COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
824

Impressive work Mike! Though its a history lots of good info! I need to copy and paste that data onto my laptop.

FE! glad to see you responding back to us… I agree with your view on CAD, I don’t think I want to trade CAD at all but maybe against USD. Still CAD looks tricky I mean speaking from specs positioning what we follow.

I haven’t gone through my charts yet as my broker is doing maintainence I should be able to though by tonight, I want to long AUD against EUR definitely and maybe NZD. I’m still with USD rally guys as I assume Fed might be the first to raise rates… /I still root for your idea Mike! to go for the underdogs! but you’ve got to be careful about that, following commercials move closely might give you some clue though just an idea I’ll see how it develops if you’re thinking of going that way/ honestly speaking I’m quite happy about last weeks NFP data , we’ve got a better price to ride dollar up I think. I was reading an article on bloomberg and for some of you whos been following labour data besides the main headline NFP everything else came out positive. Some even suggested significant amount of people retiring slowdown in hiring to dissapointing figures. They presumably think US is well on the way to recovery and the rate hike should be sooner than later. Now its only a question of how much should you raise the interest rate. And only a month of bad reading shouldn’t mean much… I’ve summarized what I read guys on bad NFP data. I was happy to see bad numbers but I was concerned if that also meant end of rally for dollar so I did some reading on the subject. Well in conclusion for now USD no doubt is the strongest economy of all AUD maybe close at second.

I’m thinking of going long on USD against EUR, JPY and NZD.

825

Good questions FE!

As for CRB index what I showed you guys was fridays open, close and daily range - change. I don’t follow CRB index on a daily basis so I’m not sure if it was up or down on thurdays or other days besides friday. That may be one reason, the second reason why it was down on friday could be due to geopolitical risk, tension rising in Ukraine. NATO summit was held from thurdays to friday I saw it briefly on the news and later read more on bloomberg that NATO leaders have agreed to provide military support to Ukraine and proposed further sanctions against Russia, if Putin persists and don’t pull the troops out of Ukraine which he repeatedly keeps denying. Thats probably why CRB index was down on friday. Peterma might have a better explanation to this.

As for open interest, I really have no idea. Should we be cautious on EUR because of it? I don’t know.

826

So here’s what I’m planning to do next week. I looked at 4H charts and narrowed them down to following pairs. Strong v weak.

  1. NZDUSD short /there’s rate decision and statement on thursday on NZD I’m not expecting much from them. I think they’ll keep the rates as it is/
  2. USDJPY long /Japan is in two decades long deflation just as I read yesterday I didnt know about that! :34: and in deep public debt and is taking all necessary measures. Tax hike is a way to cover public debt I suppose and they’re planning on yet another tax hike but next hike will accompany stimulus package to prevent contraction. They’re still aiming for economic growth in this condition - its going to be a tough battle. Job market is dissapointing with more part time workers than full time employment/
  3. AUDNZD long /There’s going be China PMI coming out next week, I’ll take that as a guide update: it was CPI/
  4. AUDJPY long - maybe
827

Latest headlines on Ukraine/Russia conflict

Just a day after Ukraine and Russia signed on a ceasefire agreement numerous explosions were heard on the outskirts of the key southeastern Ukrainian port city of Mariupol on 6th of Sept yesterday.

828

No you are absolutely right, its a typing mistake on my part. I was doing technical analysis with RSI and probably was thinking about it when I typed that. So good thing you corrected me and I’ll edit it as well. Luckily it has no bearing on the analysis so I didn’t have to edit a lot :slight_smile:
I also like your indirect analysis that we could be seeing signs of a bear market in the bearish pairs :wink:
I agree with you fundamentally, but I would reserve judgment on that since COT Index is made for trading on the weekly chart. JPY in particular has been in an extreme for a few weeks only.
Regarding the look back period, Williams said that the best period is at least 3 years. I use six years (the start of the economic crisis). The extreme level readings should remain the same though.
I will keep you posted on whether the seasonal trend worked for the three pairs I mentioned. For the record this is a 14-year seasonal trend.

Update: YouGov survey says supporters of Scottish independence have become the majority for the first time, winning the latest poll by 51%. It looks like GBP trades could be wealth makers or bank breakers this week.

829

Looks like pound is headed for a downturn. We’ll see how market players react to that when market opens.

830

This thread is a great read - thanks to you all who are contributing to it.

831

Hey guys!

Here we go with the analysis’.
First I want to say, Philip, that was such a good post! Man do I love line ups. And you have them showing. Good job on your report!! I’m very excited about your seasonal sentiments also. That was just awesome man.
And once again Rookie and FE bring the good stuff again. I absolutely love reading your guys stuff every weekend!

So here goes my stuff.
First off I ended up with +10.8% on my account. That was at the very beginning of the week, one day in.
I’m happy. And I’m up to 61% of my monthly goal. So, I got time to get the rest before months end.
So now I’m going to show you my 21 trades I’m gonna place this week. …:18: JK

This is what I’m looking at this week.
Technically, look at these 3. (Rookie, was thinking about you on 2 of them)
This is EUR/JPY daily chart.

2014-09-07_0437.jpg700×315 21.3 KB

I remember losing on this a couple weeks ago thinking the trend will continue (Rookie remember?).
Now it seems like the time. Although I would want to see price action climb back up to 136.41 (the blue line) and then continue on back down for the trend (a.k.a. retest). Also couple with that scenario I want to see JPY get strong. And guess what…tonight (the beginning of the week in Asia) the JPY will have that opportunity with some big news coming out to start off the week. If it’s good, I’m thinking of stepping in. I just want to be in the positive. Would hate to see price go above that level.

This other one is similar.
CHF/JPY daily chart.

2014-09-07_0445.jpg700×314 24.5 KB


The beginning of the week brings some news from both CHF and JPY. If things all line up, this is one I want to go in on also. And that is short with this. Also meaning I would want to see some strength from the JPY and weakness from CHF. This is short term trading also. I just want to grab some pips and get out. Like 20-30 pips.

This is EUR/NZD. First this is weekly chart.

2014-09-07_0431.jpg700×314 26.1 KB


As it stands now (1.5525) there’s 64 pips to go down to the major level (1.5461). I’m just looking to find some pips down to that level.
This is the daily chart.
2014-09-07_0432.jpg700×314 28.7 KB


So, I think there’s an opportunity here in this area.

Now I want to talk about the GBP. IF they find some strength, this is what I think are the best opportunities.
Also I want to point out that this week has some really important news coming out. Tuesday and Wednesday.
This week just could be a turn around for the pound. If it happens for a climb, I’m looking at these.
GBP/JPY —goal would be 173.57. But I wouldn’t get in until it reaches 172.70 first. So…172.70 up to 173.57. I want to play in that area.
GBP/NZD —1.9672 up to the goal of 1.9837. But of course that starting point is 93 pips away from where it’s at now.
GBP/CHF —1.5286 up to the goal of 1.5413 . And that starting point is 93 pips away from where it’s at now also. And I’m just looking at the S & R levels on the charts.
GBP/CAD —From 1.8000 up to 1.8170. That starting point is 251 pips from where it’s at now. It’s a good ways to go, but I just am thinking if the pound gets back on track with strength this is my plan.

Look guys…the USD needs some help, in regards to the Major team. Their isn’t any other player that has the potential to bring them up like the pound. And if it won’t happen with the pound, then I guess the Comms are just going to continue to put a beating on the Majors.

I’m also contemplating just putting all those GBP limit orders in and see if it they take. I am confident IF the pound gets strong, all those levels will be accomplished. I read somewhere that it is very smart to plan out your trades. (yeah FE!!) I think you wrote that up a little while ago. It was from a book that you expounded upon. That stuck with me. THANK YOU.

Well that’s what I’m looking at this week.
What do you guys think?

Mike

832

Well I like your EURNZD trade, I’m already 44 pips in profit in it. We will see if the support level you marked will hold, I have it on my chart as well.
I would not place any buy limit GBP trades going into the independence vote, I’m one of them careful traders.

833

Bravo! on your 10% gain in just a day or two again Mike! Better be careful on selecting what trades you want to be in now. I think FE already has mentioned this earlier, we don’t want to give back what we’ve taken out back to the market.

We’ve done a lot to gain that but to lose it can be done in a matter of seconds/minutes - well goes a lot faster the way around isn’t it ? As long as you’re careful on selecting the right pairs /each to his own/ I think you can aim higher than 20% per month since we trade more pairs ? :wink: 20% is good enough though I assume you’re shooting for somewhere around 18% ?

As for your setups Mike, although you mentioned you’re just going for 20 or 30 pips I think its good to stay away from pairs that has neutral bias or pairing weak v weak though there’s still a chance 50/50 I would say to win the trade. I don’t recommend going long on yen , we’ve just had the data released for yen it all came out bad and QoQ GDP was the worst contraction up to date since 2009. There’s going to be BoJ minutes tomorrow - prior data release I was thinking if BoJ will proceed with second tax hike but now looking at bad data I doubt they will go ahead - if they do even with stimulus package I’m expecting yen to plunge even further against USD. Yen might gain due to risk off sentiment - which likely will be temporary. Yen just don’t have the grounds to stand on the gain however it was obtained as long as their economy is in bad shape.

I agree with Philip Mike, I would be cautious on pound until Scotland independence vote clears out of the way. Im assuming specs are being cautious on pound as well and I’m expecting that bias unchanged for a while regardsless of upcoming economic indicators.

Oevrall, its an interesting setups. You’re doing things a little different than before I could see that. I remember the EURJPY trade, I think I was in with them as well and got stopped out.

Good trading everyone!

I’m in with all of my mentioned setups - trades. Kiwi is quite strong during asian session regardless of my strong bias that they will move down. They all seem to be during their session. Most of the time. I remember Mike mentionining this in his earlier posts , I wonder what that is… some sort of transaction going on ?

834

Hi guys,

looking at the economic calendar, I guess this week will not be too have with news so I can catch up quickly with the markets.

Reading now through all the posts, I think I have to mostly react on Mike’s long analysis. First of all, Mike I told you last week I will remind you when you get in the markets again, quickly. You said you want to trade only a few setups in the remaining of the month, now I have seen at least 10 setups!

I would be very cautious with some of your setups thought. Just like Philip, I am also on hold with GBP, I closed two bad trades. I thought it will rise and instead of that what a gap for the opening. That looks too risky for me. On the other side I am also cautious with your EUR/JPY. Rookie and Philip did not mention their opinion on it, but I find this one Weak vs. Weak and I am not comfortable with it. DO NOT FORGET: it is just my opinion, you might make great pips with it! The other setup, CHF/JPY looks better. Although I still find Weak vs. Weak which I do not like, however as EUR/CHF is coming to the 1.20 level, we can expect some time that SNB steps up and do something against having too strong currency.

Just like Philip, I also have open setups, I concentrate now myself on these ones as I have two currencies I want to avoid (CAD and GBP) I also reduce the possibilities to trade. I watch out for CHF as a possible short-term opportunity to trade.

CORRECTION: I forgot to read the last post from rookie. I am pretty much on the same opinion and wrote here down some things he already discussed.

We have waited long to have higher volatility, still it might be better to wait a bit until we get a clear view in some currencies.

835

Hey FE.

Well up to this point I have not placed a trade. Yeah, I have set ups. Nothing pending. Just what I’ve wrote down to look for. And the more I see the Yen against EUR and CHF I am shying away from the trigger.

So…given that…This morning I have been keeping an eye on things. AND I JUST CAN’T STAND IT ANY LONGER! I placed a trade. The GBP/USD going south. (right before I went to work). I figure if they are continuing on down through the opening of London for the first few hours…and technically I see nothing stopping them to the earliest point of 1.6000…and given the US session approaching…given the strength of USD…and the weakness of the GBP…given the trend…I’m in. I placed a 20 pip stop loss and a 40 pip take profit. Well, it’s a little hairy going now. If it hits --------------well I just looked on my tablet-----I’m out. Took a 20 pip loss.

Hmmmm…OK…Well, I guess I won’t need to expound on that any further. Looks like GBP has been climbing too high now. (figures)

But anyway, those set ups were just what I was thinking. I wasn’t going to pull the trigger unless they were confirmed. Surely the pound has a long way to go for all those 4 to kick in. (some were around 100 pips)
And after seeing the Yen news I surely wasn’t going for those 2.

So, I’ll keep you guys posted WHEN I pull the trigger on any opportunities I see for a trade.
I just did. And it didn’t end well.

Glad to see you back FE.

Mike

836

Hi guys,

looking around the market and thinking what might be waiting for us, I made 4 limit buy orders, waiting to be triggered:

[B]AUD/CHF long
USD/CHF long
CAD/CHF long[/B]

and [B]Silver long at 18.80[/B]

Now the first three trade ideas are based on the principle that SNB will act soon and try to decrease the value of CHF. If it happens or not, I do not know but we are really getting closer to the 1.20 EUR/CHF handle; like I mentioned yesterday. All I have in mind is that if it happens then it can boost my setups and offer a great R/R ratio. I think the potential losses would be than what I can win on this one. And of course it can also happen that my trades do not get trigered at all.

Philip, you trade silver and gold sometimes. What do you think about the setup? It is purely based on technicals

You guys might ask why do I have an order out the with CAD when I said I try to stay away from it. Frankly, I decided to have three trades vs. CHF because of risk management. USD and AUD were my first choices and EUR, JPY and NZD came not into question. Now the problem was the CAD and GBP, the to currencies I want to stay away. In GBP is just see at this moment more uncertainty so I picked CAD.

Good luck and good week to everyone!

837

[I]I continue now the series here, I write here down my own thoughts about my second 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 too? 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]Pointers and Thoughts on Trading[/B]

A perfect system or approach does not exist. It never has, and never will. The closest thing to the truth of what moves the markets that I have found is the commercials.

The point I want to make is that life is a judgment call, but that call is based on having data and systems to make life work better. So it is with trading. I need a systematic approach to get me into and out of trades. I need absolute stops, and I sure as heck need precise entry rules.

If you do not know what to do as you are trading, you must follow the rules because they will keep you alive. If you like market conditions and they fit what your rules suggest, go for it. If the rules don’t fit conditions or conditions don’t fit the rules, pass. You don’t have to trade every day.

[I]Know when to hold’em, know when to fold’em[/I]
Jesse Livermore said it best: "It was never my thinking that did it for me, it was my sitting that made me big money. My sitting! Men who are right and can sit tight are uncommon."
There is a game plan for holding on to big trades, but following the game plan is hard because: 1. our natural tendency is to take small profits to pay off recent losses, 2. our fear of losing profits exceeds ou hope of holding on.

[B]The One-Minute Commodity Trader[/B] - Part I

Buy when the trend is up and the COT Index is in phase with the trend. When the commercials are heavy sellers in a downtrend new lows are most likely to follow.

[I]The trend is the basis of all profits.[/I]

[I]An object once set in motion tends to stay in motion.[/I]
Once a trend gets rolling it’s most likely to continue and is difficult to reverse, at least to quickly reverse, most of the time.

[I]The system to decide when to enter the market uses: [/I]

  • 52-week moving average
  • 6 months COT Index was above/under 80%/20%
  • when the commercials get bullish (bearish) in an uptrend (downtrend) the best of the best opportunities appear
  • once you get your charts set up it will certainly take less than one minute per week per chart to see if this setup exists. Usually it will not be there and you will flip to another chart. This pattern is not common. Just set up a moving average on your chart and the COT Index. Then every weekend scan through the list of actively traded issues to find the nuggets of gold are prospecting for.

[I]All you wanted to know about gold[/I]
Without doubt, more people follow the price of gold than any other commodity in the world, and with good reason.
While there are many factors that have some impact on this glittery metal, the ones that I have found to have the most impact are:
1. The USD relationship
2. The seasonal pattern
3. The commercials
4. Stock market crashes/depressions

Fundamental Lesson One: There is a relationship between the USD and gold
[I]to be continued[/I]

[I]Summary:[/I] the two chapters were very interesting. The first one did not have to do too much with the COT Report, more about stop losses and take take profits. It is a nice writing about trade psychology. The second chapter is very interesting how to use the COT report in practice with other indicator. I wrote down above the system rules. It looks very good and I think we also make our decisions based on COT with combining the fundamentals. Does someone have COT Index in the charting software? I already wanted to try this indicator earlier but I do not have it on any of my softwares. I like this 20%/80% value to use as a sentiment. I do think that we could use it to our advantage. Does someone has a link maybe with commercial COT Index charts?

838

Hey fellas.
Here comes Monday.

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

Majors took 'em. +8

Majors vs. Comms

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

Notes:
The Comms only 2 up days against the Majors was NZD against GBP and JPY.
EUR, NZD, CHF was only down against the USD. Even against each other.
GBP was up against JPY, AUD, CAD.

Hopefully someone made some pips off the USD today.
I want to hear some good stories from you all in the a.m.

Mike

839

I like the trade [B]FE[/B], I do not know how long you plan to hold it for or your stops or targets to fully evaluate the trade. Silver has a very high dollar to pip ratio so I hope your account can take it.

I do not understand how Larry Williams’ system work, so can you elaborate? I don’t have a COT Index chart, but I can construct one.

[B]Mike[/B] Well if you guys go back a few pages you’ll see my trading plan of going short AUDUSD @94 and long USDCAD @1.08262. That was last week or the week before. Well it fell almost by the pip on those levels last week and you see where we are today. I didn’t manage to take them at that point because of money management, I caught a bit of the move today but only to breakeven with a bad EURCAD trade I had.

My plan is to continue looking for shorts in EURAUD, EURNZD for this week. For the month I will look to see opportunities to buy GBPJPY, USDCAD and sell AUDUSD. This all depends on the Scotland independence and the Yellen speech we’ll have this month.

840

Hey Mike!

I went with NZDUSD short and USDJPY long yesterday and just this morning my TP has been hit total +197pips.

As I see from your stats AUD and CAD were down at the bottom and NZD in the middle as of yesterday very interesting.

Now I’ve got my AUDNZD long open two positions isn’t looking too good. But I’m confident in my bias that in the long term AUD will beat the kiwi.

I read something off of PWC NZ website and thought I’d share so apparently AUD The Aussie dollar, assisted by their sovereign AAA credit rating has been a major beneficiary of funds exiting the Euro over recent weeks. Could be another reason why specs are bullish on AUD.

Here’s for FE: One thing that I took from your trading approach and that I am truly very grateful for is to pair strong v weak always. Though its too early to conclude looking at my performance since last week of august until now I’m seeing a drastic change FE! Now I see how crucial it is to determine the bias and not only that to pair strong v weak. It just increases your probability to win the trade probably up to 80-20 win loss ratio could be more than that if nothing unexpected happens during the time you’re holding the trade. Once again thank you FE! I know there’s lots of opportunities out there to grab few pips here and there and everyone approaches trading in their own way. But still I thought I’d throw it out there, is it worth taking the risk for low probability trades ?

I like your setups by the way FE! I see you’re sticking with your principle to pair strong v weak. We’ll see if there’s going t obe any annoucement coming out of SNB soon.

841

Congrats, rookie! :44:

842

Great work Rookie :slight_smile:

843

Rookie!

Good job man!
You put a smile on my face.