I throw this out to you as food for thought. Is it significant or is it not? That’s for you to decide.
By Daniel at 7 February, 2010, 1:43 am
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Kaaresve says: “You have to go back to Sept. 2007 to find a time when the “smart money” commercial hedgers have been this bullish. As you’ll see on that latest signals table, these guys are in heavy-duty extreme territory in their bullish net positioning.”
K didn’t answer my question so I looked it up myself. That extreme reading he talked about was from the release on Friday afternoon, September 28, 2007. The S&P closed at 1526.75 on that day. The index then peaked about 1 ½ weeks later at 1565.15; a 2.5% increase from the “signal” date. From that point, the S&P 500 began its descent to its intra-day low of 666.
As many of you know, I have a COT system that I developed myself and I put the signals out here on the boards in real time for anybody that cares to follow it. The last signal was on January 15, 2010. That was a sell signal that proved to be a good trade. I made 44.75 S&P points on that one. I also noted that on an absolute basis (remove the sign) the reading I got on January 15 was the most extreme move since March 27 (which was within several weeks of the lows) suggesting there could be a trend change in the near future. Thus far, it looks like that trend change has materialized. The most extreme signal prior to that…..January 27, 2009….within a week or two of a 23% slide down to 666 in March.
And now we have K giving us a “signal” of extreme bullishness….bullishness not seen since September 28, 2007…..within less than 2 weeks of the top in 2007.
Finally, on another front, my primary system…a trend following system that uses 10 ETFs…is now 40% long, 30% in cash and 30% short….so this system is is also suggesting a trend change. That said, my primary system can get whipsawed occasionally and this may very well be one of those whipsaws. Nonetheless, the system has performed very well for me since going live at the beginning of 2008 (2008 was 2% return and 2009 was 75% return).
Again, I throw this out as food thought…but everything seems to be aligning for the bears…including K’s proclamation of extreme bullishness.
Ultimately the market will be the judge, jury and executioner….but based on the various signals I’m getting, caution should prevail. Don’t get nailed by the executioner.
Caution my friends…Caution!
- Vics
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