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Recent Performance
Otherwise, this is the Guru View Part III:
On 9/20 Commercial Net Positions (from one week ago to Friday):
DJ Index Composite: -1,950 to -1,182
NASDAQ 100: 25,684 to 25,426
Russell 2000 9,224 to 8,749
S&P500 – Day session: 6,801 to 787
** After the FED cut rates by 50-basis points, all of the major indexes rallied & closed above their key levels of resistance, which are now support.
The COT charts of the major indexes remain unchanged for the most part, excluding that of the S&P 500. There is some evidence of commercial selling over the last two weeks. If net-commercial position continues to decline at its current pace the SPX COT chart will start to look bearish.
** The VIX continues to break down in price, right after net- commercial position plummeted from over 12 000 contracts to their current level at around 1 000. Currently, the VIX looks overextended to the downside, so I would expect a bearish-correction (small-rally) or some further consolidation at the current levels: around 19-20.
** While the price-chart for GOLD is similar to the of oil's, their respective COT charts are totally opposite. As gold and oil both put in impressive rallies, net-commercial position for gold declined rapidly, while for oil - on a relative basis - it barely decreased. So for Gold, the price chart remains bullish - the TREND is clearly up with support at 700 & 730 - while the COT setup is bearish. Does this mean gold will correct next week? Not necessarily, but what it does tell me is that with the current COT setup this market vulnerable to a breakdown / correction.
** Crude oil continues to soar as it sets multi-decade highs: now priced right around $82/barrel. One might argue that we are overbought and a correction is imminent...and that may be true to some extent, however the trend remains clearly up, especially as long as we HOLD above previous levels of resistance, now support at 78-79. Moreover, notice how on the COT chart, there is very LIMITED commercial selling. Look at how bearish commercials were when oil was in the mid to high 70s. And now commercials are LESS bearish on the market when oil is trading above 80? This looks very bullish.
Sunday, September 23, 2007
Guru View 3
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4 comments:
Hi Swimmer,
I'm back from vacation. Nice article, it shows how to interpret the COT charts. BTW I've read on some pages that open interest is prefered over net long/shorts, is this true?.
Best.
Hi semsons, welcome back. Hope you had a good vacation, we missed you. To answer your question, yes or no. In a sense, COT charts are not something new, people have written books about it and professionals trade on it for many years now. But for small investors, we have never heard about it that much. It's Swimmer's hope that we can introduce to our friends here and we can make good use of it and make a lot of money.
Now, in Swimmer's opinion, both the long/shorts position and open interests are important. Just like any tool, in order to make good use of it, you need a lot of experience watching it for a while in order to know the behavior of the big players. Generally speaking, Commercial can use it as a leverage to make money, or use it as a hedge, so open interest and position play different rule in different situation.
Fortunately, Swimmer has a programm using neural network to figure out when and which factor is important so we can get it right most of time. Nobody can read the genius mind right 100% of time, if you can you turn yourself into a genius instantly. Does that make sense to you?
Have fun,
Swimmer
So, you mean it's possible and necessary to distinguish between Commercials hedging and Commercials making money?.
Thanks.
Yes, you are right.
Swimmer
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