COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
621

Good morning guys!

Well, as I’ve been watching the charts since the beginning of London session we have the Comms turning the tide. I think it did start sometime in Asia, but taking off much more around 1 to 2 hrs after London began. AUD is taking the lead in the Comm camp. I made some pips from AUD long against USD, CHF, GBP, JPY. That all was from Asia session through 2 hrs into London. Man…I was watching very intently, seeing 50 pips in positive, then after very very close to cashing out I decided to hang in there longer. So, I put away the dishes from the dish washer, and next thing I know I see it (total pips) jump up to around 90 pips positive. So, I cashed out with that. “phew!!”

(that’s my story for the day)

Now, I’m not in the market anymore. Gonna wait for another opportunity. We have USD gonna do some rocking in a few hrs from now. Man, if it comes out with not so good news, look out for the AUD!

Good luck guys!

I’ll be in touch.

Mike

622

Hi Mike,

wow you made some fast pips there! You were a brave one going vs. USD. May I ask how you have chosen your countercurrencies? Why didn’t you choose EUR or NZD, the weak ones (in my opinion). On what decision did you enter the trades? Anaway, as they made so fast profit, they were the right decision!

Keep up the good work and do not forget the big picture!

623

Hey FE.

Yeah last night just after I gave the report (00GMT, start of Tuesday, Asia session start) I got to thinking of what I just said at the end of my report about the Comms gonna come back. And it might be at the beginning of an Asian session, then right before I was gonna close my computer all down I looked at the AUD. They were on the up against all. So, I went in on them. Good point about against who, weakest? Well, my decisions were based on how it looked on the charts. USD, because it was going up for a correction from yesterday, (4hr chart),also because it was a Major, and also because it was the Asian’s in session. Actually I wanted to go against the Majors, and all of them are, and not against a Comm. Why not EUR you ask? Hmmm. I’m just afraid of them around Asia and towards London.
I’m sorry. That was just my thinking. I’m sure I got lucky.

That does lead me to want to talk about another sentimental thinking.
I’m gonna write this up next. (few minutes from now)

Mike

624

Yes I do remember the conversation and will be more cautious with CHF as you suggested. This what I like about this thread is that we are always looking at how to improve each other’s ideas. Thanks for that.
It will be interesting nonetheless to see what the commercials will do with all their CHF.

625

Ok guys.
How about this.
Market sentiment and market dynamics. Same thing? Similar? Correlation.
Maybe I’m just gonna be preaching to the choir here. But I think it’s an important aspect.

It only makes sense to know who is up at bat. We know when the banks (players) are open for business things get rocking. Like when their equity markets are rolling. There’s some kind of affect one market has on the others. I can’t tell you how many times when I wake up (it’s at the end of Asian session) that I’ll see AUD and NZD just take names. They rock it MOST of the time then. Then when london wakes up I’ll see EUR, GBP mostly make moves. And we all know then USD wakes up and starts playing the USD will go one way or the other. Also we see the analysts make the correlation like “Asia has continued where USD has left off”. Or “USA has taken a clue from Asia”. I think it’s a market dynamic. Seeing who’s up at bat has a big effect on who’s likely to move. I know Peter does that sort of thing. He sees the high and low of Asia and goes from there on his trading, when London kicks off.

Look, this has always been on my mind when I think about who’s moving the market. And I think it has some merit. Maybe you all know this, and I’m sorry for making such a point about it. But when I placed those trades before I went to bed last night thinking Asia will bring back the Comms when their up at bat, I was right. And the other part was them gonna take out the Majors. That seemed to be correct also.
Believe me that’s not ALWAYS the case. Like I was tending to believe also that when US arrives that the NZD and AUD will, most of the time, dive. But I’ve seen them take off even more then also.

So talk to me. Do you guys believe this is called market dynamics? Is this important?
What about strong vs. weak? I kind of believe it SOMETIMES doesn’t follow. Because if Asia wants their players up, they will go up. If USD wants Majors up, their going up. I think each equity market also has a lateral effect on the currency market also, in some shape or form.

But maybe all in all if there is strength, in the long term that will follow. Maybe all the nonsense I just gave you has to do with shorter term trading.

Talk to me guys.

Mike

626

Hi Mike,

I think [I]peterma[/I] has the most to do with market correlations, [I]Philip[/I] with gold, [I]rookie[/I] looks sometimes oil, I don’t do much, maybe a bit 10years bond. I do not have that much of an experience. On that one I cannot help.

The same goes relationship between the different sessions. I like the point there but honostly, I do not give suggestions where I have no idea. I only heard one tip from a guy called [I]peterma[/I], where to enter GBP/USD in London session based on the Asian session action. I liked that. Basically that is all what I know (besides the obvious thing that the “own currency” is mostly traded in the “own session”).

As I told you, I am quite simple in many things. I can say that you raise many great questions which I like to learn long-term but I want to concentrate on things that I can manage. I believe in COT and I do learn COT. Until I know that one I do not do other things. I do some extra work/day to get a better knowledge, about 15% my time I make to develop special skills like reading other threads here. I like to pick up new information and methods but I do not forget what is the most important.

It does not mean I am not open. I like peterma’s posts because he gives us tips what I can make profit right away. These are very practical tips and I always write them down.

I agree [I]Philip[/I], I like the thread for the same reason.

Guys, look at the charts what AUD strength is at the moment vs. CAD, EUR, CHF and NZD! I am deciding at this moment if I should get a new Audi or BMW :slight_smile: Hey just joking. (I might pay a dinner from it though.) I know 1.5 days do not mean anything. Still it is always a better feeling when it goes the right direction.

Oh, and [I]Mike[/I] do not explain the reasons long why you won! Really! I just wanted to know basic information how you chose the pairs. But not a confirmation! As I always say (because I really like this forex saying): “It does not matter if you are right or wrong. What matters if you won or lost.” And we all lose, we make mistakes and it is normal in this business. But when you win, then enjoy it! It belongs also to this business. If you are always sad about losing then you will get depressed. You woke up made +90 pips and that is great. Have a great day and make tomorrow another +90 pips. If you have to choose between getting confirmed by me and lose or going against my bias to win then which one do you choose? I hope the second option. I was just interested why you left out the to currencies which I find the weakest. Before the trade it is the time to discuss which direction it goes, what are the probabilities and how we see it. After the trade is closed you cannot change it anymore, just have to accept it.

See you guys.

627

Hi guys,

important question as we discuss the strategies in the weekend but I do see a possible good trade opportunity out there! Read first: London Session Recap - Aug. 26, 2014

Now we see CAD and AUD are gaining strength. So with strong USD bias the question is what is the best time to fade these moves? I am searching to find that entry point.

But an easier and less riskier question seems to be when to enter NZD/USD short? Pip Diddy argues that commdolls are strong but as we see the good comdoll strength with AUD and CAD is only enough to keep the Kiwi on its current level! Guys, what is a weak sentiment indicator when not this? I do not like to take very sudden decisions, I won’t be at my computer for a couple of hours but I will think about it until night.

Even if not entering [B]AUD/USD short[/B] and [B]USD/CAD long[/B] but [B]NZD/USD short[/B] seems to be just to good risk/reward to miss out! After such a report from NZD today, I doubt that they can hold on to the current levels long.

Opinion? For it, against it?

628

I will give you more than opinion, I’ll give you my money. My money has been has been on USDCAD since yesterday (added one more today). I shorted NZDUSD this morning as well and I longed both AUDNZD and AUDJPY.

I’m already in these. May be you want to long USDCAD before the US session, but you never know.

629

Hi Philip,

thanks for the fast answer. I find it at this moment still too early. My technicals do not say it time yet. But it seems like we have the same thoughts: AUD and USD are strong. I might think about keeping away from AUD/USD short as they are both strong, I also see that is the only one you did not enter. Nothing can be sure in forex but the setups do seem good to me. The only reason at this moment to beat USD if there would be a surprise positive result on the Putin-Poroshenko meeting. However that does not seem like that, so most likely risk off sentiment stays on the markets.

Then lets change soon the direction of these currency pairs :slight_smile:

Good luck to us!

630

Adam Button has been talking about the possibility of a consolidation and pullback this week and may be next, before the “real bull dollar market” starts.
He also said that the revision of last month’s core durables from 0.5 to 1.2% and a higher than expected readings on the consumer confidence, should mean a [B]higher[/B] than expected reading on the US GDP revision. Make of that what you will. I have already probably entered all the trades I want to enter for weeks to come. I only want to short gold soon and that will be it for me.

631

Hey guys.

I hear ya both. I’m waiting for the turn for the USD myself. Keep watching the 4hr charts. Don’t see anything happening up to this point. But FE…good question. When is the USD gonna turn and burn.

(hope for me it will be at the end of US session)

Mike

632

I know I talk to him a lot, but he is someone that helps give me a perspective on the market.
This post by Button could have been written specifically for our thread. I’m in the trade he mentioned as you all know.

633

Hey FE…
I think you should get an Audi. That’s what I do. Fix them, and only them.
Good car.
I’m not a car guy, (I hate cars actually), but for the last 17 yrs I got good at figuring out problems.

634

The thing I find interesting is that the USD has shown strength since the open of the 19th. (USDX)

Likewise the commodities have been rising from the same date (CRB Index)

Usually this causes the US Dollar to drop back, but no sign yet.

One other thing I was thinking about, this Friday at London close we have the month-end fix.

Here is last month’s analysis:
Month-End FX Rebalancing May Reflect July’s Price Action: Lackluster

Here is a good article on Month ends:
http://www.mta.org/eweb/docs/pdfs/10-apr-tamag/tamag-intraday.pdf

635

Ok guys. Here goes Tuesday.
INTERESTING.

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

Comms did it today. +15. And just flip back some pages and we’ll see that yesterday the Majors took it with +15 also. So, we have a complete turn around. (I think I might have said that would happen)

Majors vs. Comms

AUD: +5 -0 0
CAD: +5 -0 0
NZD: +5 -0 0
USD: +0 -3 0
JPY: +0 -3 0
CHF: +0 -3 0
EUR: +0 -3 0
GBP: +0 -3 0

You guys can see how it comes out to be a +15.

Notes:
Completely along party lines. Opposite of yesterday. IT IS MAJORS VS. COMMS, THIS WEEK SO FAR.

AUD and CAD down against no one. NZD down only against own team mate CAD.
USD and JPY up against the rest of the majors. And they tied each other.
CHF, EUR, GBP up against no one, down against all other players.

So, guys, now what. We had the Majors dominate on Monday. Comms dominate Tuesday.
I have to say that Peter, [B]GOD BLESS YOU[/B] really hit it on the head. The end of this week will be a doozy. Throw out all trend things, price action, fundamentals, etc…Cause not only is it end of the week but end of month balancing of the books. I so remember last month, I took a big hit and realized it just too late!
We should talk about that soon, by Friday anyway.

Ok guys. Got to run.

Mike

PS…I’m still not in any trades. I guess I’m waiting with you guys about USD taking control of things. Not looking like it yet.

636

Talking about reversal. Here’s an article that I just came across have a look guys. In case if you haven’t got a time to read it through here’s a brief summary.

Global dairy auction price declined 8.4% in August 5 and on its latest auction the dairy prices were down by 0.8%. And its heavy reliance on dairy product exports, which comprise roughly 30% of the country’s total trade activity have already started having a negative effect in its recent trade balance data.

The July report showed a deficit of 692 million NZD, larger than the estimated 475 million NZD shortfall. To make matters worse, the June figure was revised lower from a surplus of 247 million NZD to 242 million NZD

Expectations of further price declines could lead to even weaker demand for dairy products, as buyers hold back on purchases in anticipation of cheaper prices later on.

With that, many are expecting to see a few more months of trade deficits for New Zealand before dairy exports start picking up. --> [B]meanwhile we can ride down on NZD by following specs move but while keeping an eye on commercials at the same time. [/B]

With dairy prices and shipments not expected to rebound until the end of year, the outlook for the New Zealand economy and the Kiwi isn’t as rosy as it used to be.

Read more: Trouble in New Zealand’s Export Industry?

We need to monitor commercials move closely on EUR, (CHF, JPY) especially NZD in few months we might spot an opportuity to long these on bargain price to ride them up long term. Thanks to you Philip! I get it now!

However I still remember you saying commercials net position can show a long extreme couple of months straight before they actually start selling off. Makes sense. They’re waiting for a rally to sell high. When specs get on longs driving the trend curve up. Thinking they’ve caught the bottom. Commercials already knew price couldn’t drop any further it already has. Interesting. I’m excited to follow the commercials guys…

637

But new Zealand was down against the US yesterday

638

Jan. – Major (26)
--------Major (10)
--------Major (18)
--------EVEN
Feb. --Comm (49)
--------Major (4)
--------Major (20)
--------Major (12)
Mar. --Comm (29)
--------Major (10)
--------Comm (24)
--------Comm (43)
Apr. --Comm (4)
--------Major (12)
--------Major (8)
--------Major (7)
--------Comm (9)
May. --Comm (24)
--------Comm (17)
--------Major (2)
--------Comm (5)
June. -Major (6)
--------Comm (36)
--------Comm (3)
--------Comm (16)
July. --Major (5)
--------Comm (8)
--------Comm (2)
--------Major (15)
--------Major (20)
Aug. --Major (6)
--------Comm (18)
--------Comm (23) (last week)

If there’s a pattern to this, it must the 3s. I’m going through the most recent posts one more time. We’ve covered a lot of stuff guys. Great info. I must have missed the most crucial info thats brought up Mike - the 3’s.

That got me thinking if it goes by 3s it sure seems to be if we look at your stats from the beginning of the year. We pretty much can conclude this week goes to the Comms ?

So in the commdolls camp we’ve got AUD thats bullish the strongest commdoll I must add. I’m in with AUDUSD short. It’s been a battle between the two. I’m crossing my fingers for thurdays data releases. NZD on the other hand has fallen a lot to most. And now I think its about time for some correction. And news like this is sure helping out kiwi to make some gains. I’m not sure about CAD, haven’t been following for a while. Enough justifcation that this week will be comms ? We’ll see. AUD is bullish. NZD is up for a correction. Could be.

“New Zealand’s Fonterra Keeps Farmer Payout Forecast Unchanged”

" Fonterra’s chairman John Wilson said, “Current market views supported by our own forecasting indicate commodity prices improving later this year or in early 2015, with global demand for dairy continuing to grow year on year.”

But I believe its temporary. Just a correction. It indeed might give us an opportunity to get back in short at the end of the correction and beginning of trend continuation. However going long NZD I wouldn’t recommend not that I’m saying you guys will long NZD unless you employ counter trend trading strategy. I guess my point is even if lets say comms take this week with 3s and majors only with 1 shouldn’t mean we should go long on the most obvious weak ones as well in this case NZD. We need to have a filter. AUD for instance proves itself that its bullish from every perspective - COT specs report, fundamentally their economy is not as bad as NZD and etc - things that we all know. I just wanted to highlight this.

One last thing if you read my earlier post on NZD , while they may produce trade deficits for following few months. Things are expected to pick up earlier next year. Well looks like Fonterra’s chairman had done a similiar forecast. Thus they’re not making any changes to farmers payout forecast.

That brings me back to my point again we should be looking out opportunities to long NZD in couple of months time guys by following commercials move. As specs tend to hold on to their position during reversals. Buy low sell high. Im just proposing this. An idea. By all no means I’m forcing on you guys to long NZD. I’ve been reading what Philip has been doing by following commercials move. And I’m excited to learn. I’ve been thinking about incorporating commercials into my trading. Commercials and specs. two seperate trading methods/strategy. One short term - hold max about a week or so. The other long term - buy low sell high by following commercials. FE you’ve already posted your opinion regards to that. If you’ve got more to add I’m here :D.

If NZD is to pick up by the end of this year or earlier next year does it mean AUD and CAD will get stronger as well as they seem to move together.

Mike’s been saying that USD rally might continue until the end of this year , GBP was leading prior. I’m with him by the way. If we look at majors there isn’t anyone that could take the lead once USD rally dies down probably the end of this year. It’s getting interesting guys… Let’s see!

639

Good news on the risk front in that Russia/Ukraine leaders have had agreement and worthwhile discussion.

Many thought they wouldn’t even meet, the sense of the meeting is positive.

There are a number of market participants who are warning of a USD squeeze ahead, (i.e. squeeze out USD longs) it is possible that geo political risk could be a catalyst for such a squeeze, regardless of the apportioned reason, I have often found that if the banks decide to move price they’ll do it anyway.

640

That isn’t a good news for my AUDUSD short. AUD being resilliant already even against USD the strongest of all. Now we’ve got this. I’ll keep it going and see what happens. Thanks for bringing that into our attention Peterma!

I noticed in terms of risk aversion we only cover conflict in Ukraine. But how about Gaza and Iraq conflict ? Does it not have an effect on market as Ukraine conflict ?

I quickly went through two articles on month end fix haven’t done reading it carefully just yet. You’ve got much insight Peterma! that brings me to conclusion about my two open trades currently in loss AUDUSD short , EURUSD short. I better be prepared. Haven’t encountered this in my short trading journey. However it may turn out, I’m sure its going to be a great lesson - an experience. So now all my hope is for a positive GDP and employment data from US :51:. Are you in any USD long trades [B]Philip[/B] and [B]FE[/B]? I know Mike isn’t he’s watching out the market USD movement closely.

Though I haven’t read the whole article carefully. I will stay away from USD for now until the first week of next month. We’ll see what happens.