I went long crude oil this morning and closed down my gold position, in accordance with my signals based on the Commitments of Traders data. Here's what the latest COT report has to say about the markets: - S&P 500: The "smart money" commercial traders are a little less bullish this week, as you can see on my latest signals table. But my trading setup for the S&P 500 remains long. The change in commercial positioning is so small it has no effect on my signal. As well, week-to-week fluctuations in the S&P 500 COT data have virtually no correlation with index prices. You'll also note from that table that the wrong-way small trader crowd has gotten a bit less bearish. If those trends both continue, eventually the signal will flip to bearish. But we're nowhere near that point yet.
- U.S. banks: My trading setup for the BKX U.S. Bank Index (based on the three-month Eurodollar COT data) is in cash again this week. The COT data has been flipping around like a fish in a pail recently. The large speculator total open interest has been particularly volatile. This data has a strong 63-percent correlation with the BKX the following week. Its signal has gone from bullish to bearish and now back to bullish in the past three weeks. The latest COT report shows the large spec and small trader total open interest rebounding in relation to past data, so that is a bullish portent - though the move isn't decisive enough to be a trading signal for me by itself. - Gold: My setup for gold goes to cash on this week's open. That's because the large spec total open interest, which I fade in this market, got excessively bullish in mid-January. That caused a bearish signal for two weeks, and with a seven-week trade delay, it took effect this week. The overall setup is in cash because the other signal that makes it up - based on the large spec net position as a percentage of the total open interest- is still bullish. If that remains so, in two weeks the setup will go back to bullish. Also of interest: The large spec total open interest, which has a nice 77-percent correlation with next week's gold price, has shot up this past week. - Natural gas: My natural gas setup remains in cash, but Friday's data looks quite sunny. The small traders and large specs have both upped their total open interest in a major way. Both sets of data correlate strongly with gas prices the ensuing week. It's still not enough to give my setup a bullish signal, but it could suggest the rout in gas is almost over. Good luck this week! My portfolio page is now updated with results of my closed gold trade and open positions. TAGS: SPX, S&P 500, gold, BKX, Bank Index, natural gas, Nikkei, crude oil, Treasury, bond, COT, Commitments of Traders,derivatives, Black Swans, market timing, trading system development, CFTC, Commodity Futures Trading Commission,COTs Timer, out-of-sample testing, walk-around testing