Follow the Smart Money / COT Analysis

Discussion in 'Trading' started by Dunstan, Jul 11, 2012.

  1. Dunstan


    Hi helensmith1023,

    I’m glad that you are satisfied with the post, I’ll do my very best to continue so that you will find it useful in the future as well.

    Let me show you the COT report on Gold in the attached chart. Actually it is a good example when the report is passive; it is not giving any signal.

    Unfortunately for those trades, seeking a lot of excitement, COT report sometimes could seem very boring, since as the example shows well, it is not telling you too much. But as some of my previous examples illustrate well, there are occasions when the report highlights a great opportunity in the market. You just need to have enough self-disciple to wait for theses signals to come.

    If you are trading on a longer time frame, I think it could be useful for you to have a look at the report from time to time.

    Have a great day,
    #51     Aug 9, 2012
  2. Gold has caught the publics eye and everyone is advertising to help trade it.. sell cold coins.. there is a guy holding up a sign on every corner to buy Gold.. When the Printing press stops Gold falls
    #52     Aug 9, 2012
  3. vinc


    Hi folks

    Today the level at 1400 s&p is very important. Very important and I can't stress it enough.
    If it closes above this level things can go higher and by the same logic if it closes below it -
    yes, you guessed it right - things can go lower.. However it's up to you HOW YOU WILL INTERPRET this free-of-charge hint. Whatever you do one thing you should bear in mind - stay profitable or you will lose money and end up as 99% of traders / just read it today , "career ' section I guess/.
    Regards .
    #53     Aug 9, 2012
  4. I downloaded the historical COT data, and was planning on making it an external indicator for my daily trading systems. I still haven't tested it out, but it's an interesting indicator. Actually, even calling it an "indicator" feels wrong, since this is real info, not some derivation. It only bothers me that the lag is tuesday-friday. Anyway, thanks for reminding me of this, if I do any statistically significant tests, I'll be sure to make a report on how useful it is.
    #54     Aug 9, 2012
  5. Dunstan

    #55     Aug 9, 2012
  6. Dunstan


    Hi braincell,

    I’m very happy to see that you are planning to test COT data in your system and especially glad to hear you saying that calling it an indicator sounds a bit wrong… The COT charts do look like a simple technical indicator, RSI or something, but it is not derivated from price.

    We will be waiting for your experiences!

    Good luck with the test,
    Have a nice evening,
    #56     Aug 9, 2012
  7. Dunstan


    Hi everyone,

    Let me share with you the link to the latest Commitments of Traders review!

    I would like to start with Wheat, since I was talking about it the last time already.

    As the attached chart shows, nothing really changed in the picture since last week, we are still at an extreme in the COT, which – studying the past similar cases – seems to be a good short opportunity. Of course I know that some of you might want me to give exact entry levels, TP levels and stop levels, but instead I would just recommend you to have a look at other posts in the forum, where they might talk about systems, strategies that can offer a tool for such a situation. All I wish to highlight here is that Wheat is a market these days/weeks, where market participants are holding positions that are extremely long/short compared to their history. This is sort of a bubble that will burst sooner or later and it is advised to have one eye on it these days…

    Live Cattle I think is also interesting. It was mentioned in the review, because Commercials changed their net position, further increased it by 16%. It is interesting really that Commercials and Large Speculators are both net long, while Small Speculators are the only ones net short in the market.

    Of course as said in the review, a lot of Small Speculators are actually Commercials, they just don’t reach the so called “reporting limits”. If you look at the chart of Commercials and Small Speculators, you should see that the two lines have a strong correlation.

    Looking at the picture, I would say that it is bullish, so if you were already long this market, you might want to stay in or if you were thinking of going short, this might not be the best time for that.

    I am also open to discuss any particular market that you are interested in if you have any.

    All the best,
    #57     Aug 13, 2012
  8. Dunstan


    Live Cattle Chart
    #58     Aug 13, 2012
  9. Dunstan


    Hi everyone,

    The latest Commitments of Traders review is out (here)

    The first market that was mentioned, was Lumber, where there was a larger than average change in Commercials positions. The longer, five year chart shows us that neither commercials nor large speculators are at extreme levels, it is only small speculators, who seem to be extremely optimistic about the market (COT Index at 99%).

    The size of the change in positions is definitely large enough and this coinciding with extreme optimism from SS is not a bad combination for confirming a bearish trade.

    Sugar was the next market. I think this could be another good example we can use to understand COT analysis better. If you look at the 5 year chart, it is clearly visible that there was a shift in the short term trend a few weeks ago, we have moved away from the relative COT extreme and there is plenty of space left to reach a new COT extreme Buy signal. The example illustrates well that we should be careful how we view a COT change signal during a trend. I believe – agreeing with the COT review – that this signal should not be taken seriously and the down trend can continue.

    I will be showing some other markets shortly, meanwhile if you would like to check out the recent COT report on other futures markets, you can do so at this service that I’m also using.

    Let me know if you are interested in any specific market, I’ll try to analyze it for you!

    All the best,
    #59     Aug 20, 2012
  10. Dunstan


    Lumber 5 yr
    #60     Aug 20, 2012