment with the Majors lately. USD has been getting stronger (was slated to this year some time). Oh, and letās talk about the Majors. USD is not the only one! How about them CHF! Philip has confirmed to me (via his report) that the CHF can be moving much more stronger.
And given the geopolitical situations we have the JPY also. I guess you can say that the Majors have the safe haven currencies in their camp. (of course we all know that).
Now, I need to bring this into the mix. See, I was all in with the TREND being the fundamental basis of my trades. Well, I started to look at that with this M/C tint to it. This week this is who I have trending via ++ rating.
EUR/USDāMajor/Major /ā USD +
GBP/USDāMajor/Major/ ā USD +
GBP/CHFāMajor/Major/ ā CHF +
EUR/CHFāMajor/Major/ ā CHF +
GBP/CADāMajor/Comm/ āCAD +
This all tells me a different scenario. It has nothing to do with M/C relationship. So, I will look at that the trending relationship in regards to M/C.
By my determination I have the USD as the strongest Major. And I have CHF as the next strongest. So, Iām looking at them against the Comms. Look at this chart. NZD/USD, daily chart back to the first of the year.
Price is real close now to a major level. It sure does look like it was a support level and is turning into resistance. The last couple days are showing indecision candles. So, something is gonna happen here. I think itās gonna go down. That is in conjunction with other factors, sentiments. Oh, man, I just remembered just now,āWE, SOMEONE, needs to remind me that on Tues. is the dairy prices coming out. That is a very important factor on this pair. Please someone remind me (or if you can find out what it ends up becoming).
This is the USD/CAD daily chart, dating back to the beginning of the year.
The thick line is a weekly major line. It seems like maybe price needs to come down and bounce off of that before it would climb. So there was definitely a correction from the big climb since July. Will it continue on up for the rest of the year? I just kind of think so. (remember guys, Iām no one special, just thoughts)
So, other than the 3 above USD possible trades Iām looking at, here are the other ones.
CHF. Their a Major, and strong lately. Actually the second strongest Major. Therefore Iām gonna be looking at these ones.
Best bet I think with the CHF would be against the NZD.
Again, daily chart. We can see that the major weekly level was broken and tested. The trend is favoring CHF now. It looks like a major trend change, once again, along with many other Majors paired to Comms.
Iām wanting to go south with this. On a longer term.
AUD/CHF. (couldnāt post image, only 5 allowed per post)
This one looks like a trend change also coming. But it has a little bit more to go than compared to the other ones. It is on itās way though. So, Iāll be watching this closely also.
Iām not attempting the CHF/CAD. Little too risky. I think I just have a mental block against that one. Was just so used to that one going up this year, rooting for it that way, and now to go back down? Sure it could. Iām just gonna be cautious on that one. Will be watching though.
So, there are all my very possible trades that Iām gonna get into this week. And I must say that I would want them to be longer term ones, but I have to think about that. Cause IF I go in on some of those, and turn some profits, I just might start taking profits, and regroup to get back in at a later time.
Iām sorry to throw in a bunch of technicals. But, we do need that coupled with the sentiments.
Iāll keep you guys informed of what I do.
Weāll be in touch.
Mike
Thanks for your positive feedback FE! I really appreciate that. Iām relieved that youāve finally found my work somewhat useful ;).
Anyways lets get to the point, Iām actually glad that youāve brought GBP up FE. I tend to forget that COT data is few days old from time to time. And as I donāt really trade GBP pairs that often I just generally donāt pay much attention to GBP. Iām not sure about the details of press conference and economic reports , all I saw on my GBPUSD chart was a huge bearish candle.
Again good point. Itās always good to have you jump in on things that I may have misinterpreted.
Hey Mike!
I really like how youāre trying to combine it all together - Major comm split , sentiment and trend. For a while though Iāve enjoyed tracking your stats to see how things are going I didnāt really know how I would incorporate that into my trading method. I think youāve hit the nail on the head on this one. I will adapt this I have a good feeling about this one. Weāll see. Keep us updated!
Hi Mike,
as I see you challenge rookie for the ābest post of the weekendā award. This was also a good one. Well, I guess NZD is a good trade now almost against all other currencies. I am amazed that you are even aware of dairy prices schedule time. You can tell me where you get the info, because I do not have such a source, only always read it late. BTW I remind you now not to forget: on Tuesday there is dairy price scheduled 
In NZD/USD my only problem is only to break the strong support level under the current levels. Well, I guess if we all go short on NZD/USD then breaking the level should not be a problem! :-))))))))
I have charting problem now but I guess AUD/CHF is somehow similar like NZD/CHF.
I like how you bring together technical analysis (in this case trend lines) with market sentiment in your charts. Actually that is the right way.
You guys make so good analysis that it takes my whole day to read it through, think about it and I do not finish in the end my own work. I have to hurry up to get it until market open.
Just do not forget for your long term trades to set your stop loss targets accordingly.
Good luck
The trading world is quite small, we talked some weeks ago about the CRB index (the index that tracks the overall price of commodities).
Commodity Research Bureau - the guys that started that index some years ago
[I]I continue now a new series here, I write here down my own thoughts about my first COT book as I read it. I write down anyway always for myself what I think is important to look it back later, so I decided why not to post it here. Important: I write down the own words of the author, in the right order as it comes in the book. However I will not structure the different thoughts and do not write down which pages they were. I just want to mention the sentences which I find important for myself. This is not the same value for you as reading the book (hopefully you will all read it when you have the time for it), however it is better than nothing. I also make my own summary in the end of each post.[/I]
[B]Epilogue[/B]
[B]Alternative Net Positions Formulas[/B]
Ratios can be used in lieu of differences in constructing net position charts. Thease have the benefit of insensivity to large open interest changes, such as those seen in currencies and stock indexes at quarterly contract rollover.
[B]Dodging the Pitfalls in COT Data[/B]
The CFTC typically posts corrections only until the next Commitments release is available, so if you only check the CFTCās website on the day of release, you will miss any corrections posted between reports.
ā data periodicity and lag
ā contract specification changes: whenever a contract specification change is involved, a cautious approach is recommended until it is established that trading patterns were not radically altered between on contract and the next.
[I]Summary[/I]: the Epilogue section had some examples with some charts. The Alternative Net Position Formulas chapter was interesting, showing 4 different methods how traders usually calculate net positions. Last but not least the Dodging the Pitfalls in COT Data chapter talks about the disadvantages of COT reports, false data, not corrected data, etc. and what you can do about it. I like it.
[I]Book summary[/I]: I found the book very informative and interesting at the same time with many insider information. The book can be devided into Part I and Part II.
Part I was more interesting for me. It described the theory of the COT report and showed many examples with explaining the different interpretation methods. The chapters: Net Positions, The COT Index and COT Movement Index were for me the most important chapter. I learnt from these 3 chapters probably more than from all the others combined.
Part II was the practical part of the book, one chapter dedicated for every different market form (currency, stocks, metals, agricultural products etc.). In every chapter I found some very valuable insider information. Still, I believe Part II was too long and sometimes I felt the goal was only to make the book longer. For example there are the historical charts for every single COT product before 2007. Of course we cannot use these charts anymore, but even in the time of publication it was for sure on the internet and from these little charts no one made trading singals. Also, using these charts would have been only valuable within 1 week after publication. So I do not understand all those charts where was no written example to it, but oh well it was not written only for my taste.
Last but not least, some chapters must be boring for many readers but not for me: View from the Gallery, View from the Pits or Appendix A and Appendix B would make many readers crazy. I found it a bit too deep in the topic in the beginning however if they were not part of the book, it is possible that I would ask myself the question: Were there studies in this topic? If yes, what were the findings? Did Briese make backtests on COT? Are there other net position calculating methods? Is the COT data always accurate? Well, these āboring chaptersā answered for all these questions.
This was the last part of this book, hopefully you enjoyed the reviews and learned something from it.
So, letās see what the COT Report tells us this week. Very important that the percentile factors will always show the long-positions of non-commercial speculators with the data from a week before. The net position of non-commercials is also shown compared to the data from a week before:
AUD: 65.80% vs. 68.83% previous. Net positions: 29 546 vs. 33 300 previous.
CAD: 62.83% vs. 64.03%. Net positions: 17 988 vs. 21 455. Large speculators are clearly more bearish.
CHF: 18.83% vs. 24.75%. Net positions: - 17 359 vs. -18 853.
GBP: 58.40% vs. 55.01%. Net positions: 18 799 vs. 12 121. I talked with rookie already about GBP and what happened in the last 3 days. However something got my attention, I am not sure if rookie said it. Regardless what happened in the last days net positions increased in the last week but price decreased at the same time. This is something important to observe.
NZD: 79.97% vs. 80.98%. Net positions: 13 429 vs. 14 500.
EUR: 22.51% vs. 23.07%. Net positions: -126 017 vs. -128 747.
JPY: 11.79% vs. 8.59%. Net positions: -81 097 vs. -95 399.
USD index: on cotbase.com non-speculators remain on an extreme long level.
Guys I need some help. There is a problem how I calculate net positions. It would be nice if someone could check the metal COT and calculate net positions. As I did non-commercials for this week, I got 22 035 for Silver and 116 427 for Gold. On the Oanda website I see 29 697 for Silver and 147 681 for Gold. This means they use different numbers of the report. I wait for your suggestions. I checked my data in currencies, they are exact. I guess the problem has to do that in commodities we have 4 categories and not three. But still where is the miscalculation?
Besides that, all comms. got weaker in my analysis. I think we discussed everything already and I posted my trading strategy for next week already yesterday. I got ready with the analysis before market open so we can start beating the market!
Regarding to fundamentals, does some know what was the outcome of the meeting of the 4 foreign Ministers today in Germany?
Good trading for everyone!
The shift by commercials on GBP is unexpected, seems to be a bullish sign.
There also seems to be a news blackout on the German meeting, not surprising given itās importance.
Hoping for an update in about 15mins, if anything I will post.
I would love to see the GBP become bullish, and join in the Major fight against the Comms. They sure do have much territory they can recoup.
Oh! I wanted to show you Peter (in case you havenāt noticed already) the chart of GBP/CAD. There has to be some kind of meaning to this. This is the daily chart, going back to the start of the year.
You can see that these guys have been ranging ever since the beginning of the year. And now, what do you think? Is it really gonna go below this major weekly support level? I will venture to say NO.
Peterā¦what do you think?
Mike
I like this setup! Only I do not know if NZD would not be a better candidate with its weakness. Unfortunately I looked the charts now and there is no such a clear level like in CAD. GBP/AUD is near to a strong support level at 1.7850. Maybe that might be a potential short-term trade too.
Now the forum is waiting for Peterās answer for confirmation
Good call FE!
Yeah, Iām going through the M/C charts now. And yep, you picked another good one. Iām gonna write that one down now also.
That 1.7954 level is major support level. Surely if it climbs up to that, Iām going in.
Guys, I do not trade the CAD, all I can say is that if you put me into a corner, beat the hell out of me for an answer whether I would buy or sell the CAD I would slowly point a finger here:
COMMODITIES-CRB hits lowest since Feb as oil, metals prices slump | Reuters
Then having done that and you all rush to the computers to sell I might whisper in a very low voice that out of the past 15 yrs had you bought the CAD on Aug 8 and exited on Sep 17 you would have won on 13 of those years.
When you all would then return, menacingly, I would again whisper -now is more important.
Ok. Thanks. Good article.
Sell CAD it is!
Just kidding.
And you say your not smart.
I understand. We just really donāt know until we see it unravel.
Mike
Back to the geo political risk, the news black out remains, itās really a guessing game - Iād say that the positive is that they havenāt fallen out with each other by this stage.
There was a famous Statesman from the UK who once said that to ājaw jaw is better that to war warā, so I am really hoping that those guys are still jaw jawing.
Update: I see GBP opened higher in Asiaā¦
Ukraine says its troops make breakthrough in rebel stronghold | Reuters
(Reuters) - Ukrainian forces have raised their national flag over a police station in the city of Luhansk which was for months under rebel control, Kiev said on Sunday, in what could be a breakthrough in Ukraineās efforts to crush pro-Moscow separatists.
The foreign ministers of Ukraine, Russia, France and Germany were meeting in Berlin and German Foreign Minister Frank-Walter Steinmeier said talks would focus on how to achieve a ceasefire and prevent weapons and fighters crossing into eastern Ukraine.
āThe news from today shows that we are far from an end to the conflict. People are still dying. We have no ceasefire. We are far away from a political solution,ā Steinmeier said before the meeting.
The four-month-old conflict in Ukraineās Russian-speaking east has reached a critical phase, with Kiev and Western governments watching nervously to see if Russia will intervene in support of the increasingly besieged rebels.
On Saturday, Alexander Zakharchenko, prime minister of the self-proclaimed Donetsk Peopleās Republic, said rebels were in the process of receiving some 150 armoured vehicles, including 30 tanks, and 1,200 fighters trained in Russia. He said they planned to launch a major counter-offensive.
Ukrainian officials have painted a picture of a separatist force that is on the run and starting to panic - though rebel fighters Reuters reporters have spoken to in Donetsk say they are determined to stand firm.
Not sure what how the meeting went. But reading recent developments in Ukraine sure doesnāt seem like its going to ease anytime soon.