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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.
Jan 27, 2008
- We're not out of the woods yet, my friends. Are we bear lunch? I dunno. But I can tell you this: this afternoon's Commitments of Traders report ain't very promising for you bulls out there...
See my Latest Signals pagefor all the grim details. My COTs U.S. Composite Equity Index is flat from last week: -0.9964 this week, up a teeny-tiny baby-step from -1.0001. This is based on the readings from my trading setups built on the COTs data for the NASDAQ 100, S&P 500, Dow Jones industrials and Russell 2000. A -1 reading for the index means all four setups have just flashed a sell for execution on next week's open of trading. So even though I'm not convinced we're bear catnip yet, the market might not be ready to bounce, either. (For you newbies, see the explanatory links on the right for more info on how all this works.)
My COTs Agriculture Composite Index (based on my setups for sugar, wheat, soybeans and corn) is also a real downer these days, but bouncing a little better. It's up to a -1.62 from last week's near-record -2.13. Don't know how heartening that is, but hey, it is what it is.
But not all commodities are busted up. My HUI Gold Bugs Index setup is giving a second renewed bullish call, based on the "dumb money" small traders sharply cutting their net long position as a percentage of the total open interest. In silver, the large speculators (also the dumb money) are building up their net long position to somewhat excessively bullish levels, but so far so good; they haven't reached the historic extremes I'm looking for in order to flip me to bearish silver.
The other interesting area is crude oil. The wrong-way large specs have dramatically reduced their net long futures and options position in the past two weeks as crude has corrected. It's given me another renewed bullish signal for crude, one of the better setups I've seen so far in the COTs data, if the past results on that table mean anything.
Of course, it's impossible to say how all these setups will perform in future. We can only guess based on various statistical measures of their robustness. That's really true for all trading systems, whether mechanical or discretionary. Incidentally, if you read something about historic market patterns but there's no mention of backtesting and tests for robustness at all, be skeptical. And that covers a lot of pretty well-known analysts out there!
Speaking of all this, I plan to include some new measures on that table soon that will let you compare them with other kinds of setups being traded out there. I have to say the COTs stand up really well. See you back here early next week with some more details on today's report. Have a good weekend!
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.
