Big Money Update
Since the initial publishing of the Big Money analysis, on balance the predictions have been fairly accurate. I warned that Gold appeared to be a short-term false breakout–and so far that appears to be the case as it broke $1000 for a few days only to stall and fall back under. Natural Gas was listed as the most bullish and promising investment–although I cautioned readers to buy into strength and not weakness, and it has since risen nearly 40%. Oil was listed as bearish and has struggled considerably being down nearly10%. Incorrect calls were on the stock market, which rose nearly 6% following my ultra-bearish stance. Furthermore, the US dollar fell roughly 2% following my mildly bullish stance. Financials were listed as ultra-bearish–and are flat since the last recommendation, underperforming the S&P500 after leading for most of the rally. As a qualifier, this analysis is by no means the cornerstone of my trading, in fact the most important inputs are my proprietary DV indicators. Nonetheless, this is a non-correlated and longer-term source of information to confirm or disconfirm my analysis.
I found a nifty little site that displays a COT stochastic : http://www.insidercapital.com/BullishReview/COTINDEX.HTM The numbers are very close to the ones that I calculate, and the difference is apparently that they are seasonally corrected. Steve Briese is the trader that publishes these numbers and has been dissecting COT numbers in his newsletter for a very long time. From now on, I will source my numbers from this site to save time gathering and processing the data. As you can see below, caution is warranted in Gold, the stock market, Oil, and short-term treasuries. There is a significant level of over-investment in these areas–making the risk versus reward unfavorable. Nonetheless, it is important to wait for technical confirmation before placing any big bets. If you want a neat way to combine short-term and long-term technical analysis with this COT information to trade ETFs the simplest way is to use ETFRanks by Market Rewind http://marketrewind.blogspot.com/2009/09/etfranks-in-vs-out-of-sample.html Most of my research background is in creating stock rankings using quantitative methods, and I can quickly tell the difference between shoddy research and robust methodologies. Having a good sense of what is behind them, I know that they are loosely based on documented academic and practioner research. One of the best and quickest long-term investment strategies would be to create COT rankings and blend these with ETRanks to select the ETFs with the most favorable risk/reward.
|Big Money Report (2week-3 month outlook)|
|COT Stochastic (change since last week)*|
|COT Analysis*||Commercials||Institutions||Small Trader|
|Stock Market||Very Bearish||2 (-23)||100% (+11)||36% (-22)|
|Oil||Very Bearish||4% (-20)||88% (+14)||74% (15)|
|Gas||Very Bullish||91% (-6)||8% (+5)||40% (+5)|
|Short term Treasury||Very Bearish||5 (-2)||97% (+2)||12% (-1)|
|10yr Treasury||Mildly Bullish||63% (+8)||30% (-4)||64% (-10)|
|USD Index||Mildly Bullish||74%||25% (-2)||27% (7)|
|* my own analysis which essentially is that commercial positions tend to be the most accurate|
|and high relative investment by commercials is bullish while low relative investment is bearish.|
|note that the predictive information contained by commercial positions is not uniformacross instruments|
|it is just a generalization.|