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Alex Roslin is a leading Canadian investigative journalist and active trader based in Montreal. He has won a Canadian Association of Journalists award for investigative reporting and is a five-time nominee for investigative and writing prizes from the CAJ and the National Magazine Awards. He has worked on major investigations for Canada's premier investigative television program, the fifth estate, and the CBC's Disclosure program. His writing has appeared in the magazine Technical Analysis of Stocks and Commodities, the Financial Post, the Toronto Star and the Montreal Gazette. He regularly writes about investing for the Montreal Gazette.
May 17, 2008
- A couple of interesting new signals from my trading setups based on this afternoon's...
A couple of interesting new signals from my trading setups based on this afternoon's update on trader positioning from the U.S. Commodity Futures Trading Commission. After being profitably short the banks since May 5, my setup for the BKX Bank Index has now flipped back to bullish. This setup is based on trading on the same side as the large speculators in the three-month Eurodollars. (That's the interest rates, not the currency; it's basically a play based on global liquidity.) The setup is one of my favourites to trade and works with a one-week trade delay, which means I'm dumping my short position and going long on the open of Monday, May 26.
insert.a.chart.BKX
The other major new signal comes from my gold setup: bullish. This one also trades on the same side as the large speculators. (They're not always the dumb money, contrary to what many analysts say about these guys.) The setup works with a two-week delay, meaning I'll go long on the open of trading Monday, June 2. I should mention that this setup recently gave a bearish signal, which is supposed to be executed for the open of trading next week. I'm going to be sitting this one out due to my new risk-control rule. You can read more about that rule in this blog post and on my "How It Works" page. The bottom line of it is this: gold is highly correlated with five other commodities markets. Of those, four are presently on bullish signals. That means I ignore the gold bearish signal but would of course take the long gold signal on June 2, provided the majority of those six highly correlated markets is still bullish at that time.
A final note: commercial traders in U.S. dollar index futures, upon whom my setup for the greenback is based, have just flipped to a net short position as a percentage of the total open interest. This by itself isn't that relevant, but the "smart money" in this market also happens to be more short now in absolute terms than any time since Feb. 2007, just before the buck broke down from a long sideways range. The positioning is also more bearish now in relation to historical positioning than any time since early January 2008, just before the dollar saw its latest slide. My setup for the U.S. dollar has actually been bearish since Oct. 2006, so this doesn't change anything for that setup. But I think it's of interest in light of questions about whether the recent commodities rally is on its last legs. The data suggests a good chance it's not. Have a great weekend, especially to Canadians with Monday's holiday, and good luck next week.
Please note
that charts and commentary provided by the moderator are for educational
purposes only. Any trades placed upon reliance on the moderator’s
charts or information is taken at your own risk for your own account.
Past performance is no guarantee of future results. While there is great
potential for reward trading stocks, futures and options, there is also
substantial risk of loss and you must decide your own suitability to trade.
Future trading results can never be guaranteed. This is not an offer to
buy or sell stock, futures, options or commodity interests.
Most trading
systems are based on historical formulas which have worked in the past.
However, what has happened before may or may not happen again. You can
lose all your money trading stocks, futures, and options and you must
decide your own suitability as to whether or not to trade. Only trade
with true risk capital you can afford to lose. Only trade markets you
can properly afford to trade. Properly funded trading accounts typically
perform better than those that are not. Never risk more than 2-3% of your
account on any one trade. Always define your risk before entering a trade
and place a stop to limit your risk.
There are
no guarantees or certainties in trading. Trading involves hard work, risk,
discipline and the ability to follow rules and trade through any tough
periods during a system’s draw downs. If you are looking for a guarantee,
trading is probably not for you. Most people lose money trading. One of
the reasons is that they lack discipline and are unable to be consistent.
A system can help you become consistent. Ironically, worrying about the
monetary aspect of trading can contribute to and cause a trader to make
trading errors. Therefore, it is important to only trade with true risk
capital.
