COT reversal

Discussion in 'Trading' started by seaker, Mar 29, 2010.

  1. seaker


    This chart shows a reversal of large and small traders from net long to net short. Any views on how to interpet this change? I wonder if it could be a sign of the rally topping out.

    <table style="width:auto;"><tr><td><a href=""><img src="" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="">Charts</a></td></tr></table>
  2. How does it backtest?
  3. Everything I have read, except one, says follow large traders, the other said follow commercials. I don't believe that is right. It takes time normally though for things to shift and its a 4 day lag on reporting. Friday's numbers are from Tuesday.

    Barry has some pretty good info on it for free

    If you do some research on it you will normally see that the red line, small specs are often most bullish or bearish at the worst time. The fact the green line is heading down says that a top may be coming soon, but it's no perfect science.
  4. seaker


    Thanks for the info, interesting video.
  5. COT info does not backtest well, and as mentioned here already thanks.
  6. Roger.
  7. I find that using COT data provides high probability set-ups. I have posted some charts on the metal futures forum illustrating one way I use the COT data. I am not good at back-testing, but it works well in real time. There are so many different ways to backtest any type of data that I do not understand how someone can make a blanket statement that the COT data does not backtest well.

    However, I have not found the COT data to work well with the stock index futures. I asked Larry Williams about the confusing signals for the S&P, Nasdaq, etc. a few months ago and he said that "it is extremely difficult to use the COT data for stock index futures at this time" due to the large amount of arbitrage occurring in those instruments.