14 replies to this topic

[rkd80]

Ahh good to know, now I definitely see what you are talking about. Last question, how do you factor in the large speculator into the equation? In terms of their significance are they close to smart or dumb money?

When I analyze COT data, I give the greatest emphasis to S&P big contract (ticker SP) not Dow or Nasdaq or any other index because SP , in my opinion, shows Commercial's real stand since they mostly trade it heavily.

Commercials have been bullish on SP since the March lows but in the last 3 weeks they have been scaling out. This week they finally went net short.

On the other side of the spectrum, small specs have been bearish since the March lows and they were getting bullish in the last 2- weeks. They finally went net long this week. Exactly the opposite of what Commercials did.

Commercials have been bearish on Dow and they have been getting more bearish in the last 3 weeks.

[A-ha]

Large speculators are trend followers. Commercials are trend makers. Commercials change trends. Large speculators follow the trends after they become obvious. In other words, large specs are always wrong at the tops and bottoms as opposed to commercials who are always right at these important trend reversals because they make/change the trends. According to Larry Williams, commercials are responsible for the %60 of the total volume in commodities.

[rkd80]

Great, ty xD One last question then. For the S&P COT...why are the commercials (according to the chart) so bearish during the entire run-up from the summer/fall of '06? I do see what you are talking about in terms of trend changes, but they seem awfully short during a very strong run up.

Large speculators are trend followers. Commercials are trend makers. Commercials change trends. Large speculators follow the trends after they become obvious.

In other words, large specs are always wrong at the tops and bottoms as opposed to commercials who are always right at these important trend reversals because they make/change the trends.

According to Larry Williams, commercials are responsible for the %60 of the total volume in commodities.

[A-ha]

Great, ty xD One last question then. For the S&P COT...why are the commercials (according to the chart) so bearish during the entire run-up from the summer/fall of '06? I do see what you are talking about in terms of trend changes, but they seem awfully short during a very strong run up.

Commercials are deep pockets, they keep adding to their positions until they bend the market and change the trend. This is especially true for the commodities where they are the dominant power behind the trends.

That is why the size of their short or long positions doesnt signal the trend changes but the sudden changes in their position often signal a trend change.

They were bearish on SP since SPX 1320 but they finally broke the trend in late Feb.

If you take a closer look at their activities in Feb, they suddenly increased their short position right before the plunge.

In early March near the bottom, they covered their massive shorts then went long. I believe that was one of the main reasons the market didnt crash that time.

Now we are seeing them getting bearish week after week.

[rkd80]

*nod* thanks for the response, has been educational. I remember Larry Williams spoke about COT a few years ago when I watched an old dvd of his, but he seemed more focused on commodities and I had no idea until just recently how an average joe could access that kind of information. so, putting this in my toolbox.

thnx xD!

Great, ty xD One last question then. For the S&P COT...why are the commercials (according to the chart) so bearish during the entire run-up from the summer/fall of '06? I do see what you are talking about in terms of trend changes, but they seem awfully short during a very strong run up.

Commercials are deep pockets, they keep adding to their positions until they bend the market and change the trend. This is especially true for the commodities where they are the dominant power behind the trends.

That is why the size of their short or long positions doesnt signal the trend changes but the sudden changes in their position often signal a trend change.

They were bearish on SP since SPX 1320 but they finally broke the trend in late Feb.

If you take a closer look at their activities in Feb, they suddenly increased their short position right before the plunge.

In early March near the bottom, they covered their massive shorts then went long. I believe that was one of the main reasons the market didnt crash that time.

Now we are seeing them getting bearish week after week.